SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20-F
(Mark One) | |
![]() |
Registration statement pursuant to Section 12 (b) or 12(g) of the Securities Exchange Act of 1934 |
or | |
![]() |
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the financial year ended: 31 December 2004 | |
or | |
![]() |
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from: __________ to __________ |
Commission file number: 1-10533 | Commission file number: 0-20122 |
Rio Tinto plc | Rio Tinto Limited |
ABN 96 004 458 404 | |
(Exact name of Registrant as specified in its charter) | (Exact name of Registrant as specified in its charter) |
England and Wales | Victoria, Australia |
(Jurisdiction of incorporation or organisation) | (Jurisdiction of incorporation or organisation) |
6 St Jamess Square | Level 33, 55 Collins Street |
London, SW1Y 4LD, England | Melbourne, Victoria 3001, Australia |
(Address of principal executive offices) | (Address of principal executive offices) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange | Name of each exchange | Title of each class |
on which registered | on which registered | ||
American Depositary | New York | None | |
Shares* | Stock Exchange | ||
Ordinary Shares of 10p | New York | ||
each** | Stock Exchange |
* | Evidenced by American Depository Receipts. Each American Depository Share Represents four Rio Tinto plc Ordinary Shares of 10p each. |
** | Not for trading, but only in connection with the listing of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Title of each class | Title of each class |
None | American Depositary Shares*** |
Ordinary Shares |
*** | Evidenced by American Depository Receipts. Each American Depository Share represents four Rio Tinto Limited Ordinary Shares. |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None | None |
Indicate
the number of outstanding shares of each of the Issuers classes of
capital or common stock as of the close of
the period covered by the annual
report:
Title of each class | Number | Number | Title of each class |
Ordinary Shares of 10p each | 1,066,674,301 | 499,058,420 | Shares |
DLC Dividend Share of 10p | 1 | 1 | DLC Dividend Share |
Special Voting Share of 10p | 1 | 1 | Special Voting Share |
Indicate
by check mark whether the Registrants (1) have filed all reports required
to
be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrants
were required to file such reports), and
(2) have been
subject to such filing requirements for the past 90 days:
Yes No
Indicate by check mark which financial statement item the Registrants have elected to follow:
Item 17 Item
18
EXPLANATORY NOTE
The Rio Tinto Group is a leading international mining group, combining
Rio Tinto plc and Rio Tinto Limited in a dual listed companies (DLC)
merger that has created a single economic enterprise, nevertheless both companies
remain separate legal entities with separate share listings and registrars, and
with separate ADR programmes.
Rio Tinto plc and Rio Tinto Limited prepare annual reports and financial statements for the combined group that are presented to their shareholders as their consolidated accounts in accordance with both United Kingdom and Australian legislation and regulations. The current such document is the 2004 Annual report and financial statements. They also prepare their annual reports on Form 20-F,that are filed with the SEC in accordance with United States legislation and regulations, as a combined document.
Rio Tinto 2004 Form 20-F 2
CONTENTS
Rio Tinto 2004 Form 20-F 3
RIO TINTO
PART I
Item 1. Identity
of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer
Statistics
and Expected Timetable
Not applicable.
Rio Tinto 2004 Form 20-F 4
Item 3. Key Information
SELECTED FINANCIAL DATA FOR THE RIO TINTO GROUP for the period 2000 to 2004
![]() |
![]() |
![]() |
|
![]() |
![]() |
||
![]() |
![]() |
![]() |
|
![]() |
![]() |
![]() |
|
Rio Tinto 2004 Form 20-F 5
The following selected consolidated financial data has been derived from the consolidated financial statements of the Rio Tinto Group and of the Rio Tinto plc and Rio Tinto Limited parts of the Group presented elsewhere herein, restated where appropriate to accord with the current accounting policies and presentations. The selected consolidated financial data should be read in conjunction with, and qualified in their entirety by reference to, the consolidated financial statements and notes thereto included elsewhere in this annual report on Form 20-F.
The consolidated financial statements are prepared
in accordance with UK GAAP, which differs in certain respects from US GAAP. Details
of the principal differences between UK GAAP and US GAAP are set out in note
42 on pages A-65 to A-84.
RIO TINTO GROUP
Income Statement Data | ||||||||||
For the years ending 31 December | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
Amounts in accordance with UK GAAP | ||||||||||
(US$ millions) | ||||||||||
Consolidated turnover (f) | 8,081 | 8,343 | 8,715 | 9,568 | 11,799 | |||||
Group operating profit (a) | 2,188 | 1,562 | 831 | 1,496 | 1,722 | |||||
Net earnings (a) | 1,507 | 1,079 | 651 | 1,508 | 2,813 | |||||
Group operating profit per share (US cents) | 159.4 | 113.6 | 60.3 | 108.6 | 124.9 | |||||
Earnings per share (US cents) | 109.8 | 78.5 | 47.3 | 109.5 | 204.0 | |||||
Diluted earnings per share (US cents) | 109.7 | 78.3 | 47.2 | 109.3 | 203.6 | |||||
Dividends per share (US cents) (b) | 57.5 | 59.0 | 60.0 | 64.0 | 77.0 | |||||
Dividends per share (pence) (b) | 38.87 | 41.68 | 37.47 | 37.13 | 41.48 | |||||
Dividends per share (Australian cents) (b) | 102.44 | 115.27 | 105.93 | 89.70 | 103.82 | |||||
Weighted average number of shares (millions) (b) | 1,373 | 1,375 | 1,377 | 1,378 | 1,379 | |||||
Amounts in accordance with US GAAP | ||||||||||
(US$ millions) | ||||||||||
Consolidated turnover (c) (f) | 8,065 | 8,348 | 8,719 | 9,545 | 11,814 | |||||
Group operating profit | 1,948 | 1,821 | 746 | 1,041 | 1,442 | |||||
Net earnings | 1,174 | 1,038 | 581 | 1,977 | 2,823 | |||||
Group operating profit per share (US cents) | 141.9 | 132.4 | 54.2 | 75.5 | 104.6 | |||||
Earnings per share (US cents) | 85.5 | 75.5 | 42.2 | 143.5 | 204.7 | |||||
Diluted earnings per share (US cents) | 85.4 | 75.4 | 42.1 | 143.3 | 204.4 | |||||
Balance Sheet Data | ||||||||||
at 31 December | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
Amounts in accordance with UK GAAP | ||||||||||
(US$ millions) | ||||||||||
Total assets | 19,367 | 19,540 | 20,204 | 24,081 | 25,711 | |||||
Share capital / premium | 2,535 | 2,486 | 2,580 | 2,869 | 2,938 | |||||
Shareholders' funds (net assets) | 7,211 | 7,043 | 7,462 | 10,037 | 12,584 | |||||
Amounts in accordance with US GAAP | ||||||||||
(US$ millions) | ||||||||||
Total assets | 21,530 | 22,102 | 22,600 | 26,959 | 28,938 | |||||
Share capital / premium | 2,535 | 2,486 | 2,580 | 2,869 | 2,938 | |||||
Shareholders' funds (net assets) | 9,812 | 9,571 | 9,517 | 12,044 | 14,462 |
Rio Tinto 2004 Form 20-F 6
RIO TINTO PLC - PART OF RIO TINTO GROUP
Income Statement Data | ||||||||||
for the years ending 31 December | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
Amounts in accordance with UK GAAP | ||||||||||
(US$ millions) | ||||||||||
Consolidated turnover (f) | 4,045 | 3,769 | 3,993 | 4,092 | 5,275 | |||||
Group operating profit (a) | 915 | 137 | (19 | ) | 368 | 289 | ||||
Net earnings (a) | 1,064 | 491 | 195 | 956 | 2,073 | |||||
Group operating profit per share (US cents) | 86.0 | 12.9 | (1.8 | ) | 34.5 | 27.1 | ||||
Earnings per share (US cents) | 100.1 | 46.1 | 18.3 | 89.7 | 194.2 | |||||
Diluted earnings per share (US cents) | 100.0 | 46.0 | 18.3 | 89.5 | 193.9 | |||||
Dividends per share (US cents) (b) | 57.5 | 59.0 | 60.0 | 64.0 | 77.0 | |||||
Dividends per share (pence) (b) | 38.87 | 41.68 | 37.47 | 37.13 | 41.48 | |||||
Weighted average number of shares (millions) (b) | 1,063 | 1,064 | 1,065 | 1,066 | 1,067 | |||||
Amounts in accordance with US GAAP | ||||||||||
(US$ millions) | ||||||||||
Consolidated turnover (c) (f) | 4,034 | 3,783 | 3,993 | 4,072 | 5,298 | |||||
Group operating profit | 747 | 548 | (481 | ) | (7 | ) | 162 | |||
Net earnings | 820 | 618 | (206 | ) | 949 | 2,010 | ||||
Group operating profit per share (US cents) | 70.2 | 51.5 | (45.2 | ) | (0.7 | ) | 15.2 | |||
Earnings per share (US cents) | 77.1 | 58.1 | (19.3 | ) | 89.0 | 188.3 | ||||
Diluted earnings per share (US cents) | 77.1 | 58.0 | (19.3 | ) | 88.9 | 188.0 | ||||
BALANCE SHEET DATA | ||||||||||
AT 31 DECEMBER | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
Amounts in accordance with UK GAAP | ||||||||||
(US$ millions) | ||||||||||
Total assets | 11,948 | 11,921 | 12,606 | 13,708 | 15,516 | |||||
Share capital / premium | 1,741 | 1,754 | 1,764 | 1,784 | 1,805 | |||||
Shareholders funds (net assets) | 6,325 | 5,902 | 5,899 | 7,343 | 9,139 | |||||
Amounts in accordance with US GAAP | ||||||||||
(US$ millions) | ||||||||||
Total assets | 13,557 | 13,735 | 13,941 | 15,180 | 17,375 | |||||
Share capital / premium | 1,741 | 1,754 | 1,764 | 1,784 | 1,805 | |||||
Shareholders funds (net assets) | 8,693 | 8,371 | 7,697 | 8,931 | 10,560 |
Rio Tinto 2004 Form 20-F 7
RIO TINTO LIMITED - PART OF RIO TINTO GROUP
Income Statement Data | ||||||||||
for the years ending 31 December | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
Amounts in accordance with UK GAAP | ||||||||||
(US$ millions) | ||||||||||
Consolidated turnover (f) | 4,036 | 4,574 | 4,722 | 5,476 | 6,524 | |||||
Group operating profit (a) | 1,273 | 1,425 | 855 | 1,128 | 1,433 | |||||
Net earnings (a) | 771 | 942 | 736 | 884 | 1,185 | |||||
Group operating profit per share (US cents) | 235.7 | 286.1 | 171.3 | 226.1 | 287.2 | |||||
Earnings per share (US cents) | 142.8 | 189.0 | 147.6 | 177.2 | 237.4 | |||||
Diluted earnings per share (US cents) | 142.7 | 188.9 | 147.4 | 176.9 | 236.9 | |||||
Dividends per share (US cents) (b) | 57.5 | 59.0 | 60.0 | 64.0 | 77.0 | |||||
Dividends per share (Australian cents) (b) | 102.44 | 115.27 | 105.93 | 89.70 | 103.82 | |||||
Weighted average number of shares (millions) (b) | 540 | 498 | 499 | 499 | 499 | |||||
Amounts in accordance with US GAAP | ||||||||||
(US$ millions) | ||||||||||
Consolidated turnover (c) (f) | 4,027 | 4,575 | 4,726 | 5,473 | 6,516 | |||||
Group operating profit | 1,201 | 1,273 | 1,231 | 1,048 | 1,280 | |||||
Net earnings | 614 | 671 | 1,267 | 1,647 | 1,301 | |||||
Group operating profit per share (US cents) | 222.4 | 255.6 | 246.7 | 210.0 | 256.5 | |||||
Earnings per share (US cents) | 113.9 | 134.6 | 254.0 | 330.1 | 260.6 | |||||
Diluted earnings per share (US cents) | 113.9 | 134.5 | 253.7 | 330.0 | 260.1 | |||||
BALANCE SHEET DATA | ||||||||||
AT 31 DECEMBER | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
Amounts in accordance with UK GAAP | ||||||||||
(US$ millions) | ||||||||||
Total assets | 9,542 | 9,977 | 10,382 | 13,542 | 15,316 | |||||
Share capital / premium | 939 | 865 | 964 | 1,280 | 1,336 | |||||
Shareholders' funds (net assets) | 1,420 | 1,828 | 2,510 | 4,324 | 5,515 | |||||
Amounts in accordance with US GAAP | ||||||||||
(US$ millions) | ||||||||||
Total assets | 10,236 | 10,770 | 11,609 | 15,234 | 16,964 | |||||
Share capital / premium | 939 | 865 | 964 | 1,280 | 1,336 | |||||
Shareholders' funds (net assets) | 1,795 | 1,920 | 2,922 | 4,996 | 6,247 |
(a) | In 2004 Rio Tinto Group operating
profit under UK GAAP is stated after charging US$558 million for certain
asset write downs and provisions for contract obligations which relate
to Rio Tinto plc. In 2004, net earnings for the Rio Tinto Group include
net write downs and provisions for contract obligations of US$321 million
relating to Rio Tinto plc. In addition the Groups net earnings for
2004 include exceptional gains of US$913 million arising on the sale of
certain operations of which US$827 million relate to Rio Tinto plc and
US$137 million relate to Rio Tinto Limited. In 2003 Rio Tinto Group net earnings under UK GAAP are stated after exceptional gains totalling US$126 million which arose on the sale of certain operations by Rio Tinto Limited. In 2002 Rio Tinto Group operating profit under UK GAAP is stated after charging US$962 million for asset write downs, of which US$529 million relates to Rio Tinto plc and US$433 million relates to Rio Tinto Limited. In addition, group operating profit for 2002 includes US$116 million for environmental remediation charges which all relate to Rio Tinto plc. In 2002 net earnings for the Rio Tinto Group include US$763 million for asset write downs of which US$623 million relates to Rio Tinto plc and US$225 million relates to Rio Tinto Limited. In addition the Groups net earnings for 2002 include US$116 million for environmental remediation charges which all relate to Rio Tinto plc. In 2001 Rio Tinto Group operating profit under UK GAAP is stated after charging US$715 million for exceptional asset write downs, of which US$644 million relates to Rio Tinto plc and US$71 million relates to Rio Tinto Limited. In 2001 Rio Tinto Group net earnings under UK GAAP are after charges of US$583 million for asset write downs of which US$551 million relates to Rio Tinto plc and US$52 million relates to Rio Tinto Limited. Under UK GAAP asset write downs and the environmental remediation charges are classified as exceptional' but none of these items would be classified as extraordinary items under US GAAP. |
(b) | These figures are the same under both UK and US GAAP. |
(c) | A cumulative adjustment was made in 2000 to reflect the application of Staff Accounting Bulletin No. 104 (SAB104) Revenue recognition in financial statements. The effect of SAB 104 is described on page A-70. |
(d) | The results for all years relate wholly to continuing operations. |
(e) | The decrease in Rio Tinto Limited shareholders funds in 2000 reflects the buy back of 91,000,000 shares from Rio Tinto plc in that year. |
(f) | The historical data for 2000-2003 has been reclassified for the impact of reporting the reimbursement of certain shipping and handling costs incurred by the Group as turnover rather than a reduction of net operating costs. See note (c) on page A-2.Footnotes. |
Rio Tinto 2004 Form 20-F 8
RISK FACTORS
The
following describes some of the risks that could affect Rio Tinto. There may
be additional risks unknown to Rio Tinto and other risks, currently believed
to be immaterial, could turn out to be material. These risks, whether they
materialise individually or simultaneously, could significantly affect the
Groups business
and financial results. They should also be considered in connection with any
forward looking statements in this document and the cautionary statement below.
Economic condition
Commodity
prices, and demand for the Groups products, are influenced strongly by world economic growth, particularly that in the US and Asia. The Groups normal policy is to sell its products at prevailing market prices. Commodity prices can fluctuate widely and could have a material and adverse impact on the Groups
asset values, revenues, earnings and cash flows. Further discussion can be
found on page 14, Business environment and markets, and on page 39, commodity
prices.
Exchange rates
The Groups asset values, earnings and cash flows are influenced by a wide variety of currencies due to the geographic diversity of the Groups sales and areas of operation. The majority of the Groups sales are denominated in US dollars. The Australian and US dollars are the most important currencies influencing costs. The relative value of currencies can fluctuate widely and could have a material and adverse impact on the Groups
asset values, costs, earnings and cash flows. Further discussion can be found
on page 37, exchange rates, reporting currencies and currency exposure.
Acquisitions
The Group has grown
partly through the acquisition of other businesses. Business combinations commonly
entail a number of risks and Rio Tinto cannot be sure that management will be
able effectively to integrate businesses acquired or generate the cost savings
and synergies anticipated. Failure to do so could have a material and adverse
impact on the Groups costs, earnings and cash flows.
Exploration and new projects
The Group seeks
to identify new mining properties through an active exploration programme. There
is no guarantee, however, that such expenditure will be recouped or that existing
mineral reserves will be replaced. Failure to do so could have a material and
adverse impact on the Groups financial results and prospects.
The Group develops new mining properties and expands its existing operations as a means of generating shareholder value. Increasing regulatory, environmental and social approvals are, however, required which can result in significant increases in construction costs and/or significant delays in construction. These increases could materially and adversely affect a projects economics, the Groups
asset values, costs, earnings and cash flows.
Reserve estimation
There are numerous
uncertainties inherent in estimating ore reserves. Reserves that are valid at
the time of estimation may change significantly when new information becomes
available. Fluctuations in the price of commodities, exchange rates, increased
production costs or reduced recovery rates may render lower grade reserves uneconomic
and may, ultimately, result in a restatement. A significant restatement could
have a material and adverse impact on the Groups asset values, costs, cash
flows and earnings.
Political and community
The Group has operations in jurisdictions having varying degrees of political instability. Political instability can result in civil unrest, expropriation, nationalisation, renegotiation or nullification of existing agreements, mining leases and permits, changes in laws, taxation policies or currency restrictions. Any of these can have a material adverse effect on the profitability or, in extreme cases, the viability of an operation.
Some of the Groups current and potential operations are located in or near communities that may now, or in the future, regard such an operation as having a detrimental effect on their economic and social circumstances. Should this occur, it might have a material adverse impact on the profitability or, in extreme cases, the viability of an operation. In addition, such an event may adversely affect the Groups
ability to enter into new operations in the country.
Technology
The Group has invested
in and implemented information system and operational initiatives. Several technical
aspects of these initiatives are still unproven and the eventual operational
outcome or viability cannot be assessed with certainty. Accordingly, the costs
and benefits from these initiatives and the consequent effects on the Groups
future earnings and financial results may vary widely from present expectations.
Land and resource tenure
The Group operates
in several countries where title to land and rights in respect of land and resources
(including indigenous title) may be unclear and may lead to disputes over resource
development. Such disputes could disrupt relevant mining projects and/or impede
the Groups ability to develop new mining properties.
Health,
safety and environment
Rio Tinto operates
in an industry that is subject to numerous health, safety and environmental
laws and regulations as well as community expectations. Evolving regulatory
standards and expectations can result in increased litigation and/or increased
costs all of which can have a material and adverse effect on earnings and
cash flows.
Mining
operations
Mining
operations are vulnerable to a number of circumstances beyond the Groups control,
including natural disasters, unexpected geological variations and industrial
actions. These can affect costs at particular mines for varying periods.
Mining, smelting and refining processes also rely on key inputs, for example
fuel and electricity. Appropriate insurance can provide protection from some,
but not all, of the costs that may arise from unforeseen events. Disruption
to the supply of key inputs, or changes in their pricing, may have a material
and adverse impact on the Groups asset values, costs, earnings and
cash flows.
Rio Tinto 2004 Form 20-F 9
Rehabilitation
Costs associated
with rehabilitating land disturbed during the mining process and addressing environmental,
health and community issues are estimated and provided for based on the most
current information available. Estimates may, however, be insufficient and/or
further issues may be identified. Any underestimated or unidentified rehabilitation
costs will reduce earnings and could materially and adversely affect the Groups
asset values, earnings and cash flows.
Non managed operations
Rio Tinto cannot
guarantee that management of mining and processing assets not subject to its
management control will comply with the Groups standards and objectives,
nor that effective policies, procedures and controls will be maintained over
those assets.
CAUTIONARY STATEMENT ABOUT FORWARD LOOKING STATEMENTS
This document contains
certain forward looking statements with respect to the financial condition, results
of operations and business of the Rio Tinto Group. The words intend, aim, project, anticipate, estimate, plan, believes, expects, may, should, will, or similar expressions, commonly identify such forward looking statements. Examples of forward looking statements in this annual report on Form 20-F include those regarding estimated reserves, anticipated production or construction commencement dates, costs, outputs and productive lives of assets or similar factors. Forward looking statements involve known and unknown risks, uncertainties, assumptions and other factors set forth in this document that are beyond the Groups
control. For example, future reserves will be based in part on market prices
that may vary significantly from current levels. These may materially affect
the timing and feasibility of particular developments. Other factors include
the ability to produce and transport products profitably, the effect of foreign
currency exchange rates on market prices and operating costs, and activities
by governmental authorities, such as changes in taxation or regulation, and political
uncertainty.
In light of these risks, uncertainties and assumptions, actual results could be materially different from any future results expressed or implied by these forward looking statements which speak only as at the date of this report. Except as required by applicable regulations or by law, the Group does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information or future events. The Group cannot guarantee that its forward looking statements will not differ materially from actual results.
Item 4. Information on the Company
INTRODUCTION
Rio Tinto Limited and Rio Tinto plc operate as one business organisation, referred to in this report as Rio Tinto, the Rio Tinto Group or, more simply, the Group. These collective expressions are used for convenience only since both Companies, and the individual companies in which they directly or indirectly own investments, are separate and distinct legal entities.
Limited, plc, Pty, Inc, Limitada, or SA has
generally been omitted from Group company names, except to distinguish between
Rio Tinto plc and Rio Tinto Limited.
Financial
data in United States dollars (US$) is derived from, and should be read in conjunction
with, the Rio Tinto Groups consolidated financial statements which are in US$. In general, financial data in pounds sterling (£) and Australian dollars (A$) have been translated from the consolidated financial statements at the rates shown on page 112 and have been provided solely for convenience; exceptions arise where data, such as directors remuneration,
can be extracted directly from source records.
Rio
Tinto Group turnover, profit before tax and net earnings and operating assets
for 2003 and 2004 attributable to the Groups products and geographical
areas are shown in Notes 26 and 27 to the consolidated financial statements on
pages A-39 to A-43. In the Operational review, operating assets and turnover
are consistent with the financial information by business unit on pages A-63
and A-64.
The tables on pages 17 to 20 show production for 2002, 2003 and 2004 and include estimates of proven and probable reserves and mineral resources. The weights and measures used are mainly metric units; conversions into other units are shown on page 112. Words and phrases, often technical, have been used which have particular meanings; definitions of these terms are on pages 109 to 111.
AN OVERVIEW
OF RIO TINTO
Rio Tinto is
a leading international mining group, combining Rio Tinto plc and Rio Tinto
Limited in a dual listed companies (DLC) structure as a single economic entity.
Nevertheless, both Companies remain legal entities with separate share listings
and registers. Rio Tinto plc is incorporated in England and Wales and Rio
Tinto Limited is incorporated in Australia.
Rio
Tintos international headquarters are in London whilst the Australian
representative office in Melbourne provides support for the operations, undertakes
external and investor relations and fulfils statutory obligations. The registered
office of Rio Tinto plc is at 6 St Jamess Square, London, SW1Y 4LD
(telephone: +44 20 7930 2399) and the registered office of Rio Tinto Limited
is at Level 33, 55 Collins Street, Melbourne, Victoria 3000 (telephone: +61
3 9283 3333).
Rio Tinto 2004 Form 20-F 10
For legal purposes, Rio Tintos US agent is Shannon Crompton, Secretary of Rio Tintos US holding companies, 8309 West 3595 South, Magna, Utah 84044. Investor relations in the US are provided by Makinson Cowell US Limited, One Penn Plaza, 250 W 34th St, Suite 1935, New York, NY 10119.
Objective, strategy and management structure | |
Rio Tintos fundamental objective is to maximise the overall long term return to its shareholders by operating responsibly and sustainably in areas of proven expertise where the Group has competitive advantage. Its strategy is to maximise the net present value per share by investing in large, long life, cost competitive mines. Investments are driven by the quality of opportunity, not choice of commodity. | |
Rio Tintos mining interests are diverse both in geography and product. The Group consists of wholly and partly owned subsidiaries, joint ventures, associated companies and joint arrangements, the principal ones being listed in Notes 31 to 34 of the consolidated financial statements on pages A-52 to A-53. | |
Rio Tintos management structure is designed to facilitate a clear focus on business performance and the Groups objective. The management structure, which is reflected in this report, is based on principal product and global support groups: | |
• | Iron Ore |
• | Energy |
• | Industrial Minerals |
• | Aluminium |
• | Copper |
• | Diamonds |
• | Exploration, and |
• | Technology |
The chief executive of each group reports to the chief executive of Rio Tinto. |
2004 financial summary
On 31 December
2004, Rio Tinto plc had a market capitalisation of £16.4 billion (US$31.6 billion) and Rio Tinto Limited had a market capitalisation of A$19.5 billion (US$15.2 billion). The combined Groups
market capitalisation in publicly held shares at the end of 2004 was US$41.1
billion.
At
31 December 2004, Rio Tinto had consolidated operating assets of US$16.6 billion:
61 per cent were located in Australia and New Zealand and 27 per cent in North
America. Group turnover, or sales revenue, in 2004 was US$14.6 billion (or US$11.8
billion excluding Rio Tintos share of joint ventures and associates turnover).
Net earnings in 2004 were US$2,813 million.
History
The Rio Tinto Company was formed by investors in 1873 to mine ancient copper workings at Rio Tinto in southern Spain. The Consolidated Zinc Corporation was incorporated in 1905, initially to treat zinc bearing mine waste at Broken Hill, New South Wales, Australia.
The RTZ Corporation (formerly The Rio Tinto-Zinc Corporation) was formed in 1962 by the merger of The Rio Tinto Company and The Consolidated Zinc Corporation. CRA Limited (formerly Conzinc Riotinto of Australia Limited) was formed at the same time by a merger of the Australian interests of The Consolidated Zinc Corporation and The Rio Tinto Company. Between 1962 and 1995, RTZ and CRA discovered important mineral deposits, developed major mining projects and also grew through acquisition.
RTZ and CRA were unified in December 1995 through a DLC structure. Directed by a common board of directors, this is designed to place the shareholders of both companies in substantially the same position as if they held shares in a single enterprise owning all of the assets of both Companies.
In June 1997, The RTZ Corporation became Rio Tinto plc and CRA Limited became Rio Tinto Limited, together known as the Rio Tinto Group. Since the 1995 merger, the Group has continued to invest in developments and acquisitions in keeping with its strategy.
RECENT
DEVELOPMENTS
Share
buybacks and issues 2004-2005 to date
In April 2004,
Rio Tinto plc shareholders renewed approvals for the buyback of up to ten
per cent of its own shares and Rio Tinto Limited shareholders renewed approvals
to buy back up to 100 per cent of Rio Tinto Limited shares held by Tinto
Holdings Australia Pty Limited (a wholly owned subsidiary of Rio Tinto plc)
plus, on market, up to ten per cent of the publicly held capital in any 12
month period.
The
Group announced on 3 February 2005, its intention to return up to US$1.5
billion of capital to shareholders, therefore, Rio Tinto plc and Rio Tinto
Limited obtained renewal of their existing shareholder approvals at their
respective annual general meetings in 2005. Both Companies also obtained
shareholder approval for Rio Tinto Limited to make off market purchases of
its shares within 12 months of the annual general meeting, within the overall
limit of ten per cent of publicly held capital described above. This was
to be through a tender process at a discount to the market price. The shareholders approval
obtained would also allow Rio Tinto Limited to buy back its shares from Tinto
Holdings Australia, after such an off market tender (at the same price),
to maintain the proportional holding of Tinto Holdings Australia following
the off market buyback. The number of shares which may eventually be bought
back under these authorities will be determined by the directors, based on
what they consider to be in the best interests of all shareholders.
Rio Tinto 2004 Form 20-F 11
In the
year to 31 December 2004, neither Rio Tinto plc nor Rio Tinto Limited purchased
any publicly held shares for cancellation in either Company. However, a
further 1,346,874 Rio Tinto plc and 280,332 Rio Tinto Limited shares were
issued in respect of the Companies employee share plans. During the year, options for a further 1,541,367 Rio Tinto plc and 1,339,834 Rio Tinto Limited shares were granted under Rio Tintos
share plans.
On
9 May 2005 Rio Tinto Limited announced the successful result of its off market
share buy back. A total of approximately 27.3 million shares, representing 8.7
per cent of Rio Tinto Limiteds publicly held issued share capital (2.0
per cent of the Rio Tinto Group), were bought back at A$36.70 per share at a
cost of approximately A$1 billion (US$780 million). The buy back price of A$36.70
per share represented a 14 per cent discount to the relevant volume weighted
average price of Rio Tinto Limited shares sold on the ASX over the five trading
days up to and including the closing date of the buy back. It also represented
a discount of 15.6 per cent to the closing price for Rio Tinto Limited shares
on 6 May 2005, of A$43.50.
Under a separate buy back, Tinto Holdings Australia accepted the same A$36.70 buy back price for a proportion of its 37.5 per cent holding of Rio Tinto Limited shares so that there was no change in the proportional shareholding in Rio Tinto Limited as a result of the buy back. Rio Tinto Limited therefore bought back a further 16.4 million shares at a cost of approximately A$600 million (US$470 million).
Share buybacks and issues 2002-2003
In 2002, 887,000
Rio Tinto plc and 360,000 Rio Tinto Limited shares were issued under the Companies employee share plans and options were granted over 2.6 million Rio Tinto plc shares and 2.2 million Rio Tinto Limited shares. In 2003, 1,193,000 Rio Tinto plc and 240,000 Rio Tinto Limited shares were issued in respect of the Companies employee share plans. During 2003, options were granted over 2.7 million Rio Tinto plc and 1.6 million Rio Tinto Limited shares in respect of the Companies employee
share plans.
In the years 2002 and 2003, neither Rio Tinto plc nor Rio Tinto Limited purchased any publicly held shares for cancellation in either Company.
Operations acquired and divested 2004-2005 to date
In January 2004,
Rio Tinto completed the sale of its 100 per cent interest in the nickel mining
company Mineração Serra da Fortaleza Ltda to Votorantim Metais,
a Brazilian controlled mining company. Including an adjustment for future nickel
prices, the total cash consideration was approximately US$80 million.
A 20 per cent interest in the Sepon project in Laos, comprising a gold operation and the Khanong copper project, was sold to Oxiana Limited for a cash consideration of US$85 million.
In
March, Rio Tinto completed the sale of its shareholding in Freeport-McMoRan Copper & Gold
Inc (FCX). Rio Tinto received net proceeds of US$882 million for its 23,931,100
FCX shares. Rio Tinto retains its 40 per cent joint venture interest in reserves
discovered after 1994 at the Grasberg mine which is managed by FCX. The sale
of FCX shares does not affect the terms of the joint venture nor the management
of the Grasberg mine.
In
June, Rio Tinto completed the sale of its 100 per cent interest in Zinkgruvan
Mining AB to South Atlantic Ventures. Zinkgruvan was acquired in 2000 as part
of North. Rio Tinto received US$101 million in cash plus US$5 million for working
capital, and can earn a further US$5 million over the next two years in price
participation payments based on zinc, lead and silver prices. Also in June, Rio
Tintos interest in the Boké bauxite deposit in west Africa was divested
for US$12 million.
Rio
Tinto and Empresa de Desenvolvimento Mineiro completed the sale of their interests
in the Neves Corvo copper mine in Portugal to EuroZinc for a cash consideration
and a participation in the average copper price in excess of certain thresholds.
Rio Tintos share of the consideration for its 49 per cent share of the
mine was US$70 million. The remaining price participation rights relating to
copper production from Neves Corvo, which was sold in the first half of the year,
were themselves sold for US$22 million.
The
directors of Rio Tinto Zimbabwe (RioZim) agreed to a restructuring of Rio
Tintos 56 per cent shareholding in RioZim. The Murowa diamond project
in Zimbabwe had been a 50:50 joint venture between Rio Tinto and RioZim.
As a result of the restructuring, Rio Tinto owns a direct 78 per cent interest
in Murowa and RioZim became an independent Zimbabwean controlled, listed
company owning the remaining 22 per cent of Murowa. Rio Tinto ceased to be
an ordinary shareholder in RioZim but retains a reduced cash participation
in RioZims assets other than the Murowa diamond project for a period
of ten years. The transaction had no material effect on Rio Tinto.
The
sale of the Groups 51 per cent interest in Rio Paracatu Mineração,
the owner of the Morro do Ouro mine in Brazil, was completed on 31 December
2004 for US$250 million, subject to an adjustment for working capital.
The
sale to Nippon Steel of an eight per cent interest in the Hail Creek Joint
Venture, and the increase in the combined share of the original participants,
Marubeni Coal and Sumisho Coal Development, by two per cent was completed
in the fourth quarter. Rio Tinto will receive about US$150 million for the
sale of these interests in the Hail Creek Joint Venture together with the
sale of a 47 per cent interest in the Beasley River iron ore deposit to its
joint venture partners in Robe River, which includes Nippon Steel.
In
December Kennecott Energy successfully bid for an additional 177 million
tonnes of in-situ coal reserves at West Antelope at a cost of US$146 million.
Rio Tinto 2004 Form 20-F 12
In March 2005 the Group announced the sale of its entire holding in the Labrador Iron Ore Royalty Income Fund (LIORIF) for net cash proceeds of US$130 million. LIORIF has an equity interest of 15.1 per cent in, and receives royalties from, the Iron Ore Company of Canada. This transaction has no effect on Rio Tintos 59 per cent direct interest in the Iron Ore Company of Canada.
Operations acquired and divested 2002-2003
In
January 2002, Kennecott Energy (KEC) purchased the North Jacobs Ranch coal reserves
for US$380 million, payable in instalments over a five year period. The reserves
are adjacent to KECs existing Jacobs Ranch operation and provide a basis
for low cost expansion in line with market demand.
Following
the purchase of outstanding units in the Western Australian Diamond Trust, Rio
Tintos interest in Argyle Diamonds increased from 99.8 per cent to 100
per cent.
In
August 2002, Comalco completed the acquisition of an additional 9.5 per cent
interest in reduction lines 1 and 2 of the Boyne Island Smelter for US$80 million.
This increased Comalcos share in lines 1 and 2 of the smelter to 59.5 per cent from 50 per cent. Comalcos
interest in line 3 remains unchanged at 59.25 per cent.
During
the first half of 2002, Coal & Allied Industries completed the sale of its interest in the Moura Joint Venture for US$166 million and in Narama and Ravensworth for US$64 million. These were classified as assets held for resale and consequently their disposal had no effect on net earnings. In September, Rio Tinto acquired for cash in the market a further three per cent in Coal & Allied
to bring its shareholding to 75.7 per cent.
As
a result of a refinancing in December 2002, in which the Labrador Iron Ore Royalty
Income Fund (LIORF) chose not to participate, Rio Tintos interest in Iron
Ore Company of Canada increased from 56.1 to 58.7 per cent.
The
sale of Rio Tintos 25 per cent interest in Minera Alumbrera Limited in
Argentina, acquired as part of North, together with its wholly owned Peak gold
mine in New South Wales, Australia, was completed in March 2003. The cash consideration
was US$210 million.
Rio
Tinto Zimbabwe sold the Patchway gold mine in 2003. The Framework Agreement signed
with the Government of Indonesia in 2002 for divestment of 51 per cent of Kaltim
Prima Coal (KPC) to Indonesian interests lapsed in 2003 when no assignment of
KPCs offer was made or accepted within the required timeframe.
On 21 July 2003 Rio Tinto and BP announced that they had agreed to sell their interests in KPC for a cash price of US$500 million, including assumed debt, to PT Bumi Resources, a public company listed on the Jakarta and Surabaya Stock Exchanges. The sale was completed on 10 October and each company received 50 per cent of the net proceeds.
Development projects 2004-2005 to date
Rio Tinto invested over US$2.2 billion in 2004 on development projects around the world.
In December 2003, Hamersley Iron announced the US$920 million expansion of its port and mine capacity, with further expenditure on the rail network and power infrastructure being evaluated. In April 2005 a further US$290 million was committed to expand the existing iron ore mines. The partners in the Robe River Joint Venture approved US$214 million (Rio Tinto share US$113 million) to dual track a significant part of the Hamersley Iron rail line. Hamersley Iron will spend a further US$46 million to upgrade power infrastructure in the Pilbara. The port and mine expansions are on track for completion by the end of 2005.
In
January 2004, Rio Tinto approved the expansion of QIT-Fer et Titane Inc.s
upgraded slag (UGS) plant in Quebec, Canada. Total investment will be US$76 million
and capacity will be increased from 250,000 tonnes per year to 325,000 tonnes
per year in 2005.
The owners of the Escondida copper mine in Chile approved expenditure of US$870 million (Rio Tinto share US$270 million) on a sulphide leach project to produce 180,000 tonnes (Rio Tinto share 54,000 tonnes) of copper cathode per annum for more than 25 years starting in the second half of 2006.
Construction of the US$100 million second block cave at the underground Northparkes copper and gold mine in New South Wales, Australia was completed and production commenced in 2004.
Development of the 54 per cent owned Eastern Range iron ore mine in Australia with a capacity of ten million tonnes per year was completed. First shipments started in the first half of 2004.
Expansion
of the Weipa bauxite mine in Queensland, Australia, was completed, resulting
in an increase in production capacity to 16.5 million tonnes per annum. This
supports the requirements of the new Comalco Alumina Refinery. A key component
of the US$150 million expenditure is a 9.5 million tonne beneficiation plant
for ore from the Andoom deposit. In 2005, a new US$42 million power station
will be constructed to service the Weipa mining operations and surrounding
communities.
Construction
of the first stage of Comalcos new alumina refinery at Gladstone, Queensland
commenced in January 2002 and was completed in late 2004, three months early
and in line with its budget of US$750 million. Initial shipments from the
1.4 million tonnes per year plant started in early 2005. There is potential
for the refinery capacity to increase to over four million tonnes per year
in two additional stages when market conditions allow.
Construction
began in January 2003 on an expanded US$200 million HIsmelt® plant
at Kwinana in Western Australia. Cold commissioning commenced in late 2004
and the first hot metal was produced in the hot commissioning process during
the second quarter of 2005. The full production rate of 800,000 tonnes per
year is expected to be achieved in 2007.
Rio Tinto 2004 Form 20-F 13
Approval
was given in 2004 for expansion of the Hail Creek coal mine in Australia to
eight million tonnes per year at a cost of US$157 million. At the Diavik diamond
mine in Canada construction begins in 2005 of a second dike at a cost of US$190
million to enable mining of a third orebody. Also approved was an optimisation
study costing US$75 million including construction of an exploration decline
to investigate underground mining.
Kennecott
Lands Project Daybreak in Utah, US, a mixed use land development on a
1,800 hectare site, started in 2003, with the first land sales in 2004 that
are expected to ramp up over a period of five to six years.
Further
detail on these investments and projects is provided in the operational review
on pages 44 to 67.
Development
projects have been funded using internally generated funds and proceeds of
asset disposals.
Development projects 2002-2003
Work
on the Robe River Joint Ventures US$450 million West Angelas iron ore mine
and port facilities in Western Australia was completed in mid-2002 and the first
shipments were made.
Freeport
Indonesias Deep Ore Zone (DOZ) underground block cave project was declared
fully operational from 1 October 2002. This achieved design capacity of 25,000
tonnes of ore per day in 2002, a year earlier than originally projected. In the
first quarter of 2003, Freeport Indonesia completed a further DOZ expansion to
35,000 tonnes per day at a cost of US$34 million.
The Diavik diamond project in the Northwest Territories, Canada was completed in January 2003 three months early and within budget. Initial production commenced from the contact zone above the orebody with the main orebody accessed during the second half of 2003.
Production
ramp up at Palaboras US$465 million underground copper mine in South Africa
started in 2003 but was constrained by an inability to clear drawpoints blocked
by poorly fragmented, large rocks.
Development
of the Escondida Norte satellite deposit at the 30 per cent owned Escondida copper
mine in Chile was started in June 2003 to provide mill feed to keep Escondidas
capacity above 1.2 million tonnes of copper per year to the end of 2008. First
production is expected by the end of 2005. Commissioning of the new US$1,045
million, 110,000 tonnes of ore per day Laguna Seca concentrator was completed
in the second quarter of 2003.
In 2003, Rio Tinto Coal Australia completed development of the US$255 million Hail Creek coking coal project in Queensland, Australia with an initial capacity of 5.5 million tonnes annually.
BUSINESS ENVIRONMENT AND MARKETS
Competitive environment
Rio Tinto is a major producer in all the metals and minerals markets in which it operates. It is generally among the top five global producers by volume. It has market shares for different commodities ranging from five per cent to 40 per cent. The competitive arena is spread across the globe, including eastern Europe, Russia and China.
Most
of Rio Tintos competitors are private sector companies which are publicly
quoted. Several are, like Rio Tinto, diversified in terms of commodity exposure,
but others are focused on particular commodity segments. Metal and mineral markets
are highly competitive with few barriers to entry. They can be subject to price
declines in real terms reflecting large productivity gains, increasing technical
sophistication, better management, and advances in information technology.
High
quality, long life mineral resources, the basis of good financial returns, are
relatively scarce. Rio Tintos ownership of or interest in some of the worlds
largest deposits enables it to contribute to long term market growth. World production
volumes are likely to grow at least in line with global economic activity. The
emergence of China and eventually India as economic forces requiring metals and
minerals for development could mean even higher market growth.
Economic overview
World economic activity in 2004 grew at the fastest rate since the 1970s, rising to over five per cent from three per cent the year before on a purchasing power parity basis. Trade growth accelerated even faster, to more than eight per cent in real terms, nearly double the rate seen in 2003.
The
increase in economic activity was widely based, led by the US and China which
grew by 4.3 per cent and nine per cent respectively. Japan benefited from
strong exports, which stimulated growth of four per cent. Growth elsewhere
in Asia was also stimulated by exports. Latin America grew by five per cent,
driven by the boom in demand for metals, oil and some agricultural products.
European activity lagged, but higher exports enabled growth to rise to over
two per cent.
Inflation
remained low by historical standards in spite of the large rise in prices
of oil and other commodities. This reflected fierce competition in the manufacturing
sector and generally weak labour markets.
The
US benefited from very low real interest rates and a loose fiscal policy
in the run up to the presidential election. The twin deficits of government
finance and trade increased rapidly. The fact that US growth was based on
borrowing was underscored by the decline in the value of the US dollar, which
fell eight per cent in trade weighted terms, following an 11 per cent fall
in 2003. Some currencies are pegged to the US dollar, notably the Chinese
renminbi, and the fall against freely traded currencies such as the euro
and the Australian dollar was considerably greater.
The
other pillar of global growth was China, with GDP rising by nine per cent.
This was driven by investment in fixed assets, which rose by more than 25
per cent for the second successive year, and industrial output, which grew
more than 16 per cent, also for the second year running.
Rio Tinto 2004 Form 20-F 14
Growth was strongest in the first half and then slowed. This was most notable in Europe and Japan as their currencies strengthened against the US dollar. The picture in China was less clear. Growth there seems to have slowed from the earlier breakneck pace as the government signalled before the middle of the year that it wanted to reduce growth in investment in fixed assets and introduced curbs. Trade with China in many commodities eased considerably in the second half, but other factors including port congestion also contributed.
Commodity markets had already started to improve in 2003, but the acceleration in economic activity and trade in 2004 tipped many of them into a zone of extreme tightness. Prices soared, aided by a declining US dollar. Fund activity fluctuated through the year, but provided strong support for prices overall. Demand for many products grew considerably faster than the world economy. Chinese growth continued to be very commodity intensive, and there was some rebuilding of stocks in the supply chain. Global steel production grew nine per cent, the fastest since 1973.
Copper benefited more than most non ferrous metals from the acceleration in growth, as it was already in deficit and refined output was held back by a series of disruptions to mine output and by smelter capacity. Demand grew by seven per cent, the deficit in refined copper rose sharply and exchange stocks fell below the levels seen in the mid 1990s. Fund buying intensified pricing in a very tight physical market. The average cash LME price rose to US$1.30 per pound from 80 US cents per pound the year before, only just short of the highest ever price in nominal terms (not adjusted for inflation). In contrast, the copper concentrates market, which had been tight for several years, was well supplied in the second half.
The
seaborne iron ore trade continued to grow strongly with Chinas iron ore
imports nearly 40 per cent above their 2003 level. Price increases of nearly
20 per cent early in the year underlined the tightness of the market. The rapid
growth in demand for iron ore caused a shortage of shipping capacity leading
to the highest freight rates ever recorded.
Prices for seaborne thermal coal rose by over 60 per cent. Even a rise of this magnitude, however, did not dampen the market and spot prices remained above the contract settlement price throughout the year. World seaborne thermal coal trade is estimated to have grown by about six per cent during 2004. Coking coal prices rose by less than those of thermal coal but significant increases in demand in Asia meant that some spot cargos were trading at very high prices.
The North American aluminium market improved significantly in 2004 with demand growth of around ten per cent. Combined with demand in China, the primary aluminium market moved into deficit for the first time since 2000. The annual average price of aluminium increased accordingly to 78 US cents per pound in 2004 from 65 US cents the previous year. However, the rise was not as strong as for copper because stocks were higher. The spot price for alumina remained very high by historical standards throughout 2004 reflecting general market tightness and strong demand from Chinese aluminium smelters.
The economic recovery in developed countries, the US in particular, benefited the demand for industrial minerals such as borates and titanium minerals. Demand growth for these products, however, generally continued to fall short of that achieved by metal markets. This was partly due to a lower exposure to the present stage of Chinese growth.
Gold averaged US$409 per ounce, a 16 year nominal high, almost entirely driven by the falling US dollar. Many less widely traded metals also benefited from much higher prices, notably molybdenum, which averaged US$14 per pound for trader oxide, a 25 year nominal high, and silver, which averaged US$6.70 per ounce, up 40 per cent year on year.
A discussion of the financial results for the three years to 31 December 2004 is given in the Financial review on pages 31 to 44.
Comments
on the financial performance of the individual product groups for the three years
to 31 December 2004 are included in the operational review on pages 44 to 67.
Details of production, reserves and information on Group mines are given on pages
17 to 20, A-85 to A-95 and 22 to 26, respectively. Analyses of Rio Tintos
revenues by product group, geographical origin and geographical destination have
been set out in Notes 26 to 27 to the consolidated financial statements on pages
A-39 to A-43.
Marketing
channels
Each business
within each product group is responsible for the marketing and sale of their
respective metal and mineral production. Consequently, Rio Tinto has numerous
marketing channels, which now include electronic marketplaces, with differing
characteristics and pricing mechanisms.
In
general, Rio Tintos businesses contract their metal and mineral production
direct to end users under long term supply contracts and at prevailing market
prices. Typically, these contracts specify annual volume commitments and
an agreed mechanism for determining prices, for example, businesses producing
non ferrous metals and minerals reference their sales prices to the London
Metal Exchange (LME) or other metal exchanges such as the Commodity Exchange
Inc (Comex) in New York. Fluctuations in these prices, particularly for aluminium,
copper and gold, inevitably affect the Groups financial results.
Businesses
producing coal and iron ore would typically reference their sales prices
to annually negotiated industry benchmarks. In markets where international
reference market prices do not exist or are not transparent, businesses negotiate
product prices on an individual customer basis.
Rio
Tintos marketing channels include a network of regional sales offices
worldwide. Some products in certain geographical markets are sold via third
party agents or to major trading companies.
Rio Tinto 2004 Form 20-F 15
Governmental
regulations
Rio
Tinto is subject to extensive governmental regulations affecting all aspects
of its operations and consistently seeks to apply best practice in all of its
activities. Due to Rio Tintos product and geographical spread, there is
unlikely to be any single governmental regulation that could have a material
effect on the Groups
business.
Rio
Tintos businesses in Australia, New Zealand, Papua New Guinea and Indonesia
are subject to state and federal regulations of general application governing
mining and processing, land tenure and use, environmental requirements, workplace
health and safety, trade and export, corporations, competition, foreign investment
and taxation. Some operations are conducted under specific agreements with the
respective governments and associated acts of parliament. In addition, Rio Tintos
uranium operation in the Northern Territory, Australia is subject to specific
regulation in relation to its mining and export of uranium.
US and Canada based operations are subject to local and national regulations governing land use, environmental aspects of operations, product and workplace health and safety and trade and export administration.
The
South African Mineral and Petroleum Resources Development Act 2002, as read with
the Empowerment Charter for the South African Mining Industry, targets the transfer
for fair value of 26 per cent ownership of South African mining assets to historically
disadvantaged South Africans (HDSAs) within ten years. Attached to the Empowerment
Charter is a scorecard by which companies will be judged on their
progress towards empowerment and the attainment of the target transfer of 26
per cent ownership. The scorecard also provides that 15 per cent ownership should
vest in HDSAs within five years of 1 May 2004. The Mineral and Petroleum Royalty
Act, proposed for approval in 2005, will govern state royalties and introduce
new royalty payments in respect of mining tenements in South Africa. The royalty
will be calculated on a gross sales value basis in relation to any minerals extracted,
rather than on the basis of profits generated. The South African government has
confirmed that any such royalties would become payable only from 2009.
Rio Tinto 2004 Form 20-F 16
METALS AND MINERALS PRODUCTION
2002 | 2003 | 2004 | ||||||||||||
Production (a) | Production (a) | Production (a) | ||||||||||||
Rio Tinto | Total | Rio Tinto | Total | Rio Tinto | Total | Rio Tinto | ||||||||
% share (b) | share | share | share | |||||||||||
ALUMINA (000 tonnes) | ||||||||||||||
Comalco Alumina Refinery (Australia) (c) | 100.0 | | | | | 175 | 175 | |||||||
Eurallumina (Italy) | 56.2 | 1,010 | 567 | 1,021 | 573 | 1,064 | 597 | |||||||
Queensland Alumina (Australia) | 38.6 | 3,574 | 1,380 | 3,731 | 1,440 | 3,778 | 1,459 | |||||||
Rio Tinto total | 1,947 | 2,014 | 2,231 | |||||||||||
ALUMINIUM (refined) (000 tonnes) | ||||||||||||||
Anglesey (UK) | 51.0 | 136.8 | 69.8 | 141.9 | 72.4 | 144.8 | 73.8 | |||||||
Bell Bay (Australia) | 100.0 | 163.9 | 163.9 | 166.6 | 166.6 | 162.0 | 162.0 | |||||||
Boyne Island (Australia) (d) | 59.4 | 520.2 | 294.6 | 520.9 | 311.1 | 540.5 | 321.2 | |||||||
Tiwai Point (New Zealand) | 79.4 | 333.9 | 265.9 | 334.4 | 266.5 | 350.3 | 279.5 | |||||||
Rio Tinto total | 794.1 | 816.6 | 836.5 | |||||||||||
BAUXITE (000 tonnes) | ||||||||||||||
Boké (Guinea) (e) | | 12,041 | 482 | 12,060 | 418 | 5,773 | 179 | |||||||
Weipa (Australia) | 100.0 | 11,241 | 11,241 | 11,898 | 11,898 | 12,649 | 12,649 | |||||||
Rio Tinto total | 11,724 | 12,316 | 12,828 | |||||||||||
BORATES (000 tonnes) (f) | ||||||||||||||
Boron mine (US) | 100.0 | 514 | 514 | 541 | 541 | 543 | 543 | |||||||
Borax Argentina (Argentina) | 100.0 | 15 | 15 | 17 | 17 | 22 | 22 | |||||||
Rio Tinto total | 528 | 559 | 565 | |||||||||||
COAL HARD COKING (000 tonnes) | ||||||||||||||
Rio Tinto Coal Australia (g) | ||||||||||||||
Hail Creek Coal (Australia) (h) | 82.0 | | | 883 | 812 | 5,104 | 4,633 | |||||||
Kestrel Coal (Australia) | 80.0 | 2,406 | 1,925 | 1,873 | 1,499 | 2,659 | 2,127 | |||||||
Rio Tinto total hard coking coal | 1,925 | 2,311 | 6,760 | |||||||||||
COAL OTHER* (000 tonnes) | ||||||||||||||
Coal & Allied Industries (i) | ||||||||||||||
Bengalla (Australia) | 30.3 | 5,385 | 1,587 | 6,203 | 1,879 | 5,312 | 1,609 | |||||||
Hunter Valley Operations (Australia) | 75.7 | 12,625 | 9,287 | 12,008 | 9,091 | 13,269 | 10,046 | |||||||
Mount Thorley Operations (Australia) | 60.6 | 4,292 | 2,524 | 3,153 | 1,910 | 3,548 | 2,149 | |||||||
Moura (Australia) (j) | | 2,399 | 959 | | | | | |||||||
Narama (Australia) (j) | | 370 | 135 | | | | | |||||||
Ravensworth East (Australia) (j) | | 387 | 281 | | | | | |||||||
Warkworth (Australia) | 42.1 | 6,882 | 2,817 | 5,868 | 2,469 | 6,954 | 2,926 | |||||||
Total Coal & Allied Industries other coal | 17,590 | 15,348 | 16,729 | |||||||||||
Rio Tinto Coal Australia (g) | ||||||||||||||
Blair Athol (Australia) | 71.2 | 11,809 | 8,412 | 12,480 | 8,890 | 12,229 | 8,712 | |||||||
Kestrel Coal (Australia) | 80.0 | 1,685 | 1,348 | 1,449 | 1,159 | 623 | 499 | |||||||
Tarong Coal (Australia) | 100.0 | 5,685 | 5,685 | 6,538 | 6,538 | 7,004 | 7,004 | |||||||
Total Rio Tinto Coal Australia other coal | 15,445 | 16,587 | 16,214 | |||||||||||
Total Australian other coal | 33,035 | 31,935 | 32,943 | |||||||||||
Kaltim Prima Coal (Indonesia) (k) | | 17,740 | 8,870 | 12,655 | 6,327 | | | |||||||
Kennecott Energy | ||||||||||||||
Antelope (US) | 100.0 | 24,319 | 24,319 | 26,806 | 26,806 | 26,928 | 26,928 | |||||||
Colowyo (US) | (l) | 4,889 | 4,889 | 4,535 | 4,535 | 5,788 | 5,788 | |||||||
Cordero Rojo (US) | 100.0 | 34,724 | 34,724 | 32,671 | 32,671 | 35,233 | 35,233 | |||||||
Decker (US) | 50.0 | 9,021 | 4,511 | 7,358 | 3,679 | 7,831 | 3,916 | |||||||
Jacobs Ranch (US) | 100.0 | 28,784 | 28,784 | 32,418 | 32,418 | 34,979 | 34,979 | |||||||
Spring Creek (US) | 100.0 | 8,093 | 8,093 | 8,069 | 8,069 | 10,892 | 10,892 | |||||||
Total US coal | 105,320 | 108,177 | 117,734 | |||||||||||
Rio Tinto total other coal | 147,225 | 146,439 | 150,677 | |||||||||||
* Coal other includes thermal coal, semi-soft coking coal
and semi-hard coking coal.
See notes on page 20
Rio Tinto 2004 Form 20-F 17
2002 | 2003 | 2004 | |||||||||||
Production (a) | Production (a) | Production (a) | |||||||||||
Rio | Total | Rio | Total | Rio | Total | Rio | |||||||
Tinto | Tinto | Tinto | Tinto | ||||||||||
% share (b) | share | share | share | ||||||||||
COPPER (mined) (000 tonnes) | |||||||||||||
Alumbrera (Argentina) (m) | | 203.7 | 50.9 | 34.9 | 8.7 | | | ||||||
Bingham Canyon (US) | 100.0 | 260.2 | 260.2 | 281.8 | 281.8 | 263.7 | 263.7 | ||||||
Escondida (Chile) | 30.0 | 754.5 | 226.3 | 992.7 | 297.8 | 1,207.1 | 362.1 | ||||||
Grasberg FCX (Indonesia) (n) | | 494.4 | 107.5 | 444.1 | 84.5 | 396.4 | 5.5 | ||||||
Grasberg Joint Venture (Indonesia) (n) | 40.0 | 370.0 | 148.0 | 271.7 | 108.7 | 120.0 | 48.0 | ||||||
Neves Corvo (Portugal) (o) | | 77.2 | 37.8 | 77.5 | 38.0 | 46.9 | 23.0 | ||||||
Northparkes (Australia) | 80.0 | 38.4 | 30.7 | 27.1 | 21.7 | 30.0 | 24.0 | ||||||
Palabora (South Africa) | 49.2 | 52.2 | 25.7 | 52.4 | 25.8 | 54.4 | 26.8 | ||||||
Rio Tinto total | 887.1 | 867.0 | 753.1 | ||||||||||
COPPER (refined) (000 tonnes) | |||||||||||||
Atlantic Copper (Spain) (n) | | 250.5 | 41.5 | 247.1 | 38.1 | 58.4 | 7.0 | ||||||
Escondida (Chile) | 30.0 | 138.7 | 41.6 | 147.6 | 44.3 | 152.1 | 45.6 | ||||||
Kennecott Utah Copper (US) | | 293.7 | 293.7 | 230.6 | 230.6 | 246.7 | 246.7 | ||||||
Palabora (South Africa) | 49.2 | 81.6 | 40.2 | 73.4 | 36.1 | 67.5 | 33.2 | ||||||
Rio Tinto total | 416.9 | 349.1 | 332.6 | ||||||||||
DIAMONDS (000 carats) | |||||||||||||
Argyle (Australia) (p) | 100.0 | 33,519 | 33,503 | 30,910 | 30,910 | 20,620 | 20,620 | ||||||
Diavik (Canada) | 60.0 | | | 3,833 | 2,300 | 7,575 | 4,545 | ||||||
Merlin (Australia) | | 117 | 117 | 62 | 62 | | | ||||||
Murowa (Zimbabwe) (q) | 77.8 | | | | | 47 | 36 | ||||||
Rio Tinto total | 33,620 | 33,272 | 25,202 | ||||||||||
GOLD (mined) (000 ounces) | |||||||||||||
Alumbrera (Argentina) (m) | | 754 | 188 | 124 | 31 | | | ||||||
Barneys Canyon (US) | 100.0 | 75 | 75 | 35 | 35 | 22 | 22 | ||||||
Bingham Canyon (US) | 100.0 | 412 | 412 | 305 | 305 | 308 | 308 | ||||||
Cortez/Pipeline (US) | 40.0 | 1,082 | 433 | 1,085 | 434 | 1,051 | 421 | ||||||
Escondida (Chile) | 30.0 | 126 | 38 | 184 | 55 | 217 | 65 | ||||||
Grasberg FCX (Indonesia) (n) | | 1,375 | 355 | 1,456 | 354 | 1,377 | 14 | ||||||
Grasberg Joint Venture (Indonesia) (n) | 40.0 | 1,655 | 662 | 1,806 | 722 | 207 | 83 | ||||||
Greens Creek (US) | 70.3 | 103 | 72 | 99 | 70 | 86 | 61 | ||||||
Kelian (Indonesia) | 90.0 | 539 | 485 | 469 | 422 | 328 | 295 | ||||||
Lihir (Papua New Guinea) (r) | 14.5 | 607 | 99 | 551 | 88 | 599 | 87 | ||||||
Morro do Ouro (Brazil) (s) | | 225 | 115 | 201 | 103 | 188 | 96 | ||||||
Northparkes (Australia) | 80.0 | 41 | 33 | 49 | 39 | 79 | 63 | ||||||
Peak (Australia) (m) | | 97 | 97 | 20 | 20 | | | ||||||
Rawhide (US) | 51.0 | 82 | 42 | 64 | 32 | 50 | 25 | ||||||
Rio Tinto Zimbabwe (Zimbabwe) (t) | | 38 | 21 | 25 | 14 | 11 | 6 | ||||||
Others | | 17 | 8 | 14 | 7 | 13 | 7 | ||||||
Rio Tinto total | 3,135 | 2,731 | 1,552 | ||||||||||
GOLD (refined) (000 ounces) | |||||||||||||
Kennecott Utah Copper (US) | 100.0 | 488 | 488 | 308 | 308 | 300 | 300 | ||||||
IRON ORE (000 tonnes) | |||||||||||||
Channar (Australia) | 60.0 | 10,594 | 6,356 | 10,347 | 6,208 | 9,759 | 5,855 | ||||||
Corumbá (Brazil) | 100.0 | 858 | 858 | 1,074 | 1,074 | 1,301 | 1,301 | ||||||
Eastern Range (Australia) (u) | | | | | | 2,970 | 2,970 | ||||||
Hamersley Iron (Australia) | 100.0 | 57,563 | 57,563 | 63,056 | 63,056 | 65,407 | 65,407 | ||||||
Iron Ore Company of Canada (Canada) (v) | 58.7 | 12,758 | 7,168 | 14,225 | 8,353 | 11,139 | 6,541 | ||||||
Robe River (Australia) | 53.0 | 35,860 | 19,006 | 45,136 | 23,922 | 48,459 | 25,684 | ||||||
Rio Tinto total | 90,951 | 102,613 | 107,757 | ||||||||||
See notes on page 20 |
Rio Tinto 2004 Form 20-F 18
2002 | 2003 | 2004 | ||||||||||||
Production (a) | Production (a) | Production (a) | ||||||||||||
Rio Tinto | Total | Rio Tinto | Total | Rio Tinto | Total | Rio Tinto | ||||||||
% share (b) | share | share | share | |||||||||||
LEAD (000 tonnes) | ||||||||||||||
Greens Creek (US) | 70.3 | 22.3 | 15.7 | 22.5 | 15.8 | 19.8 | 13.9 | |||||||
Zinkgruvan (Sweden) (w) | | 24.7 | 24.7 | 31.8 | 31.8 | 11.2 | 11.2 | |||||||
Rio Tinto total | 40.4 | 47.6 | 25.1 | |||||||||||
MOLYBDENUM (000 tonnes) | ||||||||||||||
Bingham Canyon (US) | 100.0 | 6.1 | 6.1 | 4.6 | 4.6 | 6.8 | 6.8 | |||||||
NICKEL (mined) (000 tonnes) | ||||||||||||||
Fortaleza (Brazil) (x) | | 6.3 | 6.3 | 6.0 | 6.0 | | | |||||||
NICKEL (refined) (000 tonnes) | ||||||||||||||
Empress (Zimbabwe) (t) | | 6.4 | 3.6 | 6.2 | 3.5 | 2.9 | 1.6 | |||||||
SALT (000 tonnes) | ||||||||||||||
Dampier Salt (Australia) | 64.9 | 7,186 | 4,667 | 7,135 | 4,633 | 7,380 | 4,792 | |||||||
SILVER (mined) (000 ounces) | ||||||||||||||
Bingham Canyon (US) | 100.0 | 3,663 | 3,663 | 3,548 | 3,548 | 3,584 | 3,584 | |||||||
Escondida (Chile) | 30.0 | 2,981 | 894 | 4,728 | 1,418 | 5,747 | 1,724 | |||||||
Grasberg FCX (Indonesia) (n) | | 3,795 | 804 | 3,659 | 745 | 3,077 | 79 | |||||||
Grasberg Joint Venture (Indonesia) (n) | 40.0 | 2,607 | 1,043 | 2,815 | 1,126 | 1,961 | 784 | |||||||
Greens Creek (US) | 70.3 | 10,912 | 7,668 | 11,707 | 8,226 | 9,707 | 6,821 | |||||||
Zinkgruvan (Sweden) (w) | | 1,554 | 1,554 | 1,841 | 1,841 | 651 | 651 | |||||||
Others | | 3,231 | 1,582 | 2,511 | 1,407 | 2,025 | 1,187 | |||||||
Rio Tinto total | 17,207 | 18,311 | 14,830 | |||||||||||
SILVER (refined) (000 ounces) | ||||||||||||||
Kennecott Utah Copper (US) | 100.0 | 4,037 | 4,037 | 2,963 | 2,963 | 3,344 | 3,344 | |||||||
TALC (000 tonnes) | ||||||||||||||
Luzenac Group (Australia/Europe/N. America) (y) | 99.9 | 1,328 | 1,327 | 1,358 | 1,357 | 1,444 | 1,443 | |||||||
TIN (tonnes) | ||||||||||||||
Neves Corvo (Portugal) (o) | | 345 | 169 | 203 | 100 | 120 | 59 | |||||||
TITANIUM DIOXIDE FEEDSTOCK (000 tonnes) | ||||||||||||||
Rio Tinto Iron & Titanium (Canada/South Africa) (z) | 100.0 | 1,274 | 1,274 | 1,192 | 1,192 | 1,192 | 1,192 | |||||||
URANIUM (tonnes U3O8) | ||||||||||||||
Energy Resources of Australia (Australia) | 68.4 | 4,486 | 3,068 | 5,134 | 3,512 | 5,143 | 3,517 | |||||||
Rössing (Namibia) | 68.6 | 2,751 | 1,887 | 2,401 | 1,647 | 3,582 | 2,457 | |||||||
Rio Tinto total | 4,955 | 5,158 | 5,974 | |||||||||||
ZINC (mined) (000 tonnes) | ||||||||||||||
Greens Creek (US) | 70.3 | 66.5 | 46.7 | 69.1 | 48.5 | 62.7 | 44.1 | |||||||
Zinkgruvan (Sweden) (w) | | 48.0 | 48.0 | 64.5 | 64.5 | 29.7 | 29.7 | |||||||
Rio Tinto total | 94.7 | 113.0 | 73.8 | |||||||||||
See notes on page 20 |
Rio Tinto 2004 Form 20-F 19
Production data notes | |
(a) | Mine production figures for metals refer to the total quantity of metal produced in concentrates or doré bullion irrespective of whether these products are then refined onsite, except for the data for iron ore and bauxite which represent production of saleable quantities of ore. |
(b) | Rio Tinto percentage share, shown above, is as at the end of 2004 and has applied over the period 2002 2004 except for those operations where the share has varied during the year and the weighted average for them is shown below. The Rio Tinto share varies at individual mines and refineries in the others category and thus no value is shown. |
Rio Tinto share % | ||||||||
Operation | See Note | 2002 | 2003 | 2004 | ||||
Atlantic Copper | (n) | 16.5 | 15.4 | 12.0 | ||||
Argyle | (p) | 99.9 | 100.0 | 100.0 | ||||
Bengalla | (i) | 29.4 | 30.3 | 30.3 | ||||
Boyne Island | (d) | 56.6 | 59.4 | 59.4 | ||||
Grasberg | (n) | 15.0 | 13.9 | 10.8 | ||||
Hail Creek | (h) | | 92.0 | 90.8 | ||||
Hunter Valley Operations | (i) | 73.6 | 75.7 | 75.7 | ||||
Iron Ore Company of Canada | (v) | 56.2 | 58.7 | 58.7 | ||||
Lihir | (r) | 16.3 | 16.0 | 14.5 | ||||
Mount Thorley Operations | (i) | 58.9 | 60.6 | 60.6 | ||||
Moura | (i) (j) | 40.0 | | | ||||
Narama | (i) (j) | 36.4 | | | ||||
Ravensworth East | (i) (j) | 72.7 | | | ||||
Warkworth | (i) | 41.2 | 42.1 | 42.1 | ||||
(c) | Comalco Alumina Refinery started production in October 2004. |
(d) | Rio Tinto acquired an approximately five per cent additional interest in production from the Boyne Island smelter with effect from August 2002. |
(e) | Rio Tinto completed the sale of its four per cent interest in the Boké mine on 25 June 2004. Production data are shown up to the date of sale. |
(f) | Borate quantities are expressed as B2O3 |
(g) | Rio Tinto Coal Australia was previously known as Pacific Coal. |
(h) | Hail Creek commenced production in the third quarter of 2003. Rio Tinto reduced its shareholding in Hail Creek from 92.0 per cent to 82.0 per cent on 15 November 2004. |
(i) | Rio Tinto increased its stake in Coal & Allied Industries from 72.7 per cent to 75.7 per cent during September 2002. |
(j) | On 14 March 2002, Coal & Allied completed the sale of its interests in Narama and Ravensworth. Coal & Allied sold its interest in the Moura coal mine with effect from 24 May 2002. Production data are shown up to the dates of sale. |
(k) | Rio Tinto had a 50 per cent share in Kaltim Prima and, under the terms of its Coal Agreement, the Indonesian Government was entitled to a 13.5 per cent share of Kaltim Primas production. Rio Tintos share of production shown is before deduction of the Government share. Rio Tinto completed the sale of its interest in PT Kaltim Prima Coal on 10 October 2003. Production data are shown up to the date of sale. |
(l) | Kennecott Energy has a partnership interest in the Colowyo mine but, as it is responsible under a management agreement for the operation of the mine, all of Colowyos output is included in Rio Tintos share of production. |
(m) | Rio Tinto completed the sale of its 25 per cent interest in Minera Alumbrera together with its wholly owned Peak gold mine on 17 March 2003. Production data are shown up to the date of sale. |
(n) | From mid 1995 until 30 March 2004, Rio Tinto held 23.93 million shares of Freeport-McMoRan-Copper & Gold (FCX) common stock from which it derived a share of production. This interest was sold on 30 March 2004. Also, through a joint venture agreement with FCX, Rio Tinto is entitled, as shown separately in the above tables, to 40 per cent of additional material mined as a consequence of expansions and developments of the Grasberg facilities since 1998. |
(o) | Rio Tinto completed the sale of its 49 per cent interest in Somincor on 18 June 2004. Production data are shown up to the date of sale. |
(p) | Rio Tintos interest in Argyle Diamonds increased from 99.8 per cent to 100 per cent on 29 April 2002, following the purchase of the outstanding units in the Western Australian Diamond Trust. |
(q) | Ore mining and processing at Murowa commenced during the third quarter of 2004. |
(r) | Following a placement of shares on 13 November 2003, Rio Tintos interest in Lihir moved from 16.3 per cent to 14.5 per cent. |
(s) | Rio Tinto sold its interest in Morro do Ouro on 31 December 2004. Production data are shown up to the date of sale. |
(t) | As a result of the corporate restructuring completed on 8 July 2004, Rio Tinto has ceased to be an ordinary shareholder in the renamed RioZim but will retain a reduced cash participation in its gold and nickel assets for a period of ten years. |
(u) | Rio Tintos share of production includes 100 per cent of the production from the Eastern Range mine, which commenced production in March 2004. Under the terms of the joint venture agreement, Hamersley Iron manages the operation and is obliged to purchase all mine production from the joint venture. |
(v) | Rio Tinto increased its shareholding in Iron Ore Company of Canada from 56.1 per cent to 58.7 per cent on 20 December 2002. |
(w) | Rio Tinto completed the sale of its 100 per cent interest in the Zinkgruvan mine on 2 June 2004. Production data are shown up to the date of sale. |
(x) | Rio Tinto completed the sale of its 100 per cent interest in the Fortaleza nickel mine on 16 January 2004. This was effective from 1 January 2004. |
(y) | Talc production includes some products derived from purchased ores. |
(z) | Quantities comprise 100 per cent of QIT and 50 per cent of Richards Bay Minerals production. |
ORE RESERVES
Ore reserves prepared in accordance with Industry Guide 7 under the Unites States Securities Act of 1933 have been set out on pages A-85 to A-95.
Rio Tinto 2004 Form 20-F 20
GROUP OPERATIONS (wholly owned unless stated otherwise)
![]() |
ALUMINIUM | COPPER AND GOLD | IRON ORE | TALC | ||||
Operating sites | Operating sites | Operating sites | Operating sites | ||||
1 | Anglesey Aluminium (51%) | 20 | Bougainville (not operating) | 33 | Corumbá | (only major sites are | |
2 | Bell Bay | (54%) | 34 | Hamersley Iron mines: | shown) | ||
3 | Boyne Island (59%) | 21 | Cortez/Pipeline (40%) | Brockman | 44 | Ludlow | |
3 | Comalco Alumina Refinery | 22 | Escondida (30%) | Marandoo | 45 | Talc de Luzenac (99.9%) | |
3 | Gladstone Power Station | 23 | Grasberg joint venture (40%) | Mt Tom Price | 46 | Yellowstone | |
(42%) | 24 | Kelian (90%) | Paraburdoo | 47 | Three Springs | ||
3 | Queensland Alumina (39%) | 19 | Kennecott Utah Copper | Yandicoogina | |||
4 | Eurallumina (56%) | 25 | Lihir (14%) | Channar (60%) | TITANIUM DIOXIDE | ||
5 | Tiwai Point (79%) | 26 | Northparkes (80%) | Eastern Range (54%) | FEEDSTOCK | ||
6 | Weipa | 27 | Palabora (49%) | 35 | Iron Ore Company of | Operating sites | |
28 | Rawhide (51%) | Canada (59%) | 48 | QIT-Fer et Titane Lac Allard | |||
BORATES | 34 | Robe River mines: (53%) | 49 | QIT-Fer et Titane Sorel | |||
Operating sites | Projects | West Angelas | Plant | ||||
7 | Boron | 29 | Resolution (55%) | Pannawonica | 50 | Richards Bay Minerals (50%) | |
8 | Coudekerque Plant | ||||||
9 | Tincalayu | DIAMONDS | Projects | Projects | |||
10 | Wilmington Plant | Operating sites | 36 | HIsmelt® (60%) | 51 | QIT Madagascar Minerals | |
30 | Argyle | 37 | IOC Pellet Plant (59%) | (80%) | |||
COAL | 31 | Diavik (60%) | 38 | Simandou | |||
Operating sites | 32 | Murowa (78%) | 39 | Orissa (51%) | URANIUM | ||
11 | Antelope | Operating sites | |||||
12 | Bengalla (30%) | NICKEL | 52 | ERA (68%) | |||
13 | Blair Athol (71%) | Projects | 53 | Rössing (69%) | |||
14 | Colowyo (20%) | 40 | Eagle | ||||
11 | Cordero Rojo | ZINC, LEAD, SILVER | |||||
15 | Decker (50%) | POTASH | Operating sites | ||||
13 | Hail Creek (82%) | Projects | 54 | Greens Creek (70%) | |||
16 | Hunter Valley Operations | 41 | Rio Colorado Potash | ||||
(76%) | |||||||
11 | Jacobs Ranch | SALT | |||||
17 | Kestrel (80%) | Operating sites | |||||
16 | Mt Thorley Operations | 42 | Dampier (65%) | ||||
(61%) | 43 | Lake MacLeod (65%) | |||||
15 | Spring Creek | 42 | Port Hedland (65%) | ||||
18 | Tarong | ||||||
16 | Warkworth (42%) | ![]() |
Mines and mining projects | ||||
Projects | ![]() |
Smelters, refineries and | |||||
13 | Clermont (50%) | processing plants remote | |||||
12 | Mt Pleasant (76%) | from mine |
Rio Tinto 2004 Form 20-F 21
INFORMATION ON GROUP MINES (wholly owned unless stated otherwise)
Mine | Location | Access | Title/lease | |||
ALUMINIUM | ||||||
Comalco | Weipa, Queensland, Australia | Road, air, and port | Queensland Government lease expires in 2041 with 21 year extension, then two years notice of termination | |||
COPPER | ||||||
Escondida (30%) | Atacama Desert, Chile | Pipeline and road to deep sea port at Coloso | Rights conferred by Government under Chilean Mining Code | |||
Grasberg (40% joint venture) | Papua, Indonesia | Pipeline, road and port | Indonesian Government Contracts of Work expire in 2021 with two ten year extensions | |||
Kennecott Minerals | Nevada, US | Road | Patented and unpatented mining claims | |||
Cortez/Pipeline (40%) | ||||||
Kennecott Minerals | Alaska, US | Port | Patented and unpatented mining claims | |||
Greens Creek (70%) | ||||||
Kennecott Utah Copper | Near Salt Lake City, Utah, US | Pipeline, road and rail | Owned | |||
Bingham Canyon | ||||||
Northparkes (80%) | Goonumbla, New South | Road and rail | State Government mining lease issued in 1991 for 21 years | |||
Wales, Australia | ||||||
Palabora (49%) | Phalaborwa, Northern | Rail and road | Lease from South African Government until deposits exhausted and base metal claims owned by Palabora | |||
Province, South Africa | ||||||
DIAMONDS | ||||||
Diavik (60%) | Northwest Territories, Canada | Air, ice road in winter | Mining leases from Canadian federal government | |||
Argyle Diamonds | Kimberley Ranges, Western Australia | Road and air | Mining tenement held under Diamond (Argyle Diamond Mines Joint Venture) Agreement Act 1981-83; lease extended for 21 years from 2004 | |||
Murowa (78%) | Zvishavane, Zimbabwe | Road and air | Claims and mining leases | |||
ENERGY | ||||||
Coal & Allied Industries | New South Wales, Australia | Road, rail and port | Leases granted by State | |||
(76%) | ||||||
Bengalla (30%) | ||||||
Hunter Valley Operations | ||||||
(76%) | ||||||
Mount Thorley (61%) | ||||||
Warkworth (42%) | ||||||
Energy Resources of | Northern Territory, Australia | Road | Leases granted by State | |||
Australia (68%) | ||||||
Ranger | ||||||
Rio Tinto 2004 Form 20-F 22
Mine | History | Type of mine | Power source | |||
ALUMINIUM | ||||||
Comalco | Bauxite mining commenced in 1961; Major upgrade completed in 1998 to incorporate Alcans adjacent Ely reserve in overall mining plan; Rio Tinto interest increased from 72.4% to 100% in 2000; In 2004 a mine expansion was completed to lift annual capacity to16.5 million tonnes | Open cut | On site generation; new power station under construction | |||
COPPER | ||||||
Escondida (30%) | Production started in 1990 and expanded in phases to 2002 when new concentrator was completed; approval in 2003 for Norte project | Open pit | Supplied from SING grid under two contracts with Norgener to 2008 | |||
Grasberg (40% joint venture) | Joint venture interest acquired 1995; capacity expanded to over 200,000 tonnes of ore per day in 1998 with addition of underground production of more than 35,000 tonnes per day in 2003 | Open pit and underground | Long term contract with US-Indonesian consortium operated, | |||
Kennecott Minerals | Gold production started at Cortez in 1969; Pipeline in 1997 | Open pit | Public utility | |||
Cortez/Pipeline (40%) | ||||||
Kennecott Minerals | Redeveloped in 1997 | Underground/drift and fill | On site diesel generators | |||
Greens Creek (70%) | ||||||
Kennecott Utah Copper Bingham Canyon |
Interest acquired in 1989; modernisation includes smelter complex and expanded tailings dam | Open pit | On site generation supplemented by long term contracts with Utah Power and Light | |||
Northparkes (80%) | Interest acquired in 2000; production | Open pit and underground | Supplied from State grid | |||
started in 1995 | ||||||
Palabora (49%) | Development of 20 year underground mine commenced 1996 with open pit closure in 2003 | Open pit and underground | Supplied by ESKOM via grid | |||
DIAMONDS | ||||||
Diavik (60%) | Deposits discovered 1994-1995; construction approved 2000; diamond production started 2003 | Open pit to underground | On site diesel generators; installed capacity 27MW | |||
Argyle Diamonds | Studies into further development options, including underground mining, continue; interest increased from 59.7% following purchase planned of Ashton Mining in 2000 | Open pit to underground | Long term contract with Ord Hydro Consortium and on site generation back up | |||
Murowa (78%) | Discovered 1997; small scale production started 2004 Open pit | Supplied by ZESA | ||||
ENERGY | ||||||
Coal & Allied Industries | Lemington acquired late 2000 and integrated with Hunter Valley Operations. Peabody Australian interests acquired in 2001. Moura, Narama and Ravensworth interests divested in 2002 | Open cut | State owned grid | |||
(76%) | ||||||
Bengalla (30%) | ||||||
Hunter Valley Operations | ||||||
(76%) | ||||||
Mount Thorley (61%) | ||||||
Warkworth (42%) | ||||||
Energy Resources of | Mining commenced 1981; interest acquired through North in 2000 | Open pit | On site diesel / steam power generation | |||
Australia (68%) | ||||||
Ranger | ||||||
Rio Tinto 2004 Form 20-F 23
Mine | Location | Access | Title/lease | |||
ENERGY | ||||||
Kennecott Energy | Wyoming, Montana and Colorado, US | Rail and road | Leases from US and State Governments and private parties, with minimum coal production levels, and adherence to permit requirements and statutes | |||
Antelope | ||||||
Colowyo (20%) | ||||||
Cordero Rojo | ||||||
Decker (50%) | ||||||
Jacobs Ranch | ||||||
Spring Creek | ||||||
Rio Tinto Coal Australia | Queensland, Australia | Conveyor, road, rail and port | Leases granted by State | |||
Blair Athol (71%) | ||||||
Kestrel (80%) | ||||||
Hail Creek (82%) | ||||||
Tarong | ||||||
Rössing Uranium (69%) | Namib Desert, Namibia | Rail, road and port | Federal lease | |||
INDUSTRIAL MINERALS | ||||||
Boron | California, US | Road, rail and port | Owned | |||
Dampier Salt (65%) | Dampier, Lake MacLeod and Port Hedland, Western Australia | Road and port | Mining leases expiring in 2013 at Dampier, 2018 at Port Hedland and2021 at Lake MacLeod with options to renew in each case | |||
Luzenac | Trimouns, France (other smaller operations in Australia, Europe and North America) | Road and rail | Owner of ground (orebody) and long term lease agreement to 2012 | |||
QIT-Fer et Titane | Saguenay County, Quebec ,Canada | Rail and port (St Lawrence River) | Mining covered by two Concessions granted by State in 1949 and 1951 which, subject to certain Mining Act restrictions, confer rights and obligations of an owner | |||
Richards Bay Minerals (50%) |
Richards Bay, KwaZulu- Natal, South Africa | Rail, road and port | Long term renewable leases; State lease for Reserve 4 initially runs to end 2022; Ingonyama Trust lease for Reserve 10 runs to 2010 | |||
IRON ORE | ||||||
Hamersley Iron | Hamersley Ranges, Western Australia | Railway (owned by Hamersley Iron and operated by Pilbara Rail Company) and port (owned by Hamersley Iron and operated by Pilbara Iron) | Agreements for life of mine with Government of Western Australia | |||
Brockman | ||||||
Marandoo | ||||||
Mount Tom Price | ||||||
Paraburdoo | ||||||
Yandicoogina | ||||||
Channar (60%) | ||||||
Eastern Range (54%) | ||||||
Iron Ore Company of | Labrador City, Province of Labrador and Newfoundland | Railway and port facilities in Sept-Iles, Quebec (owned and operated by IOC) | Sublease with the Labrador Iron Ore Royalty Income Fund which has lease agreements with the Government of Newfoundland and Labrador that are due to be renewed in 2020 and 2022 | |||
Canada (59%) | ||||||
(Rio Tinto also holds a 19% | ||||||
interest in the Labrador Iron | ||||||
Ore Royalty Income Fund | ||||||
which owns 15.1% of IOC) | ||||||
Robe River (53%) | Pilbara region, Western Australia | Railway (owned by Robe River Iron Associates and operated by Pilbara Rail Company) and port (owned by Robe River Iron Associates and operated by Pilbara Iron) | Agreements for life of mine with Government of Western Australia | |||
Mesa J | ||||||
West Angelas | ||||||
Rio Tinto Brasil | Matto Grosso do Sul, Brazil | Road, air and river | Government licence for undetermined period | |||
Corumbá | ||||||
OTHER | ||||||
Kelian (90%) | Kalimantan, Indonesia | Road, river and port | Contract of Work with Indonesian Government for 30 years | |||
Lihir Gold (14%) | Lihir Island, Papua New Guinea | Own road, airstrip and port | Special Mining Lease with Papua New Guinea Government expires in 2035 | |||
Rio Tinto 2004 Form 20-F 24
Mine | History | Type of mine | Power source | |||
ENERGY | ||||||
Kennecott Energy | Antelope, Spring Creek, Decker and Cordero acquired in 1993, Colowyo in 1995, and Jacobs Ranch in 1998; additional North Jacobs Ranch reserves purchased in 2002; West Antelope additional reserves 2004 | Open cut | Supplied by IPPs and Cooperatives through national grid service | |||
Antelope | ||||||
Colowyo (20%) | ||||||
Cordero Rojo | ||||||
Decker (50%) | ||||||
Jacobs Ranch | ||||||
Spring Creek | ||||||
Rio Tinto Coal Australia | Production started for export at Blair Athol and adjacent power station at Tarong in 1984. Kestrel acquired and recommissioned in 1999. Hail Creek production commenced 2003 | Open cut (Blair Athol, Tarong and Hail Creek) and underground (Kestrel) | State owned grid | |||
Blair Athol (71%) | ||||||
Kestrel (80%) | ||||||
Hail Creek (82%) | ||||||
Tarong | ||||||
Rössing Uranium (69%) | Production began in 1978 | Open pit | Namibian National Power | |||
INDUSTRIAL MINERALS | ||||||
Boron | Mine redesign project completed on budget and schedule in 2000 | Open pit | On site cogeneration units | |||
Dampier Salt (65%) | Construction of the Dampier field started in 1969; first shipment in 1972. Lake MacLeod was acquired in 1978 as an operating field | Solar evaporation of seawater (Dampier and Port Hedland) and underground brine (Lake MacLeod); dredging of gypsum from surface of Lake MacLeod | Dampier supply from Hamersley Iron Power; Lake MacLeod from Western Power and on site generation units; Port Hedland from Western Power | |||
Luzenac | Production started in 1885; acquired in 1988. (Australian mine acquired in 2001) | Open pit | Supplied by EdF and on site generation units | |||
QIT-Fer et Titane | Production started 1950; interest acquired in 1989 | Open pit | Long term contract with Quebec Hydro | |||
Richards Bay Minerals | Production started 1977; interest acquired 1989; fifth dredge commissioned 2000 | Beach sand dredging | Contract with ESCOM | |||
(50%) | ||||||
IRON ORE | ||||||
Hamersley Iron | Annual capacity increased to 68 million tonnes during 1990s; Yandicoogina first ore shipped in 1999 and port capacity increased; Eastern Range mine started 2004 | Open pits | Supplied by Hamersley Iron Power | |||
Brockman | ||||||
Marandoo | ||||||
Mount Tom Price | ||||||
Paraburdoo | ||||||
Yandicoogina | ||||||
Channar (60%) | ||||||
Eastern Range (54%) | ||||||
Iron
Ore Company of Canada (59%) (Rio Tinto also holds a 19% interest in the Labrador Iron Ore Royalty Income Fund which owns 15.1% of IOC) |
Current operation began in 1962 and has processed over one billion tonnes of crude ore since; annual capacity now 17.5 million tonnes of concentrate of which 12.5 million tonnes can be pelletised. Interest acquired in 2000 through North | Open pit | Supplied by Newfoundland Hydro under long term contract | |||
Robe River (53%) | First shipment in 1972; annual sales reached 30 million tonnes in late 1990s; interest acquired in 2000 through North; West Angelas first ore shipped in 2002 and port capacity increased | Open pit | Supplied by Robe River Iron Associates; West Angelas supplied by Hamersley Iron Power | |||
Mesa J | ||||||
West Angelas | ||||||
Rio Tinto Brasil | Iron ore production started 1978; interest acquired in 1991 | Open pit | Supplied by ENERSUL | |||
Corumbá | ||||||
OTHER | ||||||
Kelian (90%) | Gold production started in 1992 and will cease in 2005 | Open pit | Kelians own 29MW generating station with six identical 4.9MW rated units | |||
Lihir Gold (14%) | Production started in 1997; refinancing in 1999 and merger with Niugini Mining in 2000 | Open pit | 12 diesel unit power plant, four steam wells (geothermal power) producing ten per cent of requirements | |||
Rio Tinto 2004 Form 20-F 25
INFORMATION ON GROUP SMELTERS, REFINERIES AND PROCESSING PLANTS
(wholly owned unless stated otherwise)
Smelter, refinery or plant | Location | Title/lease | Plant type/product | Capacity | ||||
ALUMINIUM GROUP | ||||||||
Anglesey Aluminium (51%) | Holyhead, Anglesey, Wales | 100% Freehold | Aluminium smelter producing aluminium billet, block, sow | 145,000 tonnes per year aluminium | ||||
Bell Bay | Bell Bay, Northern Tasmania, Australia | 100% Freehold | Aluminium smelter producing aluminium ingot, block, t-bar | 167,000 tonnes per year aluminium | ||||
Boyne Smelters (59%) | Boyne Island, Queensland, Australia | 100% Freehold | Aluminium smelter producing aluminium ingot, billet, t-bar | 541,000 tonnes per year aluminium | ||||
Comalco Alumina Refinery | Gladstone, Queensland, Australia | 97% Freehold | Refinery producing alumina | 1,400,000 tonnes per year alumina | ||||
3% Leasehold | ||||||||
Eurallumina (56%) | Portoscuso, Sardinia, Italy | 39% Freehold | Refinery producing alumina | 1,065,000 tonnes per year alumina | ||||
61% Leasehold | ||||||||
Gladstone Power Station (42%) | Gladstone, Queensland, Australia | 100% Freehold | Thermal power station | 1,680 megawatts | ||||
New Zealand | Tiwai Point, Southland, New Zealand | 19.6% Freehold | Aluminium smelter producing aluminium ingot, billet, t-bar | 350,000 tonnes per year aluminium | ||||
Aluminium Smelters (NZAS) (79%) | 80.4% Leasehold | |||||||
Queensland Alumina (39%) | Gladstone, Queensland, Australia | 73.3% Freehold | Refinery producing alumina | 3,778,000 tonnes per year alumina | ||||
26.7% Leasehold | ||||||||
COPPER GROUP | ||||||||
Kennecott Utah Copper | Magna, Salt Lake City, Utah, US | 100% Freehold | Flash smelting furnace / Flash convertor furnace copper refinery | 335,000 tonnes per year refined copper | ||||
Palabora (49%) | Phalaborwa, South Africa | 100% Freehold | Reverberatory Pierce Smith copper refinery | 130,000 tonnes per year refined copper | ||||
INDUSTRIAL MINERALS | ||||||||
Boron | California, US | 100% Freehold | Borates refinery | 584,000 tonnes per year boric oxide | ||||
QIT-Fer et Titane Sorel Plant | Sorel-Tracy, Quebec, Canada | 100% Freehold | Ilmenite smelter | 1,100,000 tonnes per year titanium dioxide slag, 900,000 tonnes per year iron | ||||
Richards Bay Minerals (50%) | Richards Bay, South Africa | 100% Freehold | Ilmenite smelter | 1,060,000 tonnes per year titanium dioxide slag | ||||
IRON ORE GROUP | ||||||||
Hlsmelt® (60%) Kwinana, Western Australia |
100% Leasehold | Hlsmelt® ironmaking plant producing pig iron | 800,000 tonnes per year pig iron | |||||
IOC Pellet Plant (59%) | Labrador City, Newfoundland, Canada | 100% Subleased land | Pellet induration furnaces producing multiple iron ore pellet types | 12,500,000 tonnes per year pellet | ||||
Rio Tinto 2004 Form 20-F 26
Item 5. Operating and Financial Review and Prospects
CHAIRMANS LETTER
Dear shareholder
The recovery in the global economy that gathered momentum in 2003 continued in 2004. As a result of strong demand across our portfolio of metals and minerals, accompanied by increased prices, we achieved a record financial performance.
An important factor has been the strength in metal and minerals demand in the US and Asia, where China has been prominent but markets in Japan and elsewhere have also recovered. Rio Tinto holds a long established position in these markets; 40 years in the case of Japan and 30 years in China. Our strong position today reflects these long term customer relationships.
Chinas rapid economic development has led to the adoption by the Government of measures to achieve more balanced growth in the economy. However, we continue to believe that Chinas
growth trend will remain well above the global average in the years ahead.
In 2004, commodity prices were higher across the board and the US dollar was more stable against our main producing currencies than in 2003. Adjusted earnings* were a record US$2,221 million, US$839 million or 61 per cent above 2003 and exceeding the previous high of US$1,662 million achieved in 2001. Net earnings were US$2,813 million, or 204 US cents per share, including a US$592 million net gain on exceptional items.
Total cash flow from operations including dividends from joint ventures and associates at US$4,449 million was also a record and 28 per cent higher than 2003. An active portfolio management programme, focused on the disposal of non core assets, generated an additional US$1.5 billion in cash. This has further strengthened our balance sheet, allowing us to undertake a major capital investment programme.
While our record financial performance reflects the strong markets for our products, it also underlines the quality of our asset portfolio which has been developed over many years on the basis of a long term commitment to shareholder value.
Investments
over recent years have created a platform for earnings growth. This, coupled
with a positive view of future growth prospects, has given the board confidence
to increase our annual dividend to 77 US cents per share for 2004 an increase
of 20 per cent from 2003. This also means that the 2005 interim dividend payable
in September can be expected to be 38.5 US cents per share. We intend to maintain
our progressive dividend policy from this higher baseline. The board has also
decided the current strength of the Groups cash flow means that in addition to comfortably funding the current and planned investments, capital can be returned to shareholders without reducing our flexibility to pursue other development opportunities. Subject to market conditions, Rio Tintos
intention, therefore, is to return up to US$1.5 billion of capital to shareholders
during the course of 2005 and 2006 through share buyback programmes.
A
sustainable business also requires commitment to social and environmental performance
alongside delivery of consistently strong financial results. While much remains
to be done in this area we are very encouraged by an increasingly productive
dialogue with stakeholder organisations. Our sustainable development programmes
are responding positively to a range of issues including biodiversity, climate
change and HIV/AIDS. The Groups social and environmental contribution helps
to sustain our pipeline of project opportunities in many countries and has a
business case which I believe is compelling.
The
year 2005 will see the tenth anniversary of the formation of Rio Tintos dual listed structure and unified management, which has fully met its objectives and continues to provide great strength to Rio Tintos
operations and governance.
It
is with great sadness I report the sudden death on 27 January 2005 of Bob Adams,
our executive director for planning and development. Bob was a major contributor
to Rio Tintos growth over 35 years, having joined our planning department
in 1970. He was a key figure in building Rio Tinto into a leading international
mining group. He was respected and liked by all who knew him and his wise counsel
and advice will be sorely missed.
At our forthcoming annual meetings we shall see the retirement of Sir Richard Giordano, Leon Davis and John Morschel, all of whom have been outstanding contributors to the board and to our continuing success. I should particularly like to thank Dick and Leon as deputy chairmen for the support they have given me in my initial period as chairman. Their long experience of the Group has been invaluable in a transition period.
We recently welcomed three new colleagues to the board. Richard Goodmanson, executive vice president and chief operating officer of DuPont, was appointed on 1 December 2004.
Ashton Calvert, former secretary of the Department of Foreign Affairs and Trade of the Government of Australia, and Vivienne Cox, executive vice president of BP plc for Integrated Supply and Trading and also for Gas Power and Renewables, were both appointed on 1 February 2005. Each of them will add to the overall skill and experience of the Rio Tinto boards which is a vital underpinning of our high standard of corporate governance.
Looking forward, we expect to see continuing underlying demand growth for metals and minerals despite some economic uncertainties in 2005. We are now beginning to see a supply response to higher prices but this will take some time to impact on the currently tight markets. While prices may ease from current levels in 2005 we expect they will generally remain above the long term trend. The future direction of the US dollar remains a significant uncertainty and, as was the case in 2003, could have a major impact on earnings.
Rio Tinto 2004 Form 20-F 27
In 2004 I had the opportunity to visit many of our operating locations. I have been impressed not only with the scale and complexity of the operations themselves but the depth of management and skill with which they are operated. I would therefore like to acknowledge the hard work and dedication of the Groups employees throughout the world in 2004. Their commitment to Rio Tintos core values underpins the strong results they continue to deliver for shareholders.
Paul Skinner
Chairman
24 February 2005
*Adjusted earnings excludes the effect of exceptional items of such magnitude that their exclusion is necessary in order that adjusted earnings fulfil their purpose of reflecting the Groups underlying performance. A reconciliation to net earnings can be found on pages A-2.
CHIEF EXECUTIVES REPORT
Note: Product group earnings are stated before exceptional items, net interest, exploration and evaluation costs and other central items. A reconciliation is shown on page A-63.
We saw very strong demand across our product range in 2004. This momentum is expected to continue into 2005 though it may be affected by the uncertainties of the US economy and the rate of growth in China. Good market conditions enable us to increase focus on capital management. Our record cash flow gives us considerable options for further organic growth based on our large reserve and resource position.
Operating performance
Product group earnings, excluding exceptional items, were a record US$2,544 million, compared with US$1,584 million in 2003.
Higher metal and mineral prices and greater output from new projects were the main reasons for the strong result. Improved prices, mainly for copper, aluminium, iron ore and coal, combined with additional output from new or expanded projects such as Diavik in Canada (diamonds), Eastern Range, West Angelas and Hail Creek in Australia (iron ore and coking coal), and Escondida in Chile (copper).
The depreciation of the US dollar against most major currencies had an effect on earnings, as did higher operating costs. While the mining industry benefits from higher prices received for the commodities we produce, as a business we also incur higher prices for consumables used in our operations.
To
address cost factors more rigorously, we are evolving our business processes
to take advantage of Rio Tintos scale and to share leading practices around
the Group as key levers to creating value. We have been successful in applying
these principles in our information technology, procurement and shipping activities.
We are working to extend greater capability and sharing of expertise to mining
and processing operations, asset management and marketing, to maximise value
on several fronts.
Rio Tinto 2004 Form 20-F 28
In 2004 I announced a major reallocation of product group responsibilities. With the retirement of David Klingner as head of Exploration and Chris Renwick as chief executive, Iron Ore, Tom Albanese moved to Copper and Exploration, Sam Walsh to Iron Ore, Oscar Groeneveld to Aluminium, and Andrew Mackenzie was recruited to be chief executive Industrial Minerals. Preston Chiaro and Keith Johnson continue as chief executives of Energy and Diamonds respectively. Both David Klingner and Chris Renwick spent most of their working lives with Rio Tinto, each with 35 years service, making very valuable contributions in several areas of the business.
Strategy
Earlier
this year the board discussed Rio Tintos strategic direction to provide a framework for our medium term decisions. The discussion reaffirmed our focus on mining operations to produce minerals and metals. Furthermore, we recognised that medium term growth will be biased towards growth from within the
development of brownfield and greenfield projects inherent in our existing assets.
The
Group has long maintained a commitment to exploration. I believe this is an increasingly
important source of competitive advantage. The Groups diversity and strength,
particularly in Australia and North America, enable us to increase our involvement
in less familiar territories of the world should opportunities present themselves.
The centre of gravity of our operations has been firmly in the OECD countries where historically we have found the most opportunities. This need not always be the case. The generation of options globally is an important pathway to growth and we possess the technical, community and environmental management capabilities to do so. Also, a key building block will remain our ability to bring well thought out projects to fruition on time without compromising their performance.
A more competitive mining industry is developing and Rio Tinto needs to improve faster to keep ahead. Our fundamental strategy will not change as it has stood the test of time, but we contemplate some changes in emphasis. We will continue to focus on large, long life, low cost operations and run them efficiently. Our growth will largely come from our existing operations and reserves, supplemented by opportunistic mergers, acquisitions, structures and alliances, where these make sense.
While
historically the decentralised model of Rio Tinto has delivered enormous benefits,
to keep improving we are putting greater emphasis on Rio Tintos global
scale and specialist skills. We need to continue to improve how we operate, recognising
that operational excellence and commercial acumen go hand in hand.
New projects
Over
2005 and 2006, we plan to spend up to US$6 billion on new projects. We have many
potential investment options including opportunities in alumina, coal, iron ore,
industrial minerals, diamonds and copper. Most of these relate to the large,
long life assets we already own. We believe these provide our primary route to
value growth and should represent the priority use of shareholders funds.
We have recently completed three development projects. Currently we have ten under way, and three more were approved late in 2004. In addition, we have development studies progressing on 15 more projects. Our level of success reflects efforts we have made over a number of years and is a tangible result of our commitment to exploration.
Over
the past year we have transferred five projects from exploration to the product
groups where the necessary skills can be applied to take them through to the
next level of evaluation. These projects in copper, iron ore, nickel, gold and potash emphasise
the continuity of our growth potential for the medium term.
With a strong market, the outlook for our iron ore businesses remains exciting. The expansion of capacity in Western Australia at a cost of US$1,300 million is the single largest project investment we have made in many years. The major elements of the programme are on track for completion by the end of 2005 with the result that Rio Tinto expects to have a managed capacity of over 170 million tonnes of iron ore per year.
The expansion is part of a major capital expenditure programme in Western Australia that also includes the US$200 million HIsmelt® iron making plant that will be commissioned early in 2005 after more than 20 years of research and development. The Comalco Alumina Refinery in Australia was successfully commissioned in the fourth quarter of 2004 and made its first shipment to China ahead of schedule.
The Hail Creek coking coal mine reached its capacity of 5.5 million tonnes per annum in 2004 well ahead of our original expectations. An expansion of capacity to eight million tonnes is already under way for completion by 2006. This is an excellent example of how our focus on assets with large reserves gives us options to expand in line with demand. It is a large, high quality resource with reserves of nearly 200 million tonnes. Hail Creek also illustrates the value of patience and thoroughness; it was under study on and off for 30 years.
The success
of the Diavik diamond project in Canada, where overall performance has
comfortably exceeded expectations, prompted us to bring forward development
of a second orebody to help sustain the advantages that have been created.
Development will necessitate construction of a second dike. Mining of the
second orebody is scheduled to begin in early 2008. A study is also under
way into the viability of underground mining, including the construction
of an exploration decline.
During 2004, we continued to
pursue opportunities for asset disposals in a patient and disciplined manner.
We sold our shareholding in Freeport-McMoRan Copper & Gold, receiving net
proceeds of US$882 million while retaining our joint venture interest in production
from the Grasberg mine. We locked in further value with the sale of the Zinkgruvan
zinc mine in Sweden, and our interests in the Neves Corvo copper and tin mine
in Portugal and the Morro do Ouro gold mine in Brazil. We restructured our interest
in Rio Tinto Zimbabwe to focus on the Murowa diamond project in
that country.
Rio Tinto 2004 Form 20-F 29
Safety, health, environment and communities
There
was a marked improvement in our safety record in 2004 even though there is
considerable work still to be done to reach Rio Tintos goal of zero injuries
and illnesses.
I am sorry to report that there was one fatal accident at a managed operation. While this compares with six deaths at operations in 2003, it remains wholly unacceptable that anyone should be fatally injured at work. There were also a number of near misses. We will redouble our efforts to increase visible leadership from all levels of management and emphasise the role of employees themselves in developing safe work habits. There were 371 lost time incidents during the year, a 21 per cent decrease from 2003. The lost time frequency rate was 0.65 compared with 0.82 in 2003.
The
2004 winners of the Chief Executives Safety Award were Rio Tinto Brasils
Morro do Ouro gold mine for the second consecutive year, Quebec Metal Powders
in Canada, and Rio Tinto Exploration Australasia, which was commended for its
performance in 2003. The awards improve recognition of good performance based
on Rio Tinto's safety targets and programmes.
We continued to improve our understanding of the environmental implications of our activities regarding biodiversity, climate change, water and energy use, waste disposal and use of our products. There was no change in the number of significant environmental incidents (16) compared to 2003. There was, however, a decrease, from eight to four, in the number of significant spills.
At Energy Resources of Australia (ERA) environmental incidents occurred that were unacceptable and which marred an otherwise commendable performance. Numerous changes to systems have been made and increased resources applied so that such shortcomings are not repeated. Three subsequent Australian Government audits were satisfactorily completed.
To improve consistency and to share good practices, we developed standards and guidance to help our businesses to work more closely with people neighbouring our operations. They aim to arrive at an understanding of what we can do for mutual benefit and then to secure implementation of agreed objectives. We support over 2,000 socio-economic programmes covering health care, education, agriculture, and business development.
We responded to the Asian tsunami disaster by committing A$1 million (about US$750,000) to the relief effort in countries where we are active. The funds will be donated through appropriate international agencies in Indonesia and India where we can leverage our local knowledge most effectively.
Outlook
The world economy is slowing to a more sustainable pace after growth accelerated sharply in 2004. If the slowdown is well managed, particularly in the US and China, which have been the key drivers for growth in recent years, it will be a welcome development for commodity markets. These are already severely stretched to meet demand. Developments in the foreign exchange markets remain a key economic uncertainty.
Rio Tinto is benefiting from a very strong business environment as developing countries ramp up their demand for metals and minerals and mature economies enjoy relatively solid economic growth. While this outlook is encouraging for the short and medium term, there remain fundamental uncertainties on the world stage. Among them are the direction the US economy will take, the rate of growth in China and the sustainability of growth in Asia as a whole.
Our record financial performance under strong market conditions in 2004 enabled us to focus on capital management to achieve a balance between future investment and rewards for shareholders. We have many options for investing in our future growth, with a strong suite of opportunities in the project pipeline. As always we will apply our rigorous capital appraisal processes.
The world in which we operate is always changing and we are anticipating and reacting to those changes in order to remain successful. Barring the uncertainties I mentioned, the near term looks encouraging. Whatever the economic conditions, Rio Tinto has the assets and the people to maximise shareholder value in a sustainable way.
In conclusion, I thank my management team and our valued employees all over the world for their continued support during 2004.
Leigh Clifford
Chief executive
24 February 2005
Rio Tinto 2004 Form 20-F 30
FINANCIAL REVIEW
Financial risk management
The
Groups policies with regard to risk management are clearly defined and consistently applied. They are a fundamental tenet of the Groups
long term strategy.
The
Groups business is mining and not trading. The Group only sells commodities
it has produced. In the long term, natural hedges operate in a number of ways
to help protect and stabilise earnings and cash flow, obviating the need to
use derivatives or other forms of synthetic hedging for this purpose. Such
hedging
is therefore undertaken to a strictly limited degree, as described below.
The
Group has a diverse portfolio of commodities and markets, which have varying
responses to the economic cycle.
The
relationship between commodity prices and the currencies of most of the
countries in which the Group operates provides further natural protection.
In addition, the Groups policy of borrowing at floating US dollar
interest rates helps to counteract the effect of economic and commodity
price cycles.
The
Groups Financial statements and disclosures show the full extent of its financial commitments including debt and similar exposures. The Groups
share of the net debt of joint ventures and associates is also disclosed.
The
risk factors to which the Group is subject that are thought to be of particular
importance are summarised on pages 8 to 10.
The
effectiveness of internal control procedures continues to be a high priority
in the Rio Tinto Group. A statement on this is included in Corporate governance
on pages 85 to 86.
The
Groups policies with regard to currencies, commodities, interest
rates and treasury management are discussed below.
Adjusted earnings
UK Financial
Reporting Standard 3 permits the presentation of an adjusted measure of earnings.
As presented
by Rio Tinto, this excludes the effect of exceptional items of such magnitude
that their exclusion is necessary in order that adjusted earnings fulfil their
purpose of reflecting the Groups underlying performance. Except where otherwise
indicated, earnings contributions from Group businesses and business segments
exclude the effect of these exceptional items. Adjusted earnings is reconciled
with net earnings on pages A-2.
Group operating results
2004 compared with 2003
Net earnings of US$2,813 million were US$1,305 million above 2003. Adjusted earnings of US$2,221 million were US$839 million above 2003. The principal factors explaining the changes in earnings are shown in the table below.
US$ m | ||
2003 Net earnings | 1,508 | |
Exclude: Exceptional gains | 126 | |
2003 Adjusted earnings | 1,382 | |
Prices | 1,638 | |
Exchange rates | (247 | ) |
Inflation | (118 | ) |
Grasberg slippage | (203 | ) |
Volumes | 270 | |
Energy costs | (81 | ) |
Other costs | (173 | ) |
Other | (247 | ) |
2004 Adjusted earnings | 2,221 | |
Add: exceptional net gains | 592 | |
2004 Net earnings | 2,813 | |
Stronger markets resulted in higher prices for most of the Groups
products. Compared with 2003, average copper prices of 130c/lb were over 60 per
cent higher, average aluminium prices of 78c/lb were 20 per cent higher and average
gold prices of US$409/oz were 13 per cent higher. Average molybdenum prices were
over two and a half times those of 2003.
The
benchmark iron ore price increased 18.6 per cent. This resulted in increased
seaborne iron ore prices, mainly effective from 1 April 2004. The seaborne thermal
coal market also strengthened during the year with the benefit of higher prices
flowing through progressively in the second half of the year.
The
US dollar weakened further against those currencies in which the Group incurs
the majority of its costs. Against the Australian dollar it averaged 12 per cent
weaker. The effect of this and other currency movements on operating costs reduced
earnings by US$326 million. The effect on earnings of the revaluation of monetary
items to period end exchange rates was also adverse, although relative to a more
substantial charge in 2003 it had a positive effect of US$61 million. Gains on
currency hedges initiated by North and Comalco before they became wholly owned
subsidiaries in 2000 increased earnings by US$18 million compared with 2003.
Rio Tinto 2004 Form 20-F 31
Production
of copper and gold from the Freeport managed Grasberg mine was significantly
below 2003 as a consequence of the material slippage in the fourth quarter
of 2003. The effect of this on volumes and costs, net of insurance, was to
reduce 2004 earnings by US$203 million. Production had returned to normal by
the fourth quarter of 2004.
Excluding
the effects of the Grasberg slippage, higher volumes, mainly from new projects
at Diavik (diamonds), Hail Creek (coking coal), West Angelas (iron ore) and
additional output from Escondida (copper) increased earnings by US$270 million.
As a result of tropical cyclone Monty the volume growth from the Western Australian
iron ore operations was more modest than would otherwise have been the case.
Excluding
the effect of inflation, higher energy costs and the Grasberg slippage, the
impact on earnings of increased costs was US$173 million. Strong markets create
cyclical cost pressures within the industry. Higher prices for skilled labour,
steel, rubber, diesel, explosives and freight have all had an effect on operating
costs.
At
Hamersley, costs were also higher due to increased material movement, including
prestripping, and higher maintenance activity. Tropical cyclone Monty had a
prolonged effect on the costs as well as volumes at Hamersley and Robe (iron
ore). Adverse cost variances at Argyle (diamonds) were attributable largely
to lower production and at Palabora (copper) to lower volumes and increased
depreciation following the commissioning of the underground project.
Excluding exceptional
items, the effective tax rate of 29 per cent was in line with that of 2003.
Other
variances included the absence of earnings from divested businesses which reduced
earnings by US$122 million.
The
East 1 Pushback project at Kennecott Utah Copper was approved in February 2005.
This project is a higher value, lower capital intensive, but shorter life option
than the previous mine plan which was predicated on development of an underground
mine from 2013. Options to extend operations beyond 2017, including further open
pit and underground developments, will be fully studied over the coming years
but the results for 2004 include a one off, non cash charge of US$36 million
due to the increase in the present value of environmental remediation provisions.
Pending any extension of the assumed mine life beyond 2017 there will be an increase
in annual charges for depreciation and amortisation of discount from 2005 of
around US$45 million.
In
2004 there were gains on disposals of undeveloped properties totalling US$38
million. Against this, the 2003 earnings of Rio Tinto Brasil included a benefit
of US$32 million resulting from the part reversal of an impairment provision.
The
remaining other variance includes business interruption insurance
claims to the extent that the costs are retained in the Group and reversion
to a higher effective tax rate in the US.
The
2004 exceptional items of US$592 million include a net profit on disposals
of businesses (US$913 million), a charge of US$160 million relating to
Colowyo (coal) and a provision of US$161 million, after tax and outside
shareholder interests, for the write down of the carrying value of Palaboras
copper assets.
Gains
relating to disposals of businesses include US$518 million profit on sale
of the Groups equity interest in Freeport-McMoRan Copper & Gold Inc. (FCX). Rio Tinto invested in the Grasberg ore body through purchase of an equity interest in FCX and participation in the Grasberg joint venture: these were two components of one investment decision. The investment occurred prior to the introduction of FRS10 and the goodwill arising was therefore eliminated directly against reserves in accordance with Rio Tintos
then current UK GAAP accounting policy. On disposal of the equity interest
in FCX, goodwill of US$228 million attributable to this part of the total
investment was written back through reserves and deducted from the profit
on disposal.
Against
a background of adverse financial results, a review of Palaboras business was finalised in the third quarter of 2004. Following this review, the workforce was reduced by 13 per cent and the management levels by 20 per cent. These events triggered an assessment of the balance sheet value of Palaboras
copper assets, using forecast long term copper prices, which resulted in
the provision for asset impairment.
A
detailed review of the mine plan and projected cash flows of the Colowyo
coal business was completed in June 2004. This indicated that future operating
and development costs are substantially higher than previously estimated.
As a consequence, an exceptional charge was recorded in the first half
of 2004 for the writedown of Colowyos fixed assets and recognition
of related onerous contract obligations.
The
2003 exceptional items of US$126 million relate to gains on the disposal of Kaltim
Prima Coal and Peak/Alumbrera (gold, copper). No tax was payable on these gains.
2003 compared with 2002
Net earnings of US$1,508 million compared with US$651 million reported for 2002. Adjusted earnings of US$1,382 million were US$148 million below 2002. The principal factors explaining the changes in earnings are shown in the table below.
Rio Tinto 2004 Form 20-F 32
US$ m | ||
2002 Net earnings | 651 | |
Exclude: Exceptional charges | (879 | ) |
2002 Adjusted earnings | 1,530 | |
Prices | 442 | |
Exchange rates | (412 | ) |
Inflation | (106 | ) |
Volumes | 38 | |
Energy costs | (54 | ) |
Other costs | (82 | ) |
Other | 26 | |
2003 Adjusted earnings | 1,382 | |
Add: exceptional gains | 126 | |
2003 Net earnings | 1,508 | |
The weakening of the US dollar against the currencies in which most
of the Groups costs are denominated reduced earnings by US$412 million.
The average levels of the Australian dollar, Canadian dollar and South African
rand were respectively 20 per cent, 11 per cent and 39 per cent stronger in 2003
than in 2002. The effect of these and other currency movements on operating costs
was to reduce earnings by US$352 million. The effect of the shift in exchange
rates on balance sheet values expressed in the functional currencies of the relevant
units further reduced earnings and this charge was US$100 million more than the
corresponding charge in 2002. Gains on currency hedges initiated by North, Ashton
and Comalco, before they became wholly owned subsidiaries in 2000, increased
earnings by US$40 million relative to 2002.
The
prices of many products were stronger, increasing earnings by US$442 million.
Copper prices averaged 13 per cent higher; gold 17 per cent and aluminium seven
per cent. The copper price was 51 per cent higher at the end of the year than
at the beginning and this led to a favourable effect from provisional pricing
of US$39 million. Benchmark iron ore prices increased by nine per cent.
Over the full year, seaborne thermal coal prices were on average seven per cent lower and realised uranium prices were lower due to some higher priced contracts expiring at Rössing.
Overall,
volume changes increased earnings by US$38 million. Lower gold and molybdenum
volumes at Kennecott Utah Copper, as a result of reduced by product grades, partly
offset volume growth from new mines at Diavik and West Angelas (iron ore) and
capacity expansions at Escondida and Hamersley. The benefit of higher gold grades
at Grasberg, particularly in the first half of the year, was negated by lower
production following a slippage in the mine in the fourth quarter of the year.
Robust demand for diamonds enabled Argyle to reduce inventories. Volumes of titanium
dioxide feedstock were affected by weak markets.
Turning
to costs, higher oil, power and gas prices reduced earnings by US$54 million.
Average oil prices were US$3.50 per barrel or 14 per cent higher than in 2002.
Gas prices in the US market were also higher and there were also increases in
electricity prices, principally in New Zealand.
Excluding
the effects of energy prices and the US$106 million impact of inflation, cost
increases reduced earnings by US$82 million. Two significant events adversely
affected cost performance in the period. In the first half of the year, there
was a three week smelter shut down at Kennecott Utah Copper as a result of an
acid plant failure. The slippage at the Grasberg mine in the fourth quarter impacted
both production volumes and costs.
Costs at Coal & Allied were affected by higher demurrage caused by a shortage of rail capacity in the Hunter Valley. Lower earnings at Rio Tinto Iron & Titanium
included a charge associated with the partial write down of a customer receivable.
Excluding
exceptional items, the effective tax rate at 28.8 per cent compared with 31.2
per cent for 2002. The lower charge in 2003 reflected reduced tax payments in
the US and a number of one off benefits including a credit of US$8 million resulting
from the proposed entry into the Australian tax consolidation regime, with effect
from 1 January 2003.
The after tax net interest charge was US$36 million less than in 2002, due both to lower interest paid and higher capitalised interest. The net central cost of the Groups
pension schemes was about US$60 million higher than in 2002.
The
net earnings of Rio Tinto Brasil include a credit of US$32 million resulting
from the reversal of part of an impairment provision relating to Fortaleza (nickel)
recorded in a previous year.
The
2003 exceptional items of US$126 million relate to gains on the disposal of Kaltim
Prima Coal, Peak and Alumbrera. No tax was payable on these gains.
Cash flow
2004 compared with 2003
A record total cash flow from operations, including dividends from associates
and joint ventures, of US$4,449 million, was 28 per cent above 2003. Working
capital levels increased in absolute terms by US$60 million, which is a relatively
small
amount compared with the increase in sales and production levels.
Investment
in the business continued. Capital expenditure and financial investment of US$2,085
million was US$412 million above 2003. Purchases of property, plant and equipment
included the major expansion of iron ore capacity in Western Australia, the construction
of the Comalco Alumina Refinery, and the purchase of West Antelope coal reserves
by Kennecott Energy.
Rio Tinto 2004 Form 20-F 33
Disposals of interests in businesses
generated proceeds of over US$1.5 billion. The largest components of this
were the sale of shares in FCX and the sale of Rio Tintos interest
in the Morro do Ouro gold mine in Brazil.
The net cash inflow before
management of liquid resources and financing, but after dividends, was US$1,888
million.
2003
compared with 2002
The
Groups operating cash flow remained strong. Total cash flow from operations
of US$3,486 million, including dividends from associates and joint ventures,
was only seven per cent below 2002 despite ten per cent lower adjusted earnings.
Tax paid included an amount of US$106 million relating to the disputed tax assessments from the Australian Tax Office described in Note 29 of the consolidated financial statements. The amount paid has been recorded as a receivable in these accounts because the directors believe that the relevant tax assessments are not sustainable.
Investment
in the business continued at a high level. Capital expenditure and financial
investment of US$1,673 million was US$197 million less than 2002. Purchases of
plant and equipment included the expansion of iron ore capacity and the construction
of the Comalco Alumina Refinery. Purchases less sales of investments in 2002
of US$323 million mainly related to US Treasury bonds held as security for the
deferred consideration on the North Jacobs Ranch acquisition, of which US$76
million were sold in 2003.
The sale of assets, principally Peak, Alumbrera and Kaltim Prima Coal, generated a cash inflow of US$405 million.
Balance sheet
Shareholders funds increased by US$2,547 million. Profits exceeded dividends declared by US$1,751 million and there was a write back of goodwill of US$228 million relating to the disposal of shares in FCX. Exchange rate translation changes increased shareholders funds
by US$542 million.
As a result of the strong cash flow, both from operations and from disposals, net debt fell from US$5,646 million to US$3,751 million. The ratio of net debt to total capital fell to 21.7 per cent from 33.8 per cent at 31 December 2003. Interest was covered 20 times (2003: 11 times).
As
detailed in Note 18 to the consolidated financial statements, US$806 million
(19 per cent) of the Groups borrowings at the end of 2004 will mature
in 2005.
At the year end, medium and long term borrowings totalled US$3,337 million. The amount issued under the US$3 billion European Medium Term Notes Programme was US$1.5 billion of which US$204 million is repayable within one year.
In
addition to the above, the Groups share of the third party net debt of joint ventures and associates totalled US$602 million at 31 December 2004. This debt is set out in Note 14 to the consolidated financial statements, which includes a description of the Groups responsibilities in relation to Colowyos
debt. The debt held by other joint ventures and associates is without recourse
to the Rio Tinto Group.
Listed Company operating results
The economic interests of Rio Tinto plc and Rio Tinto Limited were merged in December 1995 as a result of the Dual Listed Companies ('DLC') merger. The DLC merger has the effect that shareholders can be regarded as having interests in a single economic enterprise that is under common control and management. Accordingly the Operating and Financial Review and Prospects have been presented on a Group basis with the exception of the separate discussion and analyses relating to Rio Tinto plc and Rio Tinto Limited parts of the Group respectively provided below as a supplement to the discussion of the Rio Tinto Group set out above.
Rio
Tinto plc - part of Rio Tinto Group
Rio Tinto 2004 Form 20-F 34
2004 compared with 2003
Rio Tinto plc's net sales revenue (referred to as consolidated turnover in the financial statements) was US$5,275 million (2003: US$4,092 million). The 29 per cent increase in 2004 is largely due to increases in commodity prices and also the effect of a full year of sales at Diavik.
Profit
on ordinary activities before interest and tax was US$2,652 million, an increase
of US$1,140 million compared with 2003. During 2004 higher copper prices contributed
to increased profits at Kennecott Utah Copper and Escondida, where there were
also higher volumes. 2004 profit also benefited from a full year of sales at
Diavik. At Freeport the higher copper and gold prices were offset by the effects
of lower production and increased costs arising from the material slippage in
2003. The absence of profit from divested operations also had an adverse impact
on profit. 2004 profit on ordinary activities before interest and taxation includes
net exceptional gains of US$275 million (2003: US$47 million). These comprise
exceptional gains on disposal of interests in operations of US$833 million (2003:
US$47 million); a charge of US$160 million relating to Colowyo (coal) and a charge
of US$398 million (before tax and minority interests) for the write down of the
carrying value of Palabora's copper assets.
In
2004, net interest payable decreased to US$69 million (2003: US$138 million),
as a result of lower net debt which more than offset the effect of interest
rate rises. Interest rates for the majority of Rio Tinto plc's borrowings are
based
on 3 month LIBOR, which averaged 1.6 per cent in 2004 and 1.2 per cent in 2003.
Net earnings of US$2,073 million compare with US$956 million in 2003. The increase of US$1,117 million includes the effect of net exceptional gains totalling US$506 million in 2004 and US$47 million in 2003.
Total cash flow from operations (including dividends from joint ventures and associates) increased from US$1,710 million in 2003 to US$1,951 million in 2004. This is largely the result of dividends received from Rio Tinto Limited (on ordinary shares) and Escondida which offset reduced dividends from the Freeport joint venture, after the material slippage in 2003, and the non recurrence of a special dividend on the Rio Tinto Limited DLC Dividend Share.
Capital expenditure and financial investment rose from US$1,097 million in 2003 to US$1,986 million in 2004 due to an increase of US$1,423 million in funds advanced to Rio Tinto Limited by Rio Tinto plc. In 2003 a subsidiary company of Rio Tinto plc acquired US$500 million of redeemable preference shares in a subsidiary company of Rio Tinto Limited.
The
net cash inflow from acquisitions and disposals of US$1,306 million in 2004
includes proceeds from the sales of Rio Tinto plc's interests in operations
including: Freeport-McMoRan Copper & Gold Inc, Rio Paracatu Mineracao SA and Mineracao Serra de Fortaleza Limitada. The sale of the investment in Freeport-McMoRan Copper & Gold
Inc does not affect the terms of the Grasberg joint venture. In 2003 the net
cash inflow from disposals of interests in businesses was US$1,208 million
and reflected the deferred payment by Rio Tinto Limited for the buy back in
2000 of some of its shares from Rio Tinto plc. Net debt fell from US$1,842
million to US$1,501 million during 2004.
Shareholders funds
increased to US$9,139 million at 31 December 2004 (31 December 2003: US$7,343
million), largely due to retained profit and exchange gains.
2003
compared with 2002
Rio
Tinto plc's net sales revenue (referred to as consolidated turnover in the financial
statements) was US$4,092 million (2002: US$3,993 million). The two per cent increase
in 2003 is largely due to the commencement of sales at Diavik
Profit on ordinary activities before interest and tax was US$1,512 million. The corresponding figure for 2002 was US$602 million lower, but suffered from exceptional charges of US$755 million. Iron and Titanium profits were lower in 2003 as a result of the weak US dollar, soft market conditions and the write down of a customer receivable. The pretax profit impact of reduced volumes at Kennecott Utah Copper was partly offset by benefits from higher copper prices. A loss at Rossing reflected lower prices and adverse exchange rates. 2003 profits also suffered from increased pension finance costs, resulting from the decrease in fund asset values. However, profits benefited in 2003 from Diavik's first year of operation; and there was an increase in operating profit contributed by joint ventures following expansion of capacity at Escondida.
In 2003, net interest payable decreased to US$138 million (2002: US$156 million), as a result of lower net debt and reduced interest rates. Interest rates for the majority of Rio Tinto plc's borrowings are based on 3 month LIBOR, which averaged 1.2 per cent in 2003 and 1.8 per cent in 2002.
The effective tax rate was 26.1 per cent in 2003. The reduction from the 2002 tax rate of 61.8 per cent is largely due to the effect of exceptional items. Excluding these, the effective tax rate in 2003, at 27.1 per cent, is lower than the 30.7 per cent for 2002 as a result of lower tax payments in the US.
Net earnings of US$956 million compare with US$195 million in 2002. The increase of US$761 million includes the effect of exceptional charges of US$739 million in 2002, in contrast with gains of US$47 million in 2003.
Total cash flow from operations was US$1,710 million (2002: US$1,976 million). Although 2003 operating profit was higher than in 2002, this largely resulted from the absence of exceptional non cash charges. Capital expenditure and financial investment in 2003 was US$1,097 million (2002: US$1,205 million). The decrease was largely due to
• | an increase in net funds advanced to Rio Tinto plc by Rio Tinto Limited; 2003: US$5 million (2002: US$(87) million) |
• | a reduction in the purchase of property plant and equipment; as Diavik commenced production. |
• | the acquisition by a subsidiary company of Rio Tinto plc of US$500 million of redeemable preference shares in a subsidiary company of Rio Tinto Limited. |
• | the purchase, in 2002, of US$304 million of treasury bonds as security for the deferred consideration on the acquisition of the North Jacobs Ranch reserves. |
The net cash inflow
from acquisitions and disposals of US$1,208 million in 2003 reflects deferred
payment by Rio Tinto Limited for the buy back in 2000 of some of its shares from
Rio Tinto plc. Net debt fell from US$2,625 million in 2002 to US$1,842 million
in 2003.
Shareholders funds increased
to US$7,343 million at 31 December 2003 (31 December 2002: US$5,899 million),
largely
due to retained profit and exchange gains.
Rio Tinto Limited - part of Rio Tinto Group
2004 Compared with 2003
Rio
Tinto Limited's net sales revenue (referred to as consolidated turnover in the
financial statements) was US$6,524 million in 2004 (2003: US$5,476 million).
The 19 per cent increase in revenue is largely due to increased volumes and prices
at the Iron Ore and Coal operations,and increased prices and smelter output at
Comalco. Stronger markets resulted in increased prices for most of the Groups
products. The disposal of Kaltim Prima Coal during 2003 had a negative impact
on 2004 revenue.
Rio Tinto 2004 Form 20-F 35
In 2004 profit on ordinary activities before interest and tax was US$1,871 million (2003: US$1,391 million). The US dollar weakened further against the Australian and Canadian dollars, currencies in which the Group incurs a large proportion of its costs, reducing profit. Profit on disposal of interests in operations was US$139 million in 2004, similar to the US$126 million realised in 2003. Disposals in 2004 included Zinkgruvan AB and a 10% interest in Hail Creek.
The effective tax rate in 2004 was 28 per cent, which compares with 28.7 per cent in 2003. However, excluding the effect of exceptional items, the effective tax rate in 2004 was 30.4 per cent (2003: 31.9 per cent) as a result of entry into the Australian consolidated tax regime.
Net earnings increased to US$1,185 million (2003: US$884 million) and total cash flow from operations was US$2,622 million (2003: US$2,053 million) as a result of the factors above. The increase in dividends from joint ventures is largely attributable to Australian coal operations.
Capital expenditure and financial investment increased from US$1,071 million in 2003 to US$1,522 million in 2004 as a result of continued expansion of iron ore capacity in Western Australia and the construction of the Comalco Alumina Refinery. Sales less purchases of other investments of US$110 million in 2004 is US$94 million higher than in 2003. Several investments were disposed of during the year, including the Sepon project in Laos.
Equity
dividends paid of US$330 million were US$135 million below 2003 payments despite
an increase in the dividend on ordinary shares; in 2004 there was no dividend
payment on the DLC dividend share held by Rio Tinto plc; in 2003 a payment of
US$164 million was made.
Rio Tinto Limited received US$1,423 million of funding from Rio Tinto plc which, combined with the factors mentioned above, resulted in a US$1,554 million decrease in net debt to US$2,250 million.
Shareholders funds were US$5,515 million at 31 December 2004 (31 December 2003: US$4,324 million). Retained profit and exchange gains have contributed to the increase.
2003 Compared with 2002
Rio
Tinto Limited's net sales revenue (referred to as consolidated turnover in the
financial statements) was US$5,476 million in 2003 (2002: US$4,722 million).
The 16 per cent increase in 2003 is largely due to increased volumes and prices
at the Iron Ore operations and increased prices and smelter output at Comalco.
The disposals of Kaltim Prima Coal and Alumbrera during the year resulted in
a reduction in share of joint ventures' and associates' turnover.
In 2003 profit on ordinary activities before interest and tax was US$1,391 million (2002: US$1,180 million after exceptional asset write downs of US$433 million). The weakening of the US dollar against the Australian dollar and Canadian dollar, in which a large proportion of the Group's costs are denominated reduced profit. However, 2003 profits benefited from exceptional gains on disposal of subsidiary, joint venture and associate, of US$126 million: whereas, 2002 profits were reduced by exceptional net write downs.
In 2003, net interest payable decreased to US$100 million (2002: US$124 million), due largely to lower interest rates.
The effective tax rate in 2003 was 28.7 per cent, which compares with 40.9 per cent in 2002. However, excluding the effect of exceptional items, the tax rate was 31.7 per cent in both years.
Profits attributable to outside interests increased in 2003, primarily because 2002 was impacted by the exceptional asset write downs at IOC.
Net earnings increased to US$884 million (2002: US$736 million) as a result of the factors above. Total cash flow from operations (including dividends from joint ventures and associates) was similar to 2002 at US$2,053 million (2002: US$ 2,043 million). The increase in cash flow from operating activities was offset by a reduction in dividends received from the coal joint ventures in 2003.
Capital expenditure and financial investment increased as a result of continued expansion at Hamersley; and construction of the Comalco Alumina Refinery. During 2003 Rio Tinto Limited remitted US$1,208 million to Rio Tinto plc in respect of shares that were repurchased in 2000. In addition, a subsidiary of Rio Tinto Limited, issued US$500 million of redeemable preference shares to a subsidiary of Rio Tinto plc. The factors mentioned above combined to reduce cash flow and increase the level of net debt in 2003.
Liquidity and capital resources
Rio
Tinto plc and Rio Tinto Limited enjoy strong long and short term credit ratings
from Moodys and Standard and Poors shown below.
Long term | Short term | Outlook | ||||
Standard & Poors | A+ | A-1 | Stable | |||
Moodys | Aa3 | P-1 | Stable | |||
Investors should be aware that a security rating is not a recommendation to buy, sell or hold securities, that it may be subject to revision or withdrawal at any time by the assigning rating organisation, and that each rating should be evaluated independently of the other.
The unified credit status of the Group is maintained through cross guarantees whereby contractual obligations of Rio Tinto plc and Rio Tinto Limited are automatically guaranteed by the other. These ratings continue to provide financial flexibility and consistent access to debt via money or capital markets and enable very competitive terms to be obtained.
Rio Tinto 2004 Form 20-F 36
The Groups
commercial paper programmes are fully backed by bank standby facilities which
totalled US$1.45 billion at 31 December 2004, of which US$0.85 billion was
on terms exceeding one year. These facilities can be drawn upon at any time.
As at 31 December 2004, the Group had contractual
obligations other than bank borrowings repayable on demand arising in the ordinary
course of business as follows:
Less | Between | Between | |||||||
than 1 | 1 and 3 | 3 and 5 | After 5 | ||||||
US$ m | Total | year | years | years | years | ||||
Contractual cash obligations | |||||||||
Debt (a) | 4,143 | 806 | 2,043 | 813 | 481 | ||||
Operating leases | 114 | 36 | 37 | 10 | 31 | ||||
Unconditional purchase obligations | 3,232 | 386 | 747 | 611 | 1,488 | ||||
Deferred consideration | 250 | 96 | 126 | 28 | | ||||
Other (b) | 700 | 564 | 48 | 88 | | ||||
Total | 8,439 | 1,888 | 3,001 | 1,550 | 2,000 | ||||
(a) | Debt obligations include commercial paper backed by bank standby facilities. |
(b) | Other relates to long term obligations including capital commitments. |
(c) | Other long term liabilities of the Group not shown here include employee benefit obligations for which we expect cash funding to be US$1.4 billion within the next five years and US$1.6 billion between 2010 and 2014. |
On the basis of the levels of obligations described above, the unused
capacity under the Groups commercial paper programmes, the Groups
anticipated ability to access debt and equity capital markets in the future and
the level of anticipated internal cash generation, the directors believe that
the Group has sufficient short and long term sources of funding available to
meet its liquidity requirements.
The Groups committed bank standby facilities contain a financial undertaking that the Groups consolidated income before interest and taxes for any annual accounting period shall not be less than three times consolidated interest payable for such period. The ratio for 2004 was 29.6 (2003: 15.2). The Group does not have any financial agreements that would be affected to any material extent by a reduction in the Groups
credit rating.
The Groups policy is to centralise surplus
cash balances whenever possible.
As at 31 December 2004 the Group had current assets amounting to US$874 million which are not expected to be used or converted into cash during the next 12 months, comprising US$836 million relating to accounts receivable and prepayments and US$38 million relating to inventories. Note 16 to the consolidated financial statements provides an analysis of the accounts receivable and prepayments falling due after more than one year. It includes a pension prepayment of US$581 million, representing the cumulative excess of the employer contributions paid to the Groups
deferred benefit pension schemes over the pension charges recognised in respect
of those schemes under SSAP 24.
Off-balance
sheet arrangements
In
the ordinary course of business, to manage the Groups operations and financing,
Rio Tinto enters into certain arrangements, which for the purposes of Item 5
would be considered off-balance sheet arrangements.
The Rio Tinto Groups off-balance sheet arrangements
are comprised principally of performance guarantees, commitments for capital
and other expenditure, and certain derivative financial instruments.
The aggregate amount of indemnities and other performance
guarantees, on which no material loss is expected, is US$435 million.
The Group has a partnership interest in the Colowyo Coal Company and has undertaken, via a subsidiary company which entered into a management agreement, to cause the partnership to perform its obligations under certain coal supply contracts. The debt owed by the Colowyo Coal Company, which has a book value of US$156 million, is to be serviced and repaid out of the proceeds of these contracts. During 2004, a provision of US$149 million has been recognised in respect of the Groups
obligations under the above management agreement. The debt held by other joint
ventures and associates is without recourse to the Rio Tinto Group.
Other commitments include contracted capital expenditure,
operating leases and unconditional purchase obligations as set forth in the table
of contractual obligations, included in the liquidity and capital resources section
above.
The Group holds certain derivative financial instruments
for which the initial fair value and/or subsequent changes to fair value are
not recorded under UK GAAP until the underlying contracts are settled or the
hedged items to which they relate are recognised. For information on these derivative
financial instruments, see Note 28 to the consolidated financial statements.
Exchange rates, reporting currencies and currency exposure
Rio
Tintos assets, earnings and cash flows are influenced by a wide variety of currencies due to the geographic diversity of the Groups sales and the countries in which it operates. The US dollar, however, is the currency in which the great majority of the Groups sales are denominated. Operating costs are influenced by the currencies of those countries where the Groups
mines and processing plants are located and also by those currencies in which
the costs of imported equipment and services are determined. The Australian and
US dollars are the most important currencies influencing costs.
Rio Tinto 2004 Form 20-F 37
In any particular year, currency fluctuations may have a significant impact on Rio Tintos financial results. A weakening of the US dollar against the currencies in which the Groups costs are determined has an adverse effect on Rio Tintos net earnings. The approximate effects on the Groups UK GAAP net earnings of ten per cent movements from the 2004 full year average exchange rates are as follows:
2003 | 2004 | ||||||
Average | Effect of | Average | Effect of | ||||
exchange | 10% change in | exchange | 10% change in | ||||
rate | full year average | rate | full year average | ||||
US cents | US$ m | US cents | US$m | ||||
Australian dollar | 65 | 141 ± | 73 | 190 ± | |||
Canadian dollar | 71 | 26 ± | 77 | 45 ± | |||
Chilean peso | 692 | 6 ± | 611 | 6 ± | |||
Indonesian rupiah | 0.012 | 6 ± | 0.011 | 3 ± | |||
New Zealand dollar | 58 | 6 ± | 66 | 7 ± | |||
South African rand | 13 | 22 ± | 16 | 20 ± | |||
UK sterling | 163 | 7 ± | 183 | 7 ± | |||
Other | n/a | 10 ± | n/a | 10 ± | |||
These sensitivities are based on 2004 prices, costs and volumes and assume that all other variables remain constant. They take into account the effect of hedges as disclosed in Note 28 to the consolidated financial statements. These exchange rate sensitivities include the effect on operating costs of movements in exchange rates but exclude the impact through revaluation of foreign currency working capital. They should, therefore, be used with care.
After taking into account the effect of relevant derivative instruments, almost all of the Groups net debt is either denominated in US dollars or in the functional currency of the entity holding the debt. The table below sets out the currency exposures arising from net monetary assets / (liabilities), other than net debt, which are not denominated in the functional currency of the relevant business unit. Gains and losses resulting from such exposures are recorded in the profit and loss account. The table below reflects the Groups
currency exposure after tax and outside interests:
2003 | 2004 | |||||||||||
Currency of exposure | Currency of exposure | |||||||||||
US$m | US dollar | Other | Total | US dollar | Other | Total | ||||||
Functional currency of business unit: | ||||||||||||
Australian dollar | 251 | (11 | ) | 240 | 222 | 7 | 229 | |||||
Canadian dollar | 19 | (1 | ) | 18 | 21 | - | 21 | |||||
South African rand | 16 | 2 | 18 | 8 | 3 | 11 | ||||||
United States dollar | - | 20 | 20 | - | 24 | 24 | ||||||
Other currencies | 14 | 9 | 23 | 5 | (16 | ) | (11 | ) | ||||
Total | 300 | 19 | 319 | 256 | 18 | 274 | ||||||
In the case of the Australian dollar, for example, there is a significant degree of natural protection against cyclical fluctuations, in that the currency tends to be weak, reducing costs in US dollar terms, when commodity prices are low, and vice versa.
Given the dominant role of the US currency in the Groups
affairs, the US dollar is the currency in which financial results are presented
both internally and externally. It is also the natural currency for borrowing
and holding surplus cash. Modest amounts of cash are held in other currencies
for short term operational reasons.
The Group finances its operations primarily in US dollars, either directly or using currency swaps, and a significant proportion of the Groups US dollar debt is located in subsidiaries having functional currencies other than the US dollar. Exchange gains and losses relating to US dollar debt impact on the profit and loss accounts of such subsidiaries. Under UK GAAP however, such exchange gains and losses are excluded from the Groups profit and loss account on consolidation with a corresponding adjustment directly to reserves. This means that financing in US dollars impacts in a consistent manner on the Groups
consolidated accounts irrespective of the functional currency of the particular
subsidiary where the debt is located.
The Group does not generally believe that active currency hedging would provide long term benefits to shareholders. Currency protection measures may be deemed appropriate in specific commercial circumstances and are subject to strict limits laid down by the Rio Tinto board. As set out in Note 28 to the consolidated financial statements, as at 31 December 2004 there were forward contracts, including synthetic forwards, to purchase A$1,113 million in respect of future trading transactions. From the Groups
perspective, these contracts offset the impact of exchange rate variations on
a portion of the local currency costs incurred by various subsidiaries. A significant
part of the above hedge book was acquired with North Ltd. North held a substantial
hedge book on acquisition which has been retained but is not being renewed as
maturities occur.
Rio Tinto 2004 Form 20-F 38
The functional currency of most operations within the Rio Tinto Group is the local currency in the country of operation. Foreign currency gains or losses arising on translation of the net assets of these operations are shown as a movement in reserves. The approximate translation effects on the Groups net assets of ten per cent movements from the year end exchange rates are as follows:
2003 | 2004 | ||||||
Closing | Effect of | Closing | Effect of | ||||
exchange | 10% change in | exchange | 10% change in | ||||
rate | closing rate | rate | closing rate | ||||
US cents | US$m | US cents | US$m | ||||
Australian dollar | 75 | 640 ± | 78 | 650 ± | |||
Canadian dollar | 77 | 85 ± | 83 | 115 ± | |||
South African rand | 15 | 21 ± | 18 | 5 ± | |||
UK sterling | 178 | 11 ± | 193 | 14 ± | |||
Other | n/a | 6 ± | n/a | 7 ± | |||
Interest
rates
Rio Tintos interest rate management policy is generally to borrow and invest cash at floating rates. Short term US dollar rates are normally lower than long term rates, resulting in lower interest costs to the Group. Furthermore, cyclical movements of interest rates tend to compensate, to an extent, for those of commodity prices. In some circumstances, an element of fixed rate funding may be considered appropriate. At the end of 2004, only 20 per cent of the Groups net debt was fixed rate. Based on the Groups net debt at 31 December 2004, and with other variables unchanged, the approximate effect on the Groups
net earnings of a one percentage point increase in US dollar LIBOR interest rates
would be a reduction of US$21 million.
Commodity
prices
The
Groups normal policy is to sell its products at prevailing market prices. Exceptions to this rule are subject to strict limits laid down by the Rio Tinto board and to rigid internal controls. Rio Tintos
exposure to commodity prices is diversified by virtue of its broad commodity
spread and the Group does not generally believe commodity price hedging would
provide long term benefit to shareholders.
Metals such as copper and aluminium are generally
sold under contract, often long term, at prices determined by reference to prevailing
market prices on terminal markets, such as the London Metal Exchange and COMEX
in New York, usually at the time of delivery. Prices fluctuate widely in response
to changing levels of supply and demand but, in the long run, prices are related
to the marginal cost of supply. Gold is also priced in an active market in which
prices respond to daily changes in quantities offered and sought. Newly mined
gold is only one source of supply; investment and disinvestment can be important
elements of supply and demand. Contract prices for many other natural resource
products are generally agreed annually or for longer periods with customers,
although volume commitments vary by product.
Approximately 40 per cent of Rio Tintos 2004
net earnings from operating businesses came from products whose prices were terminal
market related and the remainder came from products priced by direct negotiation.
The approximate effect on the Groups net
earnings of a ten per cent change from the full year average market price in
2004 for the following metals would be:
2003 | 2004 | |||||||
Average | Effect of | Average | Effect of | |||||
market | 10% change in | market | 10% change in | |||||
price | full year average | price | full year average | |||||
US$m | US$m | |||||||
Copper | 80 c/lb | 109 ± | 130 c/lb | 160 ± | ||||
Aluminium (3 month forward) | 65 c/lb | 95 ± | 78 c/lb | 110 ± | ||||
Gold | US$ 363 oz | 52 ± | US$ 409 oz | 40 ± | ||||
The above sensitivities are based on 2004 volumes and give the estimated impact on net earnings of changes in prices, assuming that all other variables remain constant. These should be used with care. The relationships between currencies and commodity prices is a complex one and movements in exchange rates can cause movements in commodity prices and vice versa. The sensitivities allow for the effect of the commodity hedges maturing in 2005, as disclosed in Note 28 to the consolidated financial statements.
Treasury management and financial instruments
Treasury
activities operate as a service to the business of the Rio Tinto Group and not
as a profit centre. Strict limits on the size and type of transaction permitted
are laid down by the Rio Tinto board and are subject to rigorous internal controls.
Corporate funding and overall strategic management of Rio Tintos balance
sheet is handled by the London based Group Treasury.
Rio Tinto 2004 Form 20-F 39
Rio
Tinto does not acquire or issue derivative financial instruments for trading
or speculative purposes; nor does it believe that it has exposure to such trading
or speculative holdings through its investments in joint ventures and associates.
Derivatives are used to separate funding and cash management decisions from
currency exposure and interest rate management. The Group uses interest rate
swaps in conjunction with longer term funds raised in the capital markets to
achieve a floating rate obligation which is consistent with the Groups interest rate policy. Currency swaps are used to convert debt or investments into currencies, primarily the US dollar, which are consistent with the Groups
policy on currency exposure management. No material exposure is considered
to exist by virtue of the possible non performance of the counterparties to
financial instruments held by the Group.
The
derivative contracts in which the Group is involved are valued for the purposes
of the Financial instrument disclosures in the Financial statements by reference
to quoted market prices, quotations from independent financial institutions
or by discounting expected cash flows.
Dividends
Dividends paid on Rio Tinto plc and Rio Tinto Limited shares are equalised on a net cash basis; that is without taking into account any associated tax credits. Dividends are determined in US dollars.
Rio
Tintos progressive dividend policy aims to increase the US dollar value of dividends over time, without cutting them in economic downturns. Rio Tinto plc shareholders receive dividends in pounds sterling and Rio Tinto Limited shareholders receive dividends in Australian dollars, which are determined by reference to the exchange rates applicable to the US dollar two days prior to the announcement of dividends. Changes in exchange rates could result in a reduced sterling or Australian dollar dividend in a year in which the US dollar value is maintained or increased. The interim dividend for each year in US dollar terms will be equivalent to 50 per cent of the previous years
total US dollar dividends.
Critical accounting policies and estimates
Dual listed company reporting
As explained
in detail in Outline of dual listed companies structure
and basis of financial statements, the consolidated financial statements of the
Rio Tinto Group on pages A-2.2004 to A-84 deal with the results and assets and
liabilities of both of the dual listed companies, Rio Tinto plc and Rio Tinto
Limited, and their subsidiaries. They are prepared under UK GAAP and satisfy
the obligations of Rio Tinto Limited, as laid down by the Australian Securities
and Investments Commission. The consolidated financial statements also
includes a statement setting out the effect of the adjustments to net earnings
and to shareholders funds for the Group that would be required under Australian GAAP. The US dollar is the presentation currency used in these financial statements, as it most reliably reflects the Groups
global business performance.
The
treatment of gains and losses on US dollar debt is described above in the section
dealing with Exchange rates, reporting currencies and currency exposure.
For
US reporting purposes separate financial statements are presented for Rio
Tinto plc and the companies legally owned by it (the Rio Tinto plc part of the Group); and for Rio Tinto Limited and the companies legally owned by it (the Rio Tinto Limited part of the Group). In these separate financial statements, the consolidated figures for the Rio Tinto plc part of the Group include Rio Tinto plcs
37.54% share of Rio Tinto Limited accounted for by the equity method.
Ore reserve estimates
The amounts presented under UK GAAP and Australian GAAP are based on the
reserves and in some cases resources determined in accordance with the JORC Code.
For
the purposes of preparing financial information under US GAAP, estimates
of ore reserves are made in accordance with the SECs Industry Guide
7.
Asset carrying values
Charges
for impairment of the carrying values of certain of the
Groups businesses and related contract obligations, net of tax and outside
shareholder interests, amounted to US$321 million in 2004 and US$763 million
in 2002. No significant impairment charges occurred in 2003.
The
carrying values are assessed by reference to the higher of disposal value
and the net present value of forecast future cash flows. The cash flows
are particularly sensitive to the change in two particular parameters:
exchange rates and commodity selling prices. Management considers, that
over the long term, there is a tendency for movements in commodity prices
to compensate to some extent for movements in the value of the US dollar
(and vice versa). But such compensating changes are not synchronised and
do not fully offset each other. The great majority of the Groups
sales are based on prices denominated in US dollars. To the extent that
the currencies of countries in which the Group produces commodities strengthen
against the US dollar without commodity price offset, cash flows and, therefore,
net present values are reduced.
In
the three years to 31 December 2004, the Australian dollar strengthened
by 53% against the US dollar, the Canadian dollar strengthened by 32% and
the South African rand by 121%. Taking these three years together, commodity
prices rose substantially: for example, copper prices increased by 124%,
aluminium by 47% and gold by 58%.
Rio
Tintos cash flow forecasts are based on assessments of expected long
term commodity prices, which for most commodities are derived from an analysis
of the marginal costs of the producers of these commodities. These assessments
often differ from current price levels and are updated periodically.
Rio Tinto 2004 Form 20-F 40
In some cases,
prices applying to some part of the future sales volumes of an Income Generating
Unit are predetermined by existing sales contracts. The effects of such contracts
are taken into account in forecasting future cash flows.
The
cash flows used in impairment reviews include the effects of derivatives and
non-derivative financial instruments designated as hedges of the cash flows of
the relevant Income Generating Unit. However, the impact of such instruments
on valuations used in measuring impairment is not significant.
For
the majority of Rio Tintos businesses, by both number and by value,
the net present value of the expected cash flows is substantially in excess
of the carrying value in the balance sheet. For a minority of the businesses
the carrying value is close to the net present value of the cash flows,
and these are reviewed for impairment where appropriate. The effects of
exchange rate and commodity price changes on the values of these units
relative to their book values are monitored closely.
Reviews
of carrying values relate to Income Generating Units which, in accordance
with FRS 11, are identified by dividing the entity into as many largely
independent income streams as is reasonably practicable. In some cases
the Business Units within the Product groups consist of several operations
with independent income streams, which therefore constitute separate Income
Generating Units.
The
expected future cash flows of Income Generating Units reflect long term
mine plans which are based on detailed research, analysis and iterative
modelling to optimise the level of investment and output and sequence of
extraction. The plan takes account of all relevant characteristics of the
ore body, including waste to ore ratios, ore grades, haul distances, chemical
and metallurgical properties of the ore impacting on process recoveries
and capacities of processing equipment that can be used. The mine plan
is therefore the basis for forecasting production output in each future
year and production costs.
The
useful lives of the major assets of an Income Generating Unit are usually
dependent on the life of the ore body to which they relate. Thus the lives
of mining properties, smelters, concentrators and other long-lived processing
equipment generally relate to the expected life of the ore body. The life
of the ore body, in turn, is estimated on the basis of the long term mine
plan.
The
cash flow forecasts are based on best estimates of expected future revenues
and costs. These may include net cash flows expected to be realised from
extraction, processing and sale of mineral resources that do not currently
qualify for inclusion in proven or probable ore reserves. Such non-reserve
material is included where there is a high degree of confidence in its
economic extraction. This expectation is usually based on preliminary drilling
and sampling of areas of mineralisation that are contiguous with existing
reserves. Typically, the additional evaluation to achieve reserve status
for such material has not yet been done because this would involve incurring
costs earlier than is required for the efficient planning and operation
of the mine.
In
the case of undeveloped properties, there may be no proven and probable
reserves to form a basis for the impairment review. The carrying values
of these assets are reviewed twice per annum by the Audit committee. The
review is based on a status report regarding the Groups intentions
for development of the undeveloped property. In some cases, the undeveloped
properties are regarded as successors to ore bodies currently in production.
It is intended that these will be developed and go into production when
the current source of ore is exhausted.
Cost
levels incorporated in the cash flow forecasts are based on the current
long term mine plan for the Income Generating Unit. Recent cost levels
are considered, together with expected changes in costs that are compatible
with the current condition of the business and meet the requirements of
FRS 11 Impairment of fixed assets and goodwill.
Under
US GAAP, assumptions used in cash flow forecasts are principally the same
as those used under UK GAAP, except that the estimated cash flows related
to the liability for asset retirement obligations are excluded under US
GAAP. Impairment is only recognised, under US GAAP, when the anticipated
undiscounted cash flows are insufficient to recover the carrying value
of the asset group. Once impairment is determined, an asset is written
down to its fair value, which is normally calculated using discounted cash
flows, similar to those under UK GAAP.
Forecast
cash flows are discounted to present values using Rio Tintos weighted
average cost of capital with appropriate adjustment for the risks associated
with the relevant unit, to the extent that such risks are not reflected
in the forecast cash flows. For final feasibility studies and ore reserve
estimation, internal hurdle rates are used which are generally higher than
the weighted average cost of capital.
The
above rates are applied to net of tax cash flows expressed in real terms.
However, where an asset is impaired, the amount of the impairment is determined
by discounting the pre-tax cash flows at a pre-tax discount rate derived
from the post tax discount rate, having regard to the tax characteristics
of the Income Generating Unit.
Final
feasibility studies and ore reserve estimation are based on the exchange
rates current at the time of the evaluation. For impairment reviews, a
forecast of the long term exchange rate is made by reference to historical
data.
Forecast
cash flows for ore reserve estimation and impairment testing are based
on Rio Tintos long term price forecasts. For final feasibility studies
these prices, and projected costs, are assumed to decline systematically
in real terms.
Close down, restoration and environmental obligations
Provision is made for environmental remediation costs when the related environmental disturbance occurs, based on the net present value of estimated future costs. Where the ultimate cost of environmental disturbance is uncertain, there may be variances from these cost estimates which could affect future financial results.
Rio Tinto 2004 Form 20-F 41
Close down and restoration costs are a normal consequence of mining, and the majority of close down and restoration expenditure is incurred at the end of the life of the mine. Although the ultimate cost to be incurred is uncertain, subsidiary companies have estimated their respective costs based on feasibility and engineering studies using current restoration standards and techniques.
Post retirement benefits
UK
GAAP post retirement benefits are accounted for in accordance with Statement
of Standard Accounting Practice 24, which requires gradual recognition of
the surpluses and deficits that emerge as a result of variances from actuarial
assumptions.
The
most significant assumptions used in accounting for pension plans are the
long term rate of return on plan assets and the discount rate. The long
term rate of return on plan assets is used to calculate interest income
on pension assets, which is credited to the Groups profit and loss account. The discount rate is used to determine the net present value of future liabilities and each year the unwinding of the discount on those liabilities is charged to the Groups
profit and loss account.
The
expected rate of return on pension plan assets is determined as managements
best estimate of the long term return on the major asset classes i.e. equity,
debt, real estate and other, weighted by the actual allocation of assets
among the categories at the measurement date. The expected rate of return
is calculated using geometric averaging.
The
sources used to determine managements best estimate of long term returns are numerous and include country specific bond yields, which may be derived from the market using local bond indices or by analysis of the local bond market, and country specific inflation and investment market expectations derived from market data and analysts or governments expectations
as applicable.
In
particular, the Group estimates long term expected real returns on equity
i.e. returns in excess of inflation, based on the economic outlook, analysts views
and those of other market commentators. This is the most subjective of
the assumptions used and it is reviewed regularly to ensure that it remains
consistent with best practice.
The
expected rate of return on pension plan assets is also used as the discount
rate for UK GAAP.
Valuations
are carried out using the projected unit method.
For
2004 the cost in relation to pensions included in the Groups net
earnings was US$82 million under
US GAAP. Under UK GAAP, the net pensions cost was US$88 million. Within
these costs the expected return on assets was US$163 million under US
GAAP and US$166 million under UK GAAP.
The impact on cash flow in 2004
of the
Groups pension plans, being the employer contributions to defined
benefit and defined contribution pension plans, was US$143 million. In
addition there were contributions of US$26 million in respect of unfunded
healthcare schemes.
In
relation to pensions, it is currently expected that there will be no significant
regular employer or employee contributions to the UK plan in 2005. Contributions
are made to the main Australian plan according to the recommendation of
the plan actuary and are primarily to a mixed defined benefit/defined contribution
type arrangement. In North America, contributions are agreed annually in
nominal terms. Whilst contributions for 2005 will not be determined until
later in the year for some Group plans, the currently expected level of
contributions by the Group to the plans in Australia, Canada and the US
is expected to be similar in aggregate to that made in 2004. Since the
Groups healthcare schemes are unfunded, contributions for future
years will be equal to benefit payments and therefore cannot be predetermined.
Under
US GAAP post retirement benefits are accounted for in accordance with Financial
Accounting Standard No. 87 under which only those surpluses or deficits
outside a ten per cent fluctuation corridor are spread.
The
discount rate under US GAAP is the implied yield available on AA rated
corporate debt at the measurement date.
For
US GAAP, the average expected long term rate of return on assets used to
determine 2004 pension cost was 6.6%. This will increase to 6.7% in 2005
primarily because of an increase in expected long term nominal equity returns.
For 2004, the average future increase in compensation levels was assumed
to be 4.2% and this will increase in 2005 to 4.6%; this increase reflects
higher anticipated general inflation in the UK and North America. For US
GAAP, the average discount rate used for the Groups plans in 2004
was 5.9% and the average discount rate used in 2005 will be 5.6%. The
decrease is attributable to lower corporate bond yields. As noted above,
the expected
long term rate of return on assets is also used as the discount rate
under UK GAAP. The other UK GAAP assumptions vary slightly from those
under US
GAAP because of the differing measurement dates.
Based
on the known changes in assumptions noted above and other known factors
such as increasing service cost and amortisation charges, and including
the one time curtailment and settlement credit in 2004, the impact of pension
costs on the Groups net earnings in 2005 would be expected to increase
by some US$36 million under US GAAP to US$118 million.
Under
US GAAP, there are net unrecognised losses in relation to the Groups pension plans of US$532 million at 31 December 2004 net of tax and minorities. This will be written off to earnings over the average remaining service life of employees in the plans to the extent the losses exceed the 10% corridor on a plan by plan basis. The 2005 impact on the Groups
US GAAP net earnings will be a cost of US$26 million compared to a cost
of US$22 million in 2004.
The
table below sets out the potential change in the Groups 2004 UK
GAAP and US GAAP net earnings (after tax and outside interests) that
would result
from hypothetical changes to post retirement assumptions and estimates.
The sensitivities are viewed for each assumption in isolation although,
under UK GAAP in particular, a change in one assumption is likely to
result in a corresponding offset elsewhere.
Rio Tinto 2004 Form 20-F 42
US$m | UK GAAP |
US GAAP |
||
Sensitivity of Groups 2004 net earnings to changes in: | ||||
Expected return on assets | ||||
- increase of 1% | 43 | 20 | ||
- decrease of 1% | (45 | ) | (20 | ) |
Discount rate | ||||
- increase of 0.5% | 20 | 6 | ||
- decrease of 0.5% | (22 | ) | (6 | ) |
Salary increases | ||||
- increase of 0.5% | (6 | ) | (5 | ) |
- decrease of 0.5% | 6 | 5 | ||
Demographic - allowance for additional future mortality improvements | ||||
- overall increase of 5% in liability | (23 | ) | (16 | ) |
- overall decrease of 5% in liability | 20 | 15 | ||
Further information on UK GAAP and US GAAP for pensions is given on pages A-58 to A-59 and A-73 respectively. In addition, information under the UK post retirement accounting standard, FRS 17, is given on pages A-59 to A-62.
Overburden removal costs
In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can economically be extracted. The process of mining overburden and waste materials is referred to as stripping. During the development of a mine, before production commences, it is generally accepted that stripping costs are capitalised as part of the investment in construction of the mine.
Stripping of waste materials continues during the production stage of the mine. Some mining companies expense these production stage stripping costs as incurred, while others defer such stripping costs. Those mining companies that expense stripping costs as incurred will report greater volatility in the results of their operations from period to period.
Rio Tinto defers production stage stripping costs for those operations where this is the most appropriate basis for matching costs with the related economic benefits and the effect is material.
The amount of stripping costs deferred is based on the ratio obtained by dividing the tonnage of waste mined either by the quantity of ore mined or by the quantity of minerals contained in the ore. In some operations, the quantity of ore is used, being a more practical basis for matching costs with the related economic benefits where there are important by products or where the grade of the ore is relatively stable from year to year.
Information about the stripping ratios of the Business Units that account for the majority of the deferred stripping balance at 31 December 2004, and year in which deferred stripping is expected to be fully amortised, is set out in the following table:
Actual stripping ratio for year | Life of mine stripping ratio | |||||||||||
2002 | 2003 | 2004 | 2002 | 2003 | 2004 | |||||||
Kennecott Utah Copper (2017) | 2.05 | 1.86 | 1.83 | 1.19 | 1.24 | 1.24 | ||||||
Borax (2034) | 25.00 | 23.00 | 20.50 | 16.00 | 16.00 | 18.70 | ||||||
Argyle Diamonds (2008) | 7.29 | 6.10 | 6.70 | 4.40 | 4.10 | 4.91 | ||||||
Freeport Joint Venture (2014) | 2.35 | 2.84 | 3.39 | 1.77 | 1.93 | 2.43 | ||||||
Diavik (2009) | 24.93 | 20.31 | 14.52 | 8.87 | 8.54 | 4.69 | ||||||
In
addition, Escondida, Rio Tinto's 30 per cent owned joint venture, defers stripping
costs based on the ratio of waste tonnes to pounds of copper mined. The actual
stripping ratio for 2004 was 0.1145 (2003: 0.1024, 2002: 0.1458). The life
of mine stripping
ratio for 2004 was 0.1129 (2003: 0.1110, 2002: 0.1094). The deferred stripping
balance is expected to be fully amortised in 2040.
The
life of mine waste-to-ore ratio is a function of an individual mines pit design and therefore changes to that design will generally result in changes to the ratio. Changes in other technical or economic parameters that impact on reserves will also have an impact on the life of mine ratio even if they do not affect the mines
pit design. Changes to the life of mine ratio are accounted for prospectively.
The reduction in the life of mine waste-to-ore ratio at Diavik resulted from the removal from the mine plan of a section of ore which would have required a high level of waste stripping. The increase in the life of mine ratio in 2003 at Utah Copper was caused by the discontinuation of the North concentrator operation. This resulted in certain lower grade material that would have been processed through the concentrator being reclassified as waste. Increases in the ratio for the Grasberg (Freeport Joint Venture) mine primarily relate to changes in the cut off grade at the open pit, caused by a reassessment of the optimal milling rate at the mill facility including a greater proportional contribution of total ore processed from the Deep Ore Zone underground mine.
In operations that experience material fluctuations in the ratio on a year to year basis over the life of the mine, deferral of stripping costs reduces the volatility of the cost of stripping expensed in individual reporting periods, in relation to production of ore or contained minerals, as applicable. Stripping costs incurred in the period are deferred to the extent that the current period ratio exceeds the life of mine ratio. Such deferred costs are then charged against reported profits to the extent that, in subsequent periods, the ratio falls short of the life of mine ratio. The life of mine ratio is based on the proven and probable reserves of the operation.
Rio Tinto 2004 Form 20-F 43
In some operations, there are distinct periods of new development during the production stage of the mine. These may, for example, relate to a discrete section of the orebody. The new development will be characterised by a major departure from the life of mine stripping ratio. Excess stripping costs during such periods are deferred and subsequently amortised on a unit of production basis.
Deferred stripping costs form part of the total investment in the relevant income generating unit, which is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable.
During 2004, production stage stripping costs incurred by subsidiaries and equity accounted operations exceeded the amounts charged against pre tax profit by US$135 million. The net book value carried forward in property, plant and equipment and in investments in joint ventures and associated companies at 31 December 2004 was US$784 million.
Amortisation
of deferred stripping costs is included in depreciation of property, plant
and equipment or in the Groups share of the results of its equity accounted
operations, as appropriate.
Contingencies
Disclosure
is made of material contingent liabilities unless the possibility of any loss
arising is considered remote. Contingencies are disclosed in Note 29 on page
A-49. These include tax assessments of approximately A$500 million which,
based
on Counsels opinion, the Group expects to be successful in challenging.
New US accounting standards
Information on upcoming US accounting standards is
provided in Note 42 on page A-71 to the consolidated financial statements.
International financial reporting standards
In
2005 Rio Tinto will be reporting its financial performance in accordance with
International Financial Reporting Standards (IFRS) starting with the interim
2005 results. Restatements of full year and half year 2004 financial information
under IFRS were included in a media release issued on 5 May 2005 and the differences
from the amounts reported under UK GAAP were explained. This media release was
filed with the SEC on Form 6-K for the month of May 2005. Restatement of 2004
financial information under IFRS resulted in an increase in net earnings of US$405
million compared to UK GAAP but underlying earnings increased by US$51 million.
Shareholders equity at 31
December 2004 reduced by US$707 million.
Trend information
The
Groups worldwide operations supply essential minerals and metals that help to meet global needs and contribute to improvements in living standards, so changes in the demand for its products are closely aligned with changes in global GDP. Changes in the GDP of developing countries will have a greater impact on materials such as iron ore and coal that can be used to improve infrastructure whereas changes in the GDP of developed countries will have a greater impact on industrial minerals that have many applications in consumer products. Trends in production of the Groups minerals and metals, consolidated turnover, earnings, total assets and shareholders funds
are set out in the operational review on pages 27 to 67.
Forward looking statements
Forward looking statements are contained in this financial review and attention is drawn to the Cautionary statement on page 10.
![]() |
![]() |
Rio Tinto 2004 Form 20-F 44
Rio Tintos Iron Ore group (RTIO) wholly owns Hamersley Iron in Western Australia. Hamersley wholly owns five mines and also operates the 60 per cent owned Channar mine and the 54 per cent owned Eastern Range mine on behalf of joint venture partners. The Channar mine is a joint venture with an Australian subsidiary of the China Iron & Steel Industry & Trade
Group Corporation. The Eastern Range mine is owned in joint venture with the
Shanghai Baosteel Group Corporation and was commissioned in April 2004.
RTIO
also includes Rio Tintos effective 53 per cent interest in Robe River Iron Associates two mines in Western Australia and Rio Tintos 59 per cent interest in Iron Ore Company of Canada. The Iron Ore group operates both enterprises, which were acquired in 2000. From 2005, RTIO also manages Rio Tinto Brasil which owns a 100 per cent interest in Mineração Corumbaense Reunida, known as Corumbá.
In addition, RTIO includes the HIsmelt® direct smelting technology developed in Western Australia and resources held globally, including Orissa (India) and the Simandou (Guinea) deposits.
At
31 December 2004, the group accounted for 28 per cent of Rio Tintos operating assets, an increase of three per cent over the year. In 2004, the group contributed approximately 20 per cent of the Groups
turnover and 26 per cent of adjusted earnings.
In
2003, Rio Tinto reached agreement with its joint venture partners in Robe River
to allow closer cooperation between the Pilbara operations of Hamersley and
Robe. In 2004, a new company, Pilbara Iron, was formed to enable the sharing
of rail,
port and power infrastructure as well as management of non infrastructure assets,
including mobile and other mining equipment, and site and corporate services.
Coordination was progressively implemented during 2004. Together with Pilbara
Rail Company, which runs the combined rail assets of Hamersley and Robe, the
two entities manage RTIOs iron ore assets in the Pilbara as an optimised
and integrated operation. Pilbara Iron, including employees seconded to Pilbara
Rail Company, employs 2,880 people.
RTIO Expansion Projects was created in September 2003 to manage the growing portfolio of projects and studies in the Pilbara. The Expansion Projects team operates closely with Pilbara Iron, but is managed independently in order to minimise the impact on operations through project study and implementation phases.
For the contract year commencing April 2005 Hamersley Iron reached agreement with Nippon Steel on price increases of 71.5 per cent for lump, fine and Yandi ore.
RTIO employs almost 6,000 people worldwide. Chris Renwick retired as chief executive Iron Ore in December 2004, and was succeeded by Sam Walsh, who is based in Perth, Western Australia.
Financial performance
2004 compared with 2003
RTIOs
contribution to 2004 earnings was US$569 million, US$70 million higher than
in 2003.
Demand for iron ore continued to be extremely strong across the product range throughout 2004. In addition to strong demand from China where iron ore imports rose 40 per cent compared to 2003, the Japanese steel industry operated near capacity and crude steel production in Korea and Taiwan was at record levels. Reflecting the strength of the market, 18.6 per cent price increases were achieved for fiscal year 2004 for both lump and fines following the nine per cent increases agreed to in 2003.
In
June, new long term agreements with leading Chinese steel mills for the sale
of an incremental 40 million tonnes per annum of iron ore were announced. These
agreements, together with supply arrangements reached with Nippon Steel and
the Shanghai Baosteel Group earlier in the year, underpin the current phase
of Rio
Tintos expansion of port, rail and mine capacity that is on schedule
for completion at the end of 2005.
2003 compared with 2002
RTIOs
contribution to 2003 earnings was US$499 million, US$47 million higher than in
2002.
Demand for iron ore continued to be extremely strong throughout 2003, particularly from China, where imports of iron ore were 30 per cent higher than 2002. Strong demand for iron and steel in China bolstered demand for iron ore in other markets, with Japan, Korea and Taiwan all at record levels.
Price increases reflected the strong market, with a nine per cent increase for 2003 achieved in May.
Hamersley Iron (Rio Tinto: 100 per cent)
Hamersley Iron operates seven mines in Western Australia, including two mines in joint venture, 630 kilometres of dedicated railway, and port and infrastructure facilities located at Dampier. These assets are run as a single operation managed and maintained by Pilbara Iron. Hamersley employs approximately 70 people who work in Sales and Marketing. Hamersley has fewer employees than in 2003 as the majority of employees have been transferred to Pilbara Iron.
In 2003, Hamersley completed option analysis studies to increase its system capacity to ensure its ability to meet the needs of customers and the strong growth in demand for iron ore, particularly in China.
As a consequence, in December 2003, Rio Tinto approved a US$920 million expansion of the Dampier port, Yandicoogina mine, additional rail assets and feasibility study costs.
The
port expansion will increase Dampiers export capacity from 74 million tonnes
per annum to 116 million tonnes per annum. The Yandicoogina mine expansion will
increase its output to 36 million tonnes per annum; capacity was increased to
24 million tonnes per annum in 2004.
Commissioning of the Yandicoogina
expansion will take place in the second half of 2005. Completion of the
port expansion is scheduled for late 2005, with progressive commissioning from
mid-2005.
Rio Tinto 2004 Form 20-F 45
Expansion
work is continuing to provide additional rail, power and other infrastructure
to complement the new port and mine requirements. Construction is well advanced
to interconnect the power systems of Hamersley and Robe. Plans are at an advanced
stage to expand and convert Paraburdoo power generation to being gas fired. Pre-development
studies to further increase the capacity of existing mines and develop new mines
are being progressed.
Construction
of the US$67 million Eastern Range mine was completed in mid-April and its
first product was shipped in the second quarter. Located ten kilometres east
of Paraburdoo,
the mine services an unincorporated joint venture between Hamersley Iron and
Shanghai Baosteel Group Corporation, Chinas largest iron and steelmaker.
The joint venture, in which Hamersley holds a 54 per cent equity share, will
supply ten million tonnes of standard Hamersley iron ore products per year
over 20 years.
2004
operating performance
Hamersley
Irons total production in 2004 was 78.1 million tonnes, 4.7 million tonnes
more than in 2003. Rio Tintos
share of this production was 74.2 million tonnes. Production was severely disrupted
in early March by tropical cyclone Monty that required port facilities to be
closed, and resulted in significant flood damage to the operations. Most operations
returned to normal by the end of April, though the Tom Price mine continued
to be affected into July, adversely affecting volumes, product mix and costs.
Shipments
by Hamersley totalled 76.5 million tonnes, including sales through joint ventures.
Hamersleys shipments to China also reached a record level at 39.5 million
tonnes, making China by far the single largest destination for Hamersley Iron
ore.
Production
from all mines was stretched to achieve these levels, placing cost and other
operating stresses on the Hamersley system.
Costs
increased in preparation for volume growth, with increased material movement,
pre-stripping and higher maintenance activity. Costs of key mining inputs were
inflated as a result of the high level of activity across the mining industry.
Drilling and exploration programmes and pre-development studies all added significantly
to 2004 costs.
The
Pilbara Rail Company, formed in 2002, which effectively integrates the rail networks
of Hamersley and Robe River into a single operation, continued to deliver operational
efficiencies. Additional locomotives and ore cars were commissioned to enhance
the overall system capacity.
In
the spirit of closer cooperation with Robe, Hamersley shipped four million
tonnes of product from its Yandicoogina mine through Robes Cape Lambert
port facilities, now operated by Pilbara Iron. This has resulted in increased
operational flexibility
and relieves congestion at Dampier.
Hamersley
Iron is currently undertaking an extensive drilling programme that is expected
to accelerate conversion of its resource base into reserves. Focused on supporting
strategic mine development options, it is one of the largest drilling efforts
in Hamersleys history.
In 2004, the Australian Industrial Relations Commission ratified the Rio Tinto Iron Ore Federal Award agreed between Hamersley Iron, Robe River, Pilbara Iron and the Australian Workers Union.
Hamersley
continued to work sustainable development principles into its daily operations
throughout the year. The Environmental Management System, certified to ISO
14001, passed the second audit conducted by an external accreditation body.
The IronSafe
system was launched in 2004, which aligns internal and external health and
safety policies, procedures and documentation, throughout Rio Tintos
Western Australian based iron ore operations.
Million tonnes | |
Hamersleys total sales of iron ore to major markets in 2004 | |
China | 39.5 |
Japan | 19.0 |
Other Asia | 14.5 |
Europe | 3.5 |
Total | 76.5 |
NOTE: This table includes 100 per cent of all sales through joint ventures.
Robe
River Iron Associates (Rio
Tinto: 53 per cent)
Robe
River Iron Associates (Robe) is an unincorporated joint venture in which Mitsui
(33 per cent), Nippon Steel (10.5 per cent) and Sumitomo Metal Industries (3.5
per cent) also have interests. Robe is the worlds fourth largest seaborne
trader in iron ore, employing approximately 570 people, which is fewer than in
2003 as many employees have been transferred to Pilbara Iron.
Robe operates two open pit mining operations in Western Australia. Mesa J is located in the Robe Valley, north of the town of Pannawonica. The mine produces Robe River fines and lump, which are pisolitic iron ore products. The West Angelas mine, opened in 2002, is located approximately 100 kilometres west of the town of Newman. The mine produces West Angelas fines and lump, which are Marra Mamba iron ore products.
West
Angelas mine production reached its original design rate of 20 million tonnes
per year in the first quarter of 2004, two years earlier than planned. This increased
Robes production capacity to a nominal 50 million tonnes per year. In 2003,
Robe obtained approval to expand West Angelas to 25 million tonnes per year.
Work started on the US$105 million expansion in early 2004 and completion is
expected by mid 2005.
Rio Tinto 2004 Form 20-F 46
The
rail expansion project to duplicate almost 145 kilometres of track and associated
interconnection and infrastructure to increase the capacity of the Pilbara
Rail main line is progressing. Robe uses a dedicated rail system, operated
by Pilbara
Rail, to transport ore from its mines to the companys deepwater port
facilities at Cape Lambert.
Robe exports under medium and long term supply contracts with major integrated steel mill customers in Japan, Europe, South Korea and China.
2004
operating performance
Robes total production in 2004 was a record 48.5 million tonnes, comprising 30 million tonnes from Mesa J, and 18.5 million tonnes from West Angelas. Production of Mesa J ore was affected in the first quarter by flooding caused by tropical cyclone Monty although production levels returned to normal by the end of April. Product quality was affected for a prolonged period. Robes
total sales were 50.4 million tonnes, with strong demand in all major markets.
Sales
were 31.2 million tonnes of Mesa J and 19.2 million tonnes of West Angelas
products. Sales growth was based on increased West Angelas tonnage availability
and focused
primarily on Japan, where all customers exercised their tonnage options. Further
penetration of the Chinese market was also achieved, with sales to China now
accounting for one quarter of Robes sales. Increased marketing effort
in China resulted in the signing of long term agreements with large steel mill
customers.
Further studies are under way to improve understanding of the orebody at West Angelas and to determine appropriate mining strategies. In pit stockpiles were introduced in 2004 which has successfully reduced grade variation.
As part of a commitment to sustainable development, Robe updated its long term closure plans for each operation in consultation with community stakeholders.
Million tonnes | |
Robes total sales of iron ore to major markets in 2004 | |
Japan | 26.6 |
China | 13.0 |
Europe | 8.2 |
Other Asia | 2.6 |
Total | 50.4 |
Iron Ore Company of Canada (Rio Tinto: 58.7 per cent)
Rio
Tintos interest in Iron Ore Company of Canada (IOC) is 58.7 per cent. Mitsubishi (26.2 per cent) and the Labrador Iron Ore Royalty Income Fund (15.1 per cent) are also shareholders in IOC, Canadas
largest iron ore pellet producer. IOC operates an open pit mine, concentrator
and pellet plant at Labrador City, Newfoundland, together with a 420 kilometre
railway to port facilities and the partially refurbished pellet plant at Sept-Iles,
Quebec.
Products
are transported on IOCs railway to Sept-Iles. The port is ice free all
year and handles ore carriers of up to 255,000 tonnes. IOC exports its concentrate
and pellet products to major North American, European and Asia Pacific steel
makers.
The Sept-Iles pellet plant remains closed, following the suspension in September 2001 of the US$240 million refurbishment project.
A five year labour contract expired at the end of February 2004. As part of the change programme at IOC, a new contract was sought which would include more flexible working arrangements. Negotiations for the new contract started in January but despite protracted negotiations the workforce went on strike on 19 July, finally returning to work on 28 September. Mine operations were halted for ten weeks though ship loading from stockpiles continued for part of this period. IOC employs approximately 1,800 people.
2004 operating performance
Net earnings were US$3 million compared with US$7 million in 2003. The reduction in earnings was attributable to the lost production caused by a ten week strike.
Pellet production in the first half of 2004 showed a six per cent improvement over the corresponding period in 2003. Although operations recovered well from the shutdown, second half results were significantly affected and, as a result, full year total production was down 22 per cent on the 2003 level.
During 2004, IOC maintained its focus on the cost reduction programme that commenced in 2002. While progress has been slower than originally anticipated, the new labour agreement provides a further key element in improving the efficiency of the operation. The new agreement, taken together with the further gains made in 2004 in improving the reliability of key production systems, leaves IOC well placed to benefit in 2005. Emphasis remains on improving safety performance.
Million tonnes | |
IOCs total sales of iron ore to major markets in 2004 | |
Europe | 5.7 |
North America | 3.7 |
Asia Pacific | 2.1 |
Total | 11.5 |
Rio Tinto 2004 Form 20-F 47
Mineração Corumbaense Reunida (Corumbá) (Rio Tinto: 100 per cent)
Corumbá has been transferred to the Iron Ore group in 2005 to accommodate plans to expand production at the mine to 15 million tonnes per year from one million tonnes. In 2004, Corumbá produced 1.3 million tonnes of iron ore which was barged along the Paraguay River to South American and European customers. Logistic options are being considered for expanded export sales, including supplies to a proposed steel making project at Corumbá. Total resources at Corumbá are
over 400 million tonnes of lump ore grading 62.7 per cent iron. There are 420
employees.
Iron ore group projects
HIsmelt®(Rio Tinto: 60 per cent)
The HIsmelt® project is a joint venture between Rio Tinto (60 per cent interest through its subsidiary, HIsmelt® Corporation), US steelmaker Nucor Corporation (25 per cent), Mitsubishi Corporation (10 per cent), and Chinese steelmaker Shougang Corporation (5 per cent). The project has received approval for Australian federal government support of A$125 million.
The HIsmelt® process is a direct iron smelting technology developed largely by Rio Tinto that will convert iron ore fines into high quality pig iron (96 per cent iron content) without the use of coke ovens and sinter plants. Notably, the technology allows efficient processing of ore fines with higher levels of impurities.
A pilot plant to demonstrate the technology is being expanded to commercial scale at Kwinana in Western Australia. Construction began in January 2003. The plant will have a production capability of 800,000 tonnes of pig iron per year. Cold commissioning commenced in late 2004 and the first hot metal was produced in the hot commissioning process during the second quarter of 2005 after which it is planned the plant will ramp up to 60 per cent of capacity in the first year, 90 per cent in the second, to reach full capacity in the third. Significant industrial relations issues occurred in the latter half of 2004, resulting in 170,000 lost hours of construction.
In 2003, HIsmelt® signed a process licence agreement with the Laiwu Steel Group Ltd of China to allow for the development of an ironmaking facility using HIsmelt® technology. HIsmelt® has 100 employees.
Orissa, India (Rio Tinto: 51 per cent)
RTIO has a 51 per cent interest in Rio Tinto Orissa Mining, a joint venture with the state owned Orissa Mining Company. The joint venture holds rights to iron ore leases in Orissa, which it is seeking to develop. RTIO has recently appointed a project director to expedite the development of operations in India.
Simandou (Rio Tinto: 100 per cent)
The Simandou deposit in Guinea, west Africa, moved from Rio Tinto Exploration to full project status as part of RTIO in October 2004. Simandou is a greenfields discovery with potential to host significant resources of high grade iron ore. A prefeasibility study, started in fourth quarter 2004, will assess mining and transport options necessary to bring Simandou into production as quickly as possible. The Government of Guinea has an option to take a 20 per cent interest on a commercial basis.
![]() |
![]() |
Rio Tinto Energy
groups coal interests are in Australia and the US. They supply internationally
traded and domestic US and Australian markets. It also includes Rössing
Uranium in Namibia and Energy Resources of Australia which supply uranium
oxide for electricity generation.
In
2003, Rio Tinto formed a single management organisation for the Energy groups coal assets in Australia. Rio Tinto and Coal & Allied (Rio Tinto: 75.7 per cent) agreed to combine Coal & Allied corporate and service functions with those of Pacific Coal to increase efficiencies and lower costs. Pacific Coal (Rio Tinto: 100 per cent) was renamed Rio Tinto Coal Australia (RTCA). Effective 1 February 2004, RTCA manages both Pacific Coals existing assets and Coal & Allieds
assets in the Hunter Valley in a centralised management structure which provides
for shared costs.
At
31 December 2004, the Energy group accounted for 13 per cent of Group operating
assets and, in 2004, contributed 20 per cent of Rio Tintos turnover
and 16 per cent of adjusted earnings.
Preston Chiaro, chief executive Energy, is based in London.
Rio Tinto 2004 Form 20-F 48
Financial
performance
2004 compared with 2003
The Energy
groups 2004 contribution to adjusted earnings was US$365 million, US$208
million higher than in 2003.
Results
benefited from a strengthening market for thermal coal and the entry of the new
Hail Creek mine into a rising market for coking coal.
2003 compared with 2002
The Energy
groups 2003 contribution to adjusted earnings was US$157 million, US$196
million lower than in 2002. A lower export thermal coal price and a stronger
Australian dollar were the principal components of the reduced result.
Kennecott Energy (Rio Tinto: 100 per cent)
Kennecott
Energy (KEC) wholly owns and operates four open cut coal mines in the Powder
River Basin of Montana and Wyoming, US and has a 50 per cent interest in, but
does not operate, the Decker mine in Montana. KEC also manages the Groups
interest in Colowyo Coal in Colorado, US. In total it employs some 1,770 people.
One
of the largest US producers, KEC sells to electricity generators predominantly
in mid western and southern states. Sales are made under multiple year contracts
and on a spot basis for one year or less.
The
domestic US market for low sulphur coal continues to grow due to its competitive
cost per delivered energy unit and restrictions on sulphur emissions by utilities.
Continued strong demand for low cost and low sulphur western coal is expected
to increase with the announcement of numerous new coal fired generation projects
and increased utilisation of existing coal generation capacity in the US.
2004 operating performance
KECs
attributable production of 118 million tonnes of coal was nine per cent higher
than in 2003 as a result of higher demand for low sulphur coal. Earnings of US$119
million were 35 per cent higher than 2003 earnings of US$88 million. This increase
represents higher realised prices and sales volumes and a lower tax charge. KEC
also made progress in implementing value delivery initiatives that led to cost
reductions, productivity improvements, reduced capital requirements and value
adding marketing benefits. These benefits were partially offset by higher fuel
prices.
A detailed review of the mine plan and projected cash flows of the Colowyo coal business was completed in June 2004. This indicated that future operating and development costs are substantially higher than previously estimated. As a consequence of this, an exceptional charge of US$160 million was recorded in the first half of 2004 for the writedown of Colowyos
fixed assets and recognition of related contract obligations. This is excluded
from adjusted earnings.
Modified
mining practices lowered the high wall and waste piles at Cordero Rojo and were
successful in alleviating the instability issues that had affected production
in 2003.
KEC
successfully bid for an additional 177 million tonnes of in-situ coal reserves
at West Antelope at a cost of US$146 million.
The improved safety performance of 2003 was sustained
into 2004.
Rio Tinto Coal Australia (Rio Tinto: 100 per cent)
Rio Tinto
Coal Australia (RTCA), formerly Pacific Coal, manages the Groups Australian coal interests. These comprise the Blair Athol (Rio Tinto: 71 per cent), Kestrel (Rio Tinto: 80 per cent), Tarong (Rio Tinto: 100 per cent) and Hail Creek (Rio Tinto: 82 per cent) coal mines and the Clermont deposit (Rio Tinto: 50 per cent). RTCA also provides management services to Coal & Allied
Industries for day to day operation of its four mines.
About
60 per cent of Blair Athol thermal coal is sold to its two Japanese joint venture
partners under contracts extending to 2008 and 2010. The rest is sold by long
term and annual agreements to European and southeast Asian customers.
Production
from the wholly owned Tarong mine is sold to Tarong Energy Corporation, an adjacent
state owned power utility. A ten year contract for up to 7.5 million tonnes annually
expires in 2010.
Kestrel,
the only underground mine, sells mainly metallurgical coal to customers in Japan,
south east Asia, Europe and Central America generally on annual agreements.
After
the first commercial shipments in October 2003, the new coking coal mine at Hail
Creek ramped up to its production capacity of 5.5 million tonnes per annum during
2004. Acceptance has been strong in all markets, resulting in a decision in mid
2004 to expand production to eight million tonnes per year at a total cost of
US$157 million. During 2004, a further two per cent of the asset was sold to
existing joint venture partners and eight per cent to Nippon Steel Corporation
which entered a 15 year coal purchase contract.
RTCA employs some 904 people.
2004 operating
performance
RTCAs
earnings of US$180 million were 157 per cent higher than in 2003 due to
new production from Hail Creek, stronger demand and improved prices. Export
thermal coal prices increased by 40 per cent, export coking coal prices
increased by 20 per cent and domestic prices by 28 per cent.
Blair
Athol shipments were constrained during the year by infrastructure: early
in the year by failure of loading equipment at the Dalrymple Bay Coal Terminal
and late in the year by port congestion.
Rio Tinto 2004 Form 20-F 49
Production
decreased from 12.5 million tonnes to 12.2 million tonnes while sales were
11.8 million. Kestrels production of 3.3 million tonnes matched 2003
while shipments of 3.2 million tonnes of coking and thermal coal were 13 per
cent lower than in 2003. The production sequence in 2004 involved two longwall
changes. At Tarong, production increased by seven per cent to seven million
tonnes in line with increased demand from Tarong Energy Corporation. Hail Creek
production was 5.1 million tonnes of which 4.7 million tonnes were shipped.
Rio
Tintos share of coal production was 23 million tonnes, an increase
of 22 per cent on 2003, principally resulting from production ramp up at
Hail Creek.
Although
Blair Athol achieved a 75 per cent reduction over 2003 in lost time injury
frequency rate, the business overall improved safety performance by only 15
per cent and fell well short of the best ever recorded in 2002.
Coal & Allied Industries (Rio Tinto: 75.7 per cent)
Coal & Allied Industries (Coal & Allied) is publicly listed on the Australian Stock Exchange and had a market capitalisation of A$2.9 billion (US$2.2 billion) at 31 December 2004. In 2003, a committee of independent Coal & Allied directors, negotiated an agreement with Rio Tinto to combine Coal & Allieds corporate and management functions with those of Rio Tinto Coal Australia. The combined management organisation lowers costs, achieves economies of scale and removes duplicated functions for both Coal & Allied
and Rio Tinto.
Coal & Allieds assets are all located within the Hunter Valley in New South Wales, Australia. It wholly owns Hunter Valley Operations, has an 80 per cent interest in Mount Thorley Operations and a 55.57 per cent interest in the contiguous Warkworth mine, and a 40 per cent interest in the Bengalla mine which abuts its wholly owned Mount Pleasant development project. Coal & Allied
also has a 37 per cent interest in Port Waratah Coal Services.
Coal & Allied produces thermal and semi soft coal. Most of its thermal coal is sold under contracts to electrical or industrial customers in Japan, Korea and elsewhere in Asia. The balance is sold in Europe and in Australia. Coal & Allieds
semi soft coal is exported to steel producing customers in Asia and Europe
under a combination of long term contracts and spot business.
Coal & Allied
employs some 1,095 people.
2004 operating performance
Earnings of US$51 million were achieved compared with a loss of US$24 million in 2003. Export coal prices increased by 37 per cent. Good progress was made in implementing operational cost reductions including the agreement to combine corporate and management functions with those of RTCA, formerly Pacific Coal, and operational integration of the Mount Thorley and Warkworth operations, in order to improve performance in 2004 and beyond.
At
all operations, sales were constrained by insufficient rail infrastructure to
meet producer demand. The Port Waratah Coal Services Port Allocation System was
introduced in April 2004 to limit ship queues and reduce demurrage and will continue
at least through 2005.
At
Hunter Valley Operations production increased from 12 million tonnes to 13.3
million tonnes while sales were 12.8 million tonnes. The integrated Mount Thorley
Warkworth operations increased production from nine million tonnes to 10.5 million
tonnes while sales were 10.1 million tonnes. At Bengalla, production decreased
from 6.2 million tonnes to 5.3 million tonnes due to mine sequencing issues while
sales were 5.8 million tonnes.
Rio
Tintos share of coal production was 16.7 million tonnes, an increase
of nine per cent on 2003, principally resulting from expanded use of seven
day rosters, improved productivity and use of contractors to meet strong
market demand within the constraints of the Port Allocation System.
Although
the lost time injury frequency rate was reduced by 45 per cent from 2003,
the result was overshadowed by a fatal injury to an employee of a contractor
at Mount Thorley operations in May.
Rössing Uranium (Rio Tinto: 68.6 per cent)
Rössing produces and exports uranium oxide from Namibia to European, US and Asia Pacific electricity producers. Production has been lower than the 4,500 tonnes per year capacity for some years due to market conditions. Rössing
employs approximately 830 people.
2004 operating performance
Total production of 3,582 tonnes of uranium oxide was 49 per cent higher than 2003 as a result of higher plant availability and improved market conditions. Expiring long term higher priced sales contracts have been replaced by contracts in line with 2004 market prices. Higher realised prices were more than offset by the strengthening of the Namibian dollar against the US dollar resulting in a loss of US$4 million compared with a loss of US$19 million in 2003. Initiatives to deliver cost savings continued, as did studies on opportunities to extend the mine beyond the life of the existing pit.
In
2004, Rössings safety performance continued to improve with
a 66 per cent reduction in the lost time injury frequency rate.
Energy Resources of Australia (Rio Tinto: 68.4 per cent)
Energy Resources of Australia Ltd (ERA) is publicly listed and had a market capitalisation of A$1.3 billion (US$1.0 billion) at 31 December 2004. ERA employs approximately 260 people with 13 per cent of the operational workforce represented by Aboriginal people.
Rio Tinto 2004 Form 20-F 50
ERA produces uranium oxide at the Ranger open pit mine, 260 kilometres east of Darwin in the Northern Territory. ERA also has title to the nearby Jabiluka mineral lease, which in 2003 was put on long term care and maintenance. Ranger has a 5,500 tonnes per year capacity and began production in 1981. Estimated ore reserves are sufficient to maintain uranium oxide production for approximately eight years at current rates. ERAs operations including Jabiluka are surrounded by, but remain separate from, the World Heritage listed Kakadu National Park and especially stringent environmental requirements and governmental oversight apply. Uranium oxide from Ranger is sold to electricity utilities in Japan, Korea, Europe and North America.
2004 operating performance
Uranium oxide production of 5,143 tonnes was above the previous year in response to greater sales commitments. Stronger prices were offset by the strengthening Australian dollar and resulted in earnings of US$19 million, an increase of US$8 million from 2003.
In
response to a water contamination incident and a series of equipment radiation
clearance breaches that occurred in late 2003 and early 2004, mining and
processing operations were suspended for a total of 10 days to ensure that
all work necessary to rectify the deficiencies was either complete or under
way. In both cases, the government Supervising Scientist's report concluded
that it is most unlikely that anyone suffered any long term health effects.
ERA has since successfully passed three government audits and has committed
to implementing the Australian Health and Safety Standard AS4801 in addition
to ISO 14001. On 1 June 2005 ERA was fined A$150,000 in the Darwin Magistrates
Court after having pleaded guilty to two charges related to these incidents.
Safety performance for 2004 deteriorated against
2003 in terms of lost time injuries.
Energy group projects
Clermont Coal (Rio Tinto: 50.1 per cent)
The Clermont
deposit is near RTCAs Blair Athol mine. It is
suited to open cut development. A feasibility study commenced in 2004. Integration
options with Blair Athol are available following the signing of a strategic alliance
agreement by the Blair Athol and Clermont Joint Ventures. JPower joined the Clermont
Joint Venture after acquiring a 15 per cent interest from Rio Tinto and Mitsubishi
in 2003.
Mount Pleasant (Rio Tinto: 75.7 per cent)
Development of the Mount Pleasant project continued with further optimisation work in 2004 on the pre-feasibility study undertaken in 2002.
INDUSTRIAL MINERALS GROUP
![]() |
![]() |
|
![]() |
Rio Tintos
Industrial Minerals group produces borates, industrial salt, talc and titanium
dioxide feedstock. Rio Tinto Borax, Rio Tinto Iron & Titanium,
Luzenac and Dampier Salt, its principal businesses, are leading suppliers of
their respective products.
The Industrial Minerals group employed approximately
7,000 people in 2004.
Rio Tinto 2004 Form 20-F 51
At 31
December 2004, the Industrial Minerals group accounted for 13 per cent
of the Groups operating assets and contributed approximately 15 per cent of Rio Tintos
turnover and 10 per cent of adjusted earnings in 2004.
Andrew Mackenzie replaced Tom Albanese as chief executive Industrial Minerals, and is based in London.
Financial performance
2004 compared with 2003
Industrial
Minerals contribution to 2004 earnings was US$223 million, 45 per cent higher than in 2003, reflecting higher volumes and prices at Borax, increased prices at Rio Tinto Iron & Titanium
and the partial reversal of a writedown taken in 2003 relating to a customer
receivable. There was also a steady improvement in trading conditions for both
the talc and salt businesses in 2004. These factors were partially offset by
the strength of the Canadian dollar and South African rand against the US dollar.
Rio
Tinto Boraxs earnings were 18 per cent higher at US$94 million. The borates
business benefited from continued strength in the US housing market and increasing
demand from China.
Rio
Tinto Iron & Titanium earnings at US$95 million were 102 per cent higher
than in 2003. Although the conventional feedstock market remained in oversupply,
earnings benefited from stronger demand for iron, steel, rutile and zircon
co-products. Production of conventional slags reflected market conditions,
while production of upgraded slag (UGS) continued to run at capacity.
2003 compared with 2002
Industrial Minerals contribution
to 2003 earnings was US$154 million, 46 per cent lower than in 2002, reflecting
the significant weakening of the US dollar against both the Canadian dollar and
South African rand and continued weakness across North American and European
markets.
Rio
Tinto Boraxs earnings were eight per cent lower at US$80 million. The cost
base was negatively impacted by higher natural gas and diesel prices, rising
employee benefit costs in California and net one off charges.
Rio
Tinto Iron & Titanium earnings at US$47 million were 71 per cent lower than
in 2002 due to the effect of the weak US dollar, soft market conditions and a
charge associated with the writedown of a customer receivable in 2003.
Rio Tinto Borax (Rio Tinto: 100 per cent)
Rio Tinto Boraxs Boron mine in Californias Mojave Desert is the worlds
largest borate mine. Borates are used in the US for vitreous applications, such
as fibreglass, glass wool, high temperature glasses and enamels. The perborate
industry, a major market in Europe, uses borates as bleach in detergents. Other
uses include ceramics, fertilisers, flame retardants, wood preservatives and
corrosion inhibitors.
Rio
Tinto Boraxs US and UK research laboratories provide technical support
and participate in collaborative projects with customers.
2004 operating performance
Production volumes were steady at 565,000 tonnes. Sales were nine per cent higher than 2003, due to good trading conditions driven by the US construction sector, growth from newer applications and Chinese demand.
The first phase of an expansion of boric acid capacity, announced in 2003, is scheduled to come on stream in 2005. Approval to commence a second phase expansion has been received, with construction to be completed by 2006.
Rio Tinto Iron & Titanium (Rio Tinto: 100 per cent)
Rio Tinto Iron & Titanium
(RIT) comprises the wholly owned QIT-Fer et Titane (QIT) in Quebec, Canada and
the 50 per cent interest in Richards Bay Minerals (RBM) in KwaZulu-Natal, South
Africa. Both produce titanium dioxide feedstock used by customers to manufacture
pigments for paints and surface coatings, plastics and paper, as well as iron
and zircon co-products.
QITs
proprietary process technology enables it to supply both the sulphate and chloride
pigment manufacturing methods. Its upgraded slag (UGS) plant supplies the growing
chloride sector and is designed for expansion in line with demand up to a capacity
of 600,000 tonnes per year from its current level of 250,000 tonnes. During 2003
RIT announced an expansion of its UGS plant to 325,000 tonnes per annum, with
new production on schedule to commence in 2005.
RBMs
ilmenite has a low alkali content which makes its feedstock suitable for the
chloride pigment process. RBM has the capacity to produce one million tonnes
of feedstock annually.
2004 operating performance
Demand for titanium dioxide pigment improved strongly throughout 2004. However, the feedstock side of the industry continued to be affected by the general oversupply of conventional chloride and sulphate slag feedstocks and feedstock inventory levels at some pigment producers. In contrast, demand for very high grade chloride feedstock products, such as UGS, remains strong. Overall, RIT production of titanium dioxide feedstocks was the same as 2003, reflecting both market conditions and the effect of the introduction of new capacity.
Demand for iron and steel coproducts was exceptionally strong during 2004, with prices reaching historic highs. Zircon markets continued to be very tight.
Rio Tinto 2004 Form 20-F 52
Dampier Salt (Rio Tinto: 64.9 per cent)
Dampier Salt (DSL)
is now the worlds largest salt exporter. It produces industrial salt by
solar evaporation at Dampier, Port Hedland and Lake MacLeod, where it also mines
gypsum, in Western Australia.
The
chemical industry in Asia is the principal customer for DSLs salt whilst gypsums
main use is in wallboard and cement manufacture.
2004 operating performance
Dampier Salts
earnings in 2004 were unchanged, at US$10 million. While trading conditions were
improved through higher volumes, earnings were impacted by the weakness of the
US dollar and escalating costs in north western Australia. Salt production was
three per cent higher than 2003, at 7.4 million tonnes (Rio Tinto share: 4.8
million tonnes).
Commissioning of a new process plant at Dampier began in December 2004.
Luzenac Group (Rio Tinto: 99.9 per cent)
The Luzenac Group
operates talc mines, including the worlds largest, in south west France,
and processing facilities in Australia, Austria, Belgium, Canada, France, Italy,
Japan, Mexico, Spain, the UK and the US.
Luzenac products are used internationally. Principal uses are in paper, paints, cosmetics, ceramics, agricultural and plastics industries.
2004 operating performance
Earnings in 2004,
at US$24 million, were 41 per cent higher than the previous year reflecting recovery
in the US paper industry and new product developments. Luzenacs production
in 2004 was six per cent higher than 2003 at 1.44 million tonnes.
Sales volumes were slightly higher than from 2003, while prices showed gradual improvement.
Industrial minerals group projects
QIT Madagascar Minerals (Rio Tinto: 80 per cent)
RIT manages QIT Madagascar Minerals (QMM), in which an agency of the Government of Madagascar has a 20 per cent interest. QMM was formed to evaluate and, if appropriate, develop large mineral sand deposits in the south east of Madagascar.
In November 2001, QMM was granted an environmental permit by the Government for the proposed minerals sands project. The permit requires QMM to comply with a full range of social and environmental obligations throughout the life of the project.
A feasibility study is progressing and RIT is working with the Government, as well as all other interested and affected parties, with a view to making a decision on development in 2005.
Rio Colorado Potash (Rio Tinto: option to acquire 100 per cent)
Rio Tinto entered into an option agreement in 2003 to acquire 100 per cent of Potasio Rio Colorado SA, an Argentine company holding the mineral rights and other assets of the Rio Colorado potash project. The project is located 1,000 kilometres south west of Buenos Aires, in the provinces of Mendoza and Neuquen. The option runs until late 2005, during which time Rio Tinto will evaluate the commercial potential for developing the project. A pilot plant was commissioned in 2004 as part of this evaluation.
Rio Tinto 2004 Form 20-F 53
![]() |
![]() |
![]() |
Rio Tintos
Aluminium group encompasses its wholly owned, integrated aluminium subsidiary,
Comalco, and its 51 per cent share in Anglesey Aluminium.
At
31 December 2004, the Aluminium group accounted for 23 per cent of Rio Tintos
operating assets and in 2004 contributed 17 per cent of Group turnover and
15 per cent of adjusted earnings.
Oscar Groeneveld succeeded Sam Walsh as chief executive Aluminium, and is based in Brisbane, Australia.
Financial performance
2004 compared with 2003
Rio Tinto Aluminiums
contribution to 2004 earnings was US$334 million, an increase of 67 per cent.
Stronger
aluminium prices increased earnings by US$162 million with the average three
months aluminium price in 2004 at 78 US cents per pound compared with 65 US cents
per pound in 2003. The effect of the weakening US currency reduced Aluminiums
earnings by US$55 million.
2003 compared with 2002
Aluminiums
contribution to 2003 earnings was US$200 million, a decrease of 22 per cent from
2002.
Stronger
aluminium prices increased earning by US$51 million with the average three month
aluminium price in 2003 at 65 US cents per pound compared with 61 US cents per
pound in 2002. The effect of the weakening US currency reduced Aluminiums
earnings by US$111 million.
Rio Tinto Aluminium
Rio Tinto Aluminium is a major supplier of bauxite, alumina and primary aluminium to world markets. It employs about 3,850 people.
Rio Tinto Aluminium has a large, wholly owned bauxite mine on Cape York Peninsula, Queensland. A US$150 million mine expansion was completed on time to supply the bauxite requirements of the Comalco Alumina Refinery. Approximately 90 per cent of the bauxite from Weipa is shipped to alumina refineries at Gladstone, Queensland and Sardinia, Italy.
Construction
of the first stage of the wholly owned Comalco Alumina Refinery at Gladstone
in Queensland was completed in late 2004, ahead of schedule and close to the
budget of US$750 million. Operations have commenced and first shipments were
made in November 2004, three months ahead of schedule. The refinery is expected
to produce 1.4 million tonnes of alumina annually, with full capacity due to
be reached by the end of 2006. There is potential for capacity to be increased
to over four million tonnes per year in two additional stages and a small team
is working on a feasibility study for Stage Two. The majority of the refinerys Stage One output will go into Rio Tinto Aluminium smelters. The balance will be placed in the traded alumina market. The refinery enables Rio Tinto Aluminium to add further value to the Weipa bauxite deposit and strengthen both Rio Tinto Aluminiums and Australias
positions in the world alumina market.
In
2004, Comalco sold its four per cent interest in the Boké bauxite deposit
in West Africa to other shareholders in the joint venture for US$12 million.
The gain of US$4 million has been excluded from adjusted earnings.
In 2003, Comalco signed a long term alumina supply agreement with Norsk Hydro, to supply 300,000 tonnes of alumina in 2005 and then 500,000 tonnes of alumina per year for more than 20 years. This agreement underpins the investment in the Comalco Alumina Refinery.
Rio
Tinto Aluminiums primary aluminium is produced by smelters at Boyne Island
at Gladstone (59.4 per cent), Bell Bay (100 per cent) in Tasmania, Tiwai Point
(79.4 per cent) in New Zealand and Anglesey Aluminium (51 per cent) in Wales,
UK.
2004 operating performance
Overall, Rio Tintos share of bauxite production in 2004 increased by four per cent above 2003, despite a first quarter affected by wet weather and the sale of Boké in
June 2004.
Bauxite production at Weipa was 12.6 million tonnes, six per cent higher than in 2003. Weipa bauxite shipments increased eight per cent, to 12.3 million tonnes, compared with 2003 levels.
Rio Tinto 2004 Form 20-F 54
QAL production
increased by one per cent compared to 2003, despite an interruption to
the refinerys power supply. This interruption reduced production
by approximately 85,000 tonnes (33,000 tonnes Rio Tinto share) but otherwise
QAL enjoyed strong production for the balance of the year. Eurallumina
production increased four per cent over 2003 levels.
Rio
Tinto Aluminiums share of aluminium production from its four smelters at
837,000 tonnes was 20,000 tonnes above 2003 production. Attributable metal shipments
for 2004 were 841,000 tonnes, an increase of 21,000 tonnes, and went to similar
destinations as in 2003, primarily Japan, Australia, Europe and Korea.
Production at Anglesey increased by two per cent, Boyne Island increased by four per cent, Tiwai Point increased by five per cent. The Bell Bay smelter suffered equipment failure in June in the electrical switchyard, resulting in a three per cent decrease in production. The equipment has been replaced and production returned to normal levels.
Aluminium group projects
Weipa mine expansion (Rio Tinto: 100 per cent)
The
US$150 million mine expansion at Weipa in 2004 is expected to increase capacity
to 16.5 million tonnes of bauxite per year. The mining upgrade relates to a move
to simultaneous mining at Weipas Andoom and East Weipa mines and involves
a change in ore characteristic (fine ore) to that previously being mined. The
majority of the expenditure for the project was on a 9.5 million tonne beneficiation
plant to allow mining of lower grade fine ores. The next activity will be the
construction of a new US$42 million power station for the Weipa mining operations
and surrounding communities.
![]() |
![]() |
![]() |
Rio Tintos
Copper group comprises Kennecott Utah Copper in the US and interests in the
copper mines of Escondida in Chile, Grasberg in Indonesia, Northparkes in
Australia, Palabora in South Africa, and the Resolution Copper project in
the US. The group also has management responsibility for Kennecott Minerals
Company and Kennecott Land in the US.
In
March 2004, Rio Tinto sold its holding in Freeport-McMoRan Copper and Gold
Inc. (FCX) to FCX for net consideration of US$882 million. Later in the year,
it divested its interests in the Zinkgruvan and Neves Corvo mines for a net
consideration of US$193 million which included a profit sharing adjustment
and the sale of the rights to future price participation on the Neves Corvo
sale. Sale of the Fortaleza nickel complex in Brazil was completed in early
2004 for total cash consideration of about US$80 million. The sale of Rio
Tintos 51 per cent interest in Rio Paracatu Mineração for US$250 million was completed at the end of the year. Responsibility for Rio Tinto Brasil, owner of the Corumbá iron
ore mine, was transferred to the Iron Ore group. The gains arising from business
disposals by the Copper group have been excluded from adjusted earnings.
At
31 December 2004, the Copper group, which also produces gold as a significant
co-product, accounted for 19 per cent of the Groups operating assets and, in 2004, contributed approximately 22 per cent of Rio Tintos
turnover, of which 70 per cent was from copper and the remainder mostly from
gold. It accounted for 39 per cent of adjusted earnings in 2004.
Tom Albanese, who took over from
Oscar Groeneveld as chief executive Copper, is based in London.
Financial performance
2004 compared with 2003
The
Copper groups contribution to earnings was US$856 million, US$416 million
higher than in 2003. The average price of copper was 130 US cents per pound compared
to 80 US cents in 2003. The average gold price of US$409 per ounce increased
by 13 per cent.
Kennecott
Utah Coppers contribution to earnings of US$293 million compared with US$88
million in 2003.
Rio Tintos
share of earnings from Escondida increased by US$294 million to US$416 million.
Mined production of copper was up 22 per cent due to the resumption of full production
at the beginning of 2004.
Rio Tinto 2004 Form 20-F 55
The earnings contribution from the Grasberg joint venture decreased by US$66 million to US$38 million chiefly as a result of the material slippage in October 2003. Early in 2004 efforts were directed at accelerating the removal of waste material to restore safe access to the higher grade area of the open pit. Production activities in this area resumed in the second quarter and grades improved during the second half.
Palabora recorded a loss of US$21 million in 2004 due to the negative effect of the stronger rand in relation to the US dollar combined with lower volumes and higher costs due to continued delays in reaching production capacity in the underground mine.
2003 compared with 2002
The
Copper groups contribution to earnings was US$440 million in 2003, US$99
million higher than in 2002. The average price of copper was 80 US cents per
pound compared to 71 US cents in 2002. The average gold price of US$363 per
ounce increased by 17 per cent.
Kennecott
Utah Coppers 2003 contribution to earnings of US$88 million was broadly
in line with 2002.
Rio Tintos earnings from Escondida increased
to
US$122 million despite constrained output in response to weak market demand.
Mined production of copper was up 32 per cent (Rio Tintos
share) due to the commissioning of the new Laguna Seca concentrator.
The
Grasberg joint ventures earnings contribution decreased by US$5 million
to US$127 million chiefly as a result of the material slippage in October.
This had an adverse effect on both volumes and costs. In the fourth quarter,
only
lower grade material was mined from the open pit and near term mine sequencing
operations were directed to restoration of safe access to the higher grade
areas. Despite full production from the underground mine, mill throughput was
still
significantly below capacity.
Earnings at Palabora decreased to US$1 million in 2003 due to the negative effect of the stronger rand in relation to the US dollar combined with lower volumes and higher costs due to delays in reaching production capacity in the underground mine.
Kennecott Utah Copper (Rio Tinto: 100 per cent)
Kennecott Utah Copper (KUC) operates the Bingham Canyon mine, Copperton concentrator and Garfield smelter complex, near Salt Lake City, US.
KUC supplies more than ten per cent of annual US refined copper requirements and employs approximately 1,500 people. Negotiation of a new labour agreement, to last until September 2009, was concluded in June 2003. The agreement provided for greater flexibility in deployment of personnel and assignment of work.
KUC provides some management services to the wholly owned Barneys Canyon gold mine due to its proximity to Bingham Canyon. Mining and milling at Barneys Canyon ended in 2001 but gold production continues until 2005. The operation employs about 20 people.
KUC, as the owner of 53 per cent of undeveloped land in the Salt Lake Valley of Utah, formed Kennecott Land to develop about 16,000 hectares of the 37,200 hectares owned. The initial 1,800 hectare Daybreak project site lies in the path of expanding residential areas. Kennecott Land has the right to build roads, make utility connections and prepare the land for sale to builders who will construct houses for 30,000 people. Rio Tinto initially invested US$50 million. The first revenues were received in 2004.
2004 operating performance
Net earnings of US$293 million were US$205 million above 2003 assisted by higher metal prices. Byproduct grades, particularly gold and silver, remained at 2003 levels but are anticipated to return to life of mine averages in 2005. Molybdenum production was 48 per cent higher than in 2003 due to higher head grades and recoveries.
Refined copper production was seven per cent higher than in 2003. A project to enlarge the Bingham Canyon open pit was approved in February 2005. The East 1 pushback is expected to extend the life of the open pit to 2017. Capital expenditure on the project is budgeted to be US$100 million for mine facilities, a concentrator upgrade and mobile equipment, and US$70 million after 2008 for the relocation of the in pit crusher and dewatering facilities. The East 1 pushback is a higher value, lower capital intensive option than the previous mine plan which was predicated on development of an underground mine from 2013. Mine development options from 2017 will be reviewed in the context of the decision to proceed with the East 1 pushback, and include various open pit and underground alternatives. A one off non cash charge of US$36 million has been recorded in 2004 to reflect an increase in the present value of provisions for environmental remediation costs, based on the assumption that mining operations cease in 2017. Pending any extension of the assumed mine life beyond 2017, there will be an increase in the annual depreciation charge and amortisation of discount from 2005 of around US$45 million.
Rio Tinto 2004 Form 20-F 56
2002 | 2003 | 2004 | ||||
Principal operating statistics at KUC 2002 2004 | ||||||
Rock mined (000 tonnes) | 150,331 | 135,204 | 129,196 | |||
Ore milled (000 tonnes) | 40,720 | 46,105 | 45,712 | |||
Head grades: | ||||||
Copper (%) | 0.69 | 0.67 | 0.63 | |||
Gold (g/t) | 0.44 | 0.29 | 0.29 | |||
Silver (g/t) | 3.42 | 3.02 | 3.04 | |||
Molybdenum (%) | 0.034 | 0.027 | 0.033 | |||
Copper concentrates produced (000 tonnes) | 992 | 1,147 | 1,106 | |||
Production of metals in copper concentrates | ||||||
Copper (000 tonnes) | 260.2 | 281.8 | 263.7 | |||
Gold (000 ounces) | 412 | 305 | 308 | |||
Silver (000 ounces) | 3,663 | 3,548 | 3,584 | |||
Molybdenum concentrates produced (000 tonnes) | 11.2 | 8.8 | 12.9 | |||
Contained molybdenum (000 tonnes) | 6.1 | 4.6 | 6.8 | |||
Concentrate smelted on site (000 tonnes) | 1,096 | 1,060 | 1,098 | |||
Production of refined metals | ||||||
Copper (000 tonnes) | 293.7 | 230.6 | 246.7 | |||
Gold (000 ounces) | 488 | 308 | 300 | |||
Silver (000 ounces) | 4,037 | 2,963 | 3,344 | |||
Grasberg (Rio Tinto: 40 per cent joint venture)
Grasberg, in Papua,
Indonesia, is one of the worlds largest copper and gold mines in terms of reserves and production. It is owned and operated by Freeport Indonesia (PTFI), the principal and 91 per cent owned subsidiary of the US based Freeport-McMoRan Copper & Gold
Inc. (FCX).
To
meet the mines social obligations to local communities, at least one per cent of Grasbergs
net sales revenues are committed to support village based programmes. In addition,
two new trust funds were established in 2001 in recognition of the traditional
land rights of the local Amungme and Komoro tribes. In 2004, PTFI contributed
US$17.8 million (net of Rio Tinto portion) and Rio Tinto US$1.6 million in total
to the funds.
As
a result of training and educational programmes, Papuans represented more than
a quarter of PTFIs approximately 9,000 workforce by the end of 2004.
2004 operating performance
Grasberg
open pit production was affected by two rock slippages in the last quarter of
2003. Consequently, a large part of 2004 was focused on ensuring a safe production
environment into the future. This resulted in lower than predicted open pit copper
and gold production due to a combination of lower tonnages and grades of ore
exacerbated by using low grade ore from the pit to supplement mill production
during the first four months of the year. Pit production stabilised during the
second half of the year. In December 2004, Rio Tinto and FCX agreed the adjustment
to the Participation Agreement and sharing of insurance proceeds attributable
to the Grasberg pit slippage incidents. Rio Tintos share of insurance proceeds
contributed US$20 million to net earnings.
2002 | 2003 | 2004 | ||||
Principal operating statistics for PTFI 2002-2004 | ||||||
Ore milled (000 tonnes) | 86,001 | 74,103 | 67,750 | |||
Head grades: | ||||||
Copper (%) | 1.14 | 1.09 | 0.87 | |||
Gold (g/t) | 1.24 | 1.54 | 0.88 | |||
Silver (g/t) | 3.60 | 4.03 | 3.85 | |||
Production of metals in concentrates | ||||||
Copper (000 tonnes) | 864.4 | 715.8 | 516.4 | |||
Gold (000 ounces) | 3,030 | 3,262 | 1,584 | |||
Silver (000 ounces) | 6,402 | 6,474 | 5,037 | |||
Escondida (Rio Tinto: 30 per cent)
The low cost Escondida copper mine in Chile is one of the largest copper mines in the world, with a mine life expected to exceed 30 years at current rates of production. The mine is 57.5 per cent owned and managed by BHP Billiton.
Approval
was given in 2003 for the US$400 million Escondida Norte project. The satellite
deposit will provide mill feed to maintain capacity at Escondida above 1.2 million
tonnes per annum of copper in concentrate and cathode to the end of 2008 as existing
Escondida mine grades decline. First production from Norte is expected in the
fourth quarter of 2005. Rio Tintos share of the project cost is US$120
million.
In 2004 a US$870 million sulphide
leach project was approved involving the use of bacteria to leach copper from
sulphide ores that would otherwise be discarded as waste. The project will produce
180,000 tonnes (Rio Tinto share 54,000 tonnes) of copper cathode metal per annum
for more than 25 years. It is scheduled to start production during the second
half of 2006.
Escondida
employs approximately 2,800 people directly, together with 2,400 contractor personnel.
Rio Tinto 2004 Form 20-F 57
2004 operating performance
Escondidas
mined copper production was 22 per cent higher than in 2003. In late 2003 high
clay content in the ore caused problems in recovering water from tailings that
inhibited production from the new Laguna Seca concentrator. These problems
were resolved in early 2004 and the concentrator achieved an average throughput
of
105,216 tonnes per day during the year compared to the design capacity of 110,000
tonnes per day. Overall, Escondida ore tonnes milled were 17 per cent higher
and copper grades six per cent higher than in 2003.
2002 | 2003 | 2004 | ||||
Principal operating statistics at Escondida 2002-2004 | ||||||
Rock mined (000 tonnes) | 306,620 | 300,386 | 377,356 | |||
Ore milled (000 tonnes) | 46,536 | 70,347 | 82,378 | |||
Head grade: | ||||||
Copper (%) | 1.58 | 1.43 | 1.51 | |||
Production of metals in concentrates | ||||||
Copper (000 tonnes) | 622.6 | 847.0 | 1,045.6 | |||
Gold (000 ounces) | 126 | 184 | 217 | |||
Silver (000 ounces) | 2,981 | 4,728 | 5,747 | |||
Copper cathode (000 tonnes) | 138.7 | 147.6 | 152.1 | |||
Palabora (Rio Tinto: 49.2 per cent)
Palabora Mining Company (Palabora) is a publicly listed company on the Johannesburg Stock Exchange and operates a mine and smelter complex in South Africa.
Palabora has developed a US$465 million underground mine with a planned production rate of 30,000 tonnes per day of ore. Approximately 1.6 million tonnes of copper are expected to be produced over its 20 year life.
Palabora
supplies most of South Africas copper needs and exports the balance. It
employs approximately 1,700 people and labour agreements are negotiated annually.
2004 operating
performance
Palabora recorded a net loss of US$21 million compared with earnings of US$1 million in 2003. With closure of the open pit mine in 2002 after 40 years of production, a start was made on commissioning of the underground block cave mining project. During 2003 and 2004 the ramp up to full production of 30,000 tonnes per day was hindered by fragmentation problems and poor performance of remote rock breaking equipment. The average production rate of underground ore mined during the last quarter of 2004 was 26,500 tonnes per day, with 27,250 tonnes per day in December, compared to the target of 30,000 tonnes per day.
The
aggregate impact of the limited production from the underground mine, and the
strength of the rand against the US dollar, partly offset by cost saving actions,
adversely affected earnings, and led to additional borrowing requirements. In
addition, this triggered an evaluation of the recoverable amount of Palaboras copper business which resulted in a provision for asset impairment of US$161 million after tax and outside shareholders interests.
This is excluded from adjusted earnings.
Palabora is selling its magnetite
iron ore stockpile with completion expected in 2005, a by-product of previous
and current copper mining, that is stored on site. The stockpile is estimated
to
contain
over 235
million
tonnes
of material grading more than 55 per cent iron.
2002 | 2003 | 2004 | ||||
Principal operating statistics at Palabora 2002-2004 | ||||||
Ore milled (000 tonnes) | 9,933 | 11,415 | 8,657 | |||
Head grade: | ||||||
Copper (%) | 0.63 | 0.59 | 0.74 | |||
Copper concentrates produced (000 tonnes) | 167.9 | 163.3 | 187.7 | |||
Contained copper (000 tonnes) | 52.2 | 52.4 | 54.4 | |||
New concentrates smelted on site (000 tonnes) | 258.6 | 267.6 | 253.4 | |||
Refined copper produced (000 tonnes) | 81.6 | 73.4 | 67.5 | |||
Northparkes (Rio Tinto: 80 per cent)
Rio
Tintos interest in the Northparkes copper-gold mine resulted from the acquisition
of North Limited. Northparkes is a joint venture with the Sumitomo Group (20
per cent).
Following an initial open pit operation at Northparkes in central New South Wales, Australia, underground block cave mining has been undertaken since 1997. With present and future developments, the operation has an expected life of 13 years at current production rates.
The copper concentrate produced is shipped under long term contracts that provide for periodic negotiation of certain charges, as well as spot sales, to smelters in Japan (67 per cent), Australia (14 per cent) and other countries (19 per cent).
Northparkes employs approximately 160 people together with 140 permanent contractors.
Rio Tinto 2004 Form 20-F 58
2004 operating performance
Production from the first underground block cave ceased in early 2003 and is being replaced by the Lift 2 block cave which commenced production in 2004. Progress with mine development for Lift 2 was hampered by high rock stresses which adversely affected mine development but assists in the caving of the orebody with good fragmentation. The transition to Lift 2 was completed in 2004.
2002 | 2003 | 2004 | ||||
Principal operating statistics at Northparkes 2002-2004 | ||||||
Ore milled (000 tonnes) | 5,364 | 5,168 | 5,008 | |||
Head grade: | ||||||
Copper (%) | 0.86 | 0.67 | 0.79 | |||
Gold (g/t) | 0.35 | 0.44 | 0.66 | |||
Production of contained metals | ||||||
Copper (000 tonnes) | 38.4 | 27.1 | 30.0 | |||
Gold (000 ounces) | 40.8 | 48.6 | 79.4 | |||
Kennecott Minerals (Rio Tinto: 100 per cent)
Kennecott
Minerals in the US manages the Greens Creek mine (Rio Tinto: 70 per cent) in
Alaska and the Rawhide mine (Rio Tinto: 51 per cent) in Nevada. It also owns
the Groups interest in the Cortez gold mine (Rio Tinto: 40 per cent), also
in Nevada. Ore extraction from Rawhide was completed in October 2002 and reclamation
work is well advanced.
Kennecott
Minerals employs approximately 300 people, excluding employees of non managed
operations.
2004 operating
performance
Net earnings of US$79 million were US$19 million above 2003, benefiting from higher gold prices. Gold production decreased by three per cent at the Cortez gold mine.
Greens Creek (Rio Tinto: 70.3 per cent)
In addition to gold,
the Kennecott Greens Creek mine on Admiralty Island in Alaska produces silver,
zinc and lead.
2004 operating performance
Mill throughput
was three per cent higher than in 2003, but due to lower grades, silver and zinc
production from Greens Creek were 17 per cent and nine per cent lower,
respectively, than in 2003.
Copper group projects
Resolution (Rio Tinto: 55 per cent)
The Resolution project is situated in Arizona, US, in the area of the depleted Magma (Superior) copper mine. In 2001, an agreement was signed with BHP Billiton Base Metals which allowed Rio Tinto to earn a 55 per cent interest in the project by spending US$25 million over six years. In 2003, five deep exploration drillholes intersected significant copper mineralisation, indicating a large deposit at depth. Rio Tinto completed earning its 55 per cent interest in the project in early 2004. The project is currently in the preliminary stages of a prefeasibility study. It is anticipated that studies will take some considerable time.
Cortez Hills (Rio Tinto: 40 per cent)
Rio Tinto holds a 40 per cent interest in the Cortez gold mine, a joint venture with Placer Dome. The mine is located in northeastern Nevada, US, and the associated area of interest includes the Cortez Hills deposit, discovered in 2003 which contains proven and probable reserves of 7.5 million ounces of gold. A feasibility study is in progress to determine the optimum sequencing for development of the deposits within the Cortez area of interest. It is anticipated that operating permits for Cortez Hills will be obtained in 2006, with initial gold production occurring in mid 2007.
Eagle (Rio Tinto: 100 per cent)
The Eagle project is a small tonnage, high grade nickel deposit located in Michigan, US, for which Kennecott Minerals has commissioned a prefeasibility study.
Rio Tinto 2004 Form 20-F 59
With diamonds becoming a significant earner for Rio Tinto, the Diamonds
product group was formed in 2003 from the former Diamonds & Gold group. The group comprises Rio Tintos 60 per cent interest in the Diavik Diamonds mine in Canada, the wholly owned Argyle mine in Australia, Rio Tintos
78 per cent interest in the Murowa mine in Zimbabwe which started production
in 2004 and diamond sales and representative offices in Belgium and India.
Rio Tinto is a
leading proponent of the Kimberley Process which seeks to ensure that only legitimately
mined and traded rough diamonds are introduced into the world market. Programmes
are in place to ensure that firms operating to acceptable standards of social
responsibility process diamonds mined by Rio Tinto. Rio Tinto sells its diamonds
through its marketing arm, Rio Tinto Diamonds, according to their mine source
in order to gain the benefits of origin.
At
31 December 2004, Diamonds accounted for eight per cent of the Groups operating assets and, in 2004, contributed five per cent of Rio Tintos
turnover and eight per cent of adjusted earnings.
Keith
Johnson, chief executive, Diamonds, is based in London.
Financial performance
2004 compared
with 2003
Diamonds
contributed US$169 million to adjusted earnings, an increase of US$56 million
from 2003, assisted by the continuing operating success of the Diavik Diamonds
mine.
The diamond market continued to be strong. There was robust growth in retail jewellery sales in the US and the Japanese market grew for the first time in a number of years. Industry rough prices improved, particularly for large, clean, white rough diamonds for which demand has been consistently in excess of supply. Prices also increased for polished diamonds.
2003 compared
with 2002
Diamonds in 2003 contributed US$113 million to adjusted earnings, up US$50 million from 2002, reflecting the startup of the Diavik Diamonds mine.
Demand for rough diamonds was strong throughout 2003 with the rough market outperforming the market for polished stones.
Diavik Diamonds (Rio Tinto: 60 per cent)
Diavik
Diamond Mines (DDMI) owns Rio Tintos interest in and manages the unincorporated
Diavik Diamonds joint venture in the Northwest Territories of Canada.
The project was completed in 2003 well ahead of schedule and within budget. Initial production of gem quality diamonds commenced in January 2003 with commissioning of the process plant. Production will build up over the next two years.
DDMIs
commitment to work with Aboriginal communities was formally concluded in five
participation agreements, providing training, employment and business opportunities.
Procurement contracts for the operating phase were negotiated with Aboriginal
businesses.
2004 operating
performance
Net earnings were US$145 million, US$104 million more than in 2003. Sales of diamonds continued to attract a high level of interest with prices being achieved at a significantly higher level than originally projected.
Production continued to ramp up during 2004 and exceeded expectations in nearly all respects. Record volumes were produced as the process plant comfortably exceeded design throughput on a consistent basis. Improving grades continued to reflect the processing of mud rich material that surrounds the kimberlite proper.
A strategic planning team, separate from mine operations, is studying how best to capture the upside of a stronger market and new geological information for both the A154South and A154North kimberlites. After 12 months of study, Rio Tinto approved the construction of the A418 dike at an expected cost of US$190 million. Construction is planned to commence in mid 2005. Rio Tinto also approved studies to investigate the feasibility of underground mining of three of the four kimberlite bodies. The studies will include the construction of an exploratory decline. The project is expected to cost US$75 million. Diavik includes some of the most valuable kimberlites in the world.
Rio Tinto 2004 Form 20-F 60
Argyle
(Rio
Tinto: 100 per cent)
Rio Tinto owns
and operates the Argyle diamond mine in Western Australia.
Production
from Argyles major resource, the AK1 open pit mine, is expected to continue
until 2007 with processing continuing for a short while thereafter. A feasibility
study is under way into underground mining by the block caving method beneath
the open pit. A decision is expected in 2005 relating to mine closure or further
mine development. Development of an exploration decline commenced in 2003 to
assist in confirming design criteria. The range of statutory approvals required
for underground operation includes environmental and social impact assessments.
Argyle employs approximately 780 people.
2004
operating performance
Net earnings of
US$23 million were US$49 million lower than in 2003. Diamond production for
2004 was 33 per cent lower with 21 million carats produced. Tight mining conditions
prevailed as a result of the deepening open pit which, together with abnormally
wet weather, limited mine production. Lower grade ore from stockpiles supplemented
ore from the mine.
Reserves
decreased following the development of a new resource model and revised mine
plan which resulted in some material being transferred to resources.
Murowa
(Rio
Tinto: 78 per cent)
Early
in 2004, Rio Tinto and Rio Tinto Zimbabwe approved expenditure of US$11 million
on a small scale plant to start diamond production at Murowa near Zvishavane
in southern Zimbabwe.
An
updated feasibility study confirmed the existence of three kimberlite pipes
representing a mining reserve of 18.7 million tonnes of ore at a grade of 0.9
carats per tonne.
Commercial
production commenced in the third quarter. Initial operations are focused on
1.3 million tonnes of weathered material containing 140,000 tonnes of enriched
ore. A phased approach reduces the initial investment required and allows confirmation
of marketing and regulatory arrangements prior to expansion, which could be
considered within three years. Diamonds from Murowa are marketed through Rio
Tinto Diamonds in Antwerp. Safeguards are in place regarding the chain of custody
of the product. Zimbabwe is a signatory of the Kimberley Process.
Following
the decision to proceed with Murowa, the directors of Rio Tinto Zimbabwe (RioZim)
agreed to a restructuring of Rio Tintos 56 per cent shareholding in RioZim.
As a result of the restructure, Rio Tinto owns a direct 78 per cent interest
in Murowa and has a residual economic interest in RioZim. RioZim became an
independent,
Zimbabwean controlled, listed company owning the remaining 22 per cent of Murowa.
2004
operating performance
Net
earnings were US$1 million. The construction and commissioning of facilities
and infrastructure was the main objective in 2004. While commissioning problems
in the process plant delayed full capacity being reached, the fourth quarter
saw the first parcel of diamonds successfully mined, processed and sold.
OTHER
OPERATIONS
Other
operations comprise the Lihir gold mine in Papua New Guinea, the Kelian gold
mine in Indonesia and the Sari Gunay gold project in Iran.
Lihir
(Rio
Tinto: 14.5 per cent)
Lihir
Gold is a publicly quoted company formed to finance and develop the Lihir mine
in Papua New Guinea. Lihir Gold had a market capitalisation of A$1.49 billion
(US$1.16 billion) at 31 December 2004.
Lihir
directly employs approximately 1,070 people, of whom 91 per cent are Papua New
Guinea nationals, including 36 per cent Lihirians. Some 1,600 contractors are
also employed.
2004
operating performance
Lihirs
contribution to Rio Tintos earnings for 2004 included US$12 million resulting
from the revaluation of ore stockpiles to restore these to the lower of cost
and net realisable value taking account of changes in circumstances including
higher gold prices.
Gold
production at Lihir was 8.9 per cent higher than in 2003 due to higher throughput
and higher head grades.
Kelian
(Rio
Tinto: 90 per cent)
Kelian
Equatorial Mining (Kelian) operated an open pit gold mine in East Kalimantan,
Indonesia.
Mining
ceased in 2003 with production from stockpiled ore completed in February 2005.
A mine closure consultative process was completed in 2003 with stakeholders
agreeing on the key mine closure directions. Work is continuing on mine closure
activities including establishment of post closure institutions, the upgrade
of the Namuk tailings dam, and rehabilitation and revegetation. Work is planned
for removal of camp and operating facilities and the camp site area prepared
for future wetlands development.
Rio Tinto 2004 Form 20-F 61
Kelian has been reducing employee and contractor numbers as it winds down its operations and focuses on mine closure activities. Settlement of compensation claims is continuing under a 2001 agreement and a number of programmes are in place to provide sustainable solutions for local communities and former employees after closure.
2004
operating performance
Rio
Tintos share of Kelians production was 295,000 ounces in 2004,
30 per cent below the previous year, as a result of the processing of low grade
stockpiles.
Project
Sari
Gunay (Rio
Tinto: 70 per cent)
The
Sari Gunay (formerly Dashkasan) project in Iran entered the prefeasibility stage
during the year. Work continued on the delineation of the sizeable body of gold
mineralisation discovered in Kordestan province in western Iran. Drilling continued
to outline additional mineralisation and to increase confidence in existing
estimates.
Metallurgical
test work and community and environmental baseline studies continued.
EXPLORATION
GROUP
Rio
Tinto Exploration seeks to discover or identify mineral resources that will
contribute to the growth of the Rio Tinto Group. The discovery of new resources
is essential to replace deposits as they are mined and to help meet the increasing
global demand for minerals and metals.
The
Exploration group is opportunistic in approach and its resources are deployed
on projects that show the best chance of delivering a world class deposit to
Rio Tinto. Mineral exploration is a high risk activity. Rio Tintos statistics
show that an average of only one in 350 mineral prospects that are drill tested
result in a mine for the Group. Rio Tinto believes in having a critical mass
of projects, selected through a rigorous process of prioritisation.
The
Exploration group is organised into four geographically based teams and a fifth
team that looks for industrial minerals on a global basis. Additionally, a small
focused project generation team covers the world for new opportunities.
At
the end of 2004, Rio Tinto was exploring in 30 countries for a broad range of
commodities including copper, diamonds, nickel, industrial minerals, gold, bauxite,
iron ore and coal. Exploration employs 191 geologists and geophysicists around
the world and has a total complement of 880 people.
Tom Albanese succeeded
David Klingner as head of Exploration, and is based in London.
2004
operating performance
Exploration
in 2004 focused on advancing the most promising targets across the spectrum
of grassroots, generative, drill test stage, and near mine programmes. Encouraging
results were obtained from a number of locations.
Order
of magnitude studies were completed on the Simandou (iron ore, Guinea) and Eagle
(nickel-copper, Michigan, US) projects. Both projects have been transferred
to relevant product group teams for pre-feasibility assessment. Since 2001 five
projects have moved from exploration to the next stage of project evaluation
including Resolution (copper, Arizona, US) and Potasio Rio Colorado (potash,
Argentina). In addition to these projects, near mine exploration has also been
undertaken. Where resources have been supplemented or additional resource discovered
this has been has reported by the respective product group.
Several
projects are in the process of, or about to initiate, order of magnitude studies
to assess their economic potential for advancement to pre-feasibility assessment.
An order of magnitude study was commenced at the La Sampala nickel laterite
resource in Indonesia, and is nearing completion.
The çöpler and Marcona deposits discovered previously were divested
in 2003 and 2004 respectively. In 2004, the Groups interest in the Sepon
project in Laos was sold.
Diamond
exploration continued in Canada, southern Africa, Mauritania, Brazil and India.
A number of diamond bearing kimberlite pipes were discovered and follow up test
work is in progress to gauge economic potential.
Copper
exploration continued in Turkey, Peru, Chile, Argentina and the US. Copper mineralisation
was encountered in drilling in projects in Turkey and Peru, which warrant further
follow up drill testing.
Exploration
focus on the bulk commodities iron ore, coal and bauxite has been increasing
each year for the last several years and evaluation of several projects is continuing
with the intention to progress two projects to product group handover in 2005.
The
Exploration group was active in the search for industrial mineral deposits in
a number of parts of the world including North and South America, Europe, south
east Asia and Turkey.
The
Exploration group continued to support brownfield work at a number of Rio Tinto
operations. Additional work to develop the Argyle diamond mine continued. In
the US and Argentina, active programmes were conducted in the vicinity of the
Boron and Tincalayu mines. In Indonesia, exploration in and around the Grasberg
mine led to the addition of further copper reserves.
Rio Tinto 2004 Form 20-F 62
Financial
performance
2004
compared with 2003
Cash
expenditure on exploration in 2004 was US$193 million and the pre-tax charge
to earnings was US$187 million, a US$60 million increase over 2003, reflecting
increased iron ore exploration in Western Australia and acceleration of evaluation
on significant projects by product groups during the year.
2003
compared with 2002
Cash
expenditure on exploration in 2003 was US$130 million and the pre-tax charge
to earnings was US$127 million, similar to 2002.
TECHNOLOGY
GROUP
The
Technology group provides technical assistance to Rio Tintos product
groups and their businesses, and advises executive management. In support of
the drive
towards operational excellence, a key focus is to identify and implement best
practices, to improve safety and environmental performance, maximise operating
efficiency and add value across Rio Tinto.
Technology
staff include experienced professionals covering all the main industry related
disciplines, while the Office of the Chief Technologist manages the Groups
involvement in external and collaborative research.
The
total staff in the Technology group at year end was 362 compared with 333 in
2003.
Ian
Smith, head of Technology, is based in London. He was formerly managing director,
Aluminium Smelting, Comalco and succeeded John OReilly who moved to a
part time role on 1 May 2005.
2004
operating performance
Technical
Services
Technical
Services continued to increase its involvement with Rio Tinto operations and
also provided significant contributions at non managed operations. Activity
over the year was again at record levels, with a strong focus on the enhancement
of initiatives to improve performance and implement best practice such as in
water management and metallurgical margin improvement. New initiatives recently
commenced include Excellence in Mine Planning and Resource Management.
A
number of current development projects are linked with external research programmes
in order to leverage value for Rio Tinto. Others are focussed on innovation
and best practice in key areas to add value in a shorter time frame.
Office
of the Chief Technologist
The
Office of the Chief Technologist is responsible for the identification and the
transfer of technology based opportunities for the Group.
The
external research portfolio covers a broad range of industry related initiatives.
Some of these link directly with internal development projects. Work on improving
efficiency and reducing costs is continuing in areas such as comminution, water
usage and materials handling. A number of breakthrough projects are also being
pursued.
The
Rio Tinto Foundation for a Sustainable Minerals Industry approved a further
14 projects for funding.
Technical
Evaluation and Project Management
Technical
Evaluation continued in its principal role of providing independent review of
all major investment proposals being considered by the Group. Risk assessment
and management is an important and integral component of the project review
process. The unit also continued with the programme of post investment reviews.
It has established a database to consolidate the findings so that lessons learned
from completed projects can be shared within the Group.
The
Project Management Unit provides ongoing support to major project teams across
Rio Tinto, both for projects in execution and those still in the feasibility
stage. There was also continued involvement with some major projects at non
managed operations. Two project management forums were held during the year
focussing on collaboration between projects and lessons learned.
Asset
Utilisation
This
unit is now well established across the Group and its workload continued to
expand. There has been particularly heavy involvement with the iron ore operations
in Western Australia which is expected to continue through 2005. The process
control group is now well established. The development of tools to improve performance
continues, including on asset integrity and remote monitoring.
There
is continuing emphasis on ensuring that safety, operability and maintainability
issues are fully addressed and incorporated in all the units work.
Financial
performance
The
charge for the Technology group against net earnings was US$25 million, compared
with US$16 million in 2003. The increase was mainly due to the weaker US dollar
and the greater level of activity in all Technology group units.
Rio Tinto 2004 Form 20-F 63
GROUP SOCIETY AND ENVIRONMENT
The way we work
Rio Tinto is in business to create value by finding and developing world class mineral deposits and operating and eventually closing operations safely, responsibly and efficiently. To do so, the Group takes a disciplined and integrated approach to the economic, social and environmental aspects of all its activities.
The approach to achieving this is through implementation of the policies described in The way we work,
Rio Tintos statement of business practice, at all levels of the business.
The statement, redistributed in 2003 in 19 languages, is the result of many months of wide internal consultation and discussion and represents shared values from around the Group. The document was published initially in January 1998. It was revised in 2002 in the light of experience, following further Group wide review and consultation, external benchmarking of policies against the best practice of other organisations and approval by the Rio Tinto board.
The way we work commits the Group to transparency consistent with normal commercial confidentiality, corporate accountability and the application of appropriate standards and internal controls. It sets the basis for how Group companies' employees work and also provides guidance for joint venture partners and others. Every employee is responsible for implementing the policies in the document.
Rio
Tinto has adopted the Association of British Insurers 2003 disclosure guidelines on social responsibility in preparing this report. Details of the Groups overall and individual businesses social
and environmental performance continue to be published on the Rio Tinto website:
www.riotinto.com/se and in the Sustainable development review.
Board responsibilities
The directors of Rio Tinto, and of Group companies, are responsible for monitoring adherence to the Group policies outlined in The way we work.
Assurance for performance in these areas involves checking, reviewing and reporting
each businesss implementation of the policies, their compliance with
regulations and voluntary commitments, and the effectiveness of management
and control systems,
while also providing mechanisms for improvement.
As
discussed in the section on Corporate governance on pages 82 to 89, the boards
established a process for identifying, evaluating and managing the significant
risks faced by the Group. Directors meet regularly, have regular scheduled
discussions on aspects of the Groups strategy and full and timely access
to the information required to discharge their responsibilities fully and effectively.
Rio
Tintos Compliance guidance requires that the identification of risk be systematic and ongoing. It recommends that each Group company undertakes a structured risk profiling exercise to identify, categorise and weigh the risks it faces in the conduct of its business. Each Group company puts systems in place to ensure that risks are reviewed at an appropriate frequency.
Total remuneration is related to performance through the use of annual bonuses, long term incentives and stretching targets for personal, financial and safety performance.
The
boards Committee on social and environmental accountability reviews the effectiveness of policies and procedures. The committee comprises four non executive directors and is chaired by the chairman of the main board. It meets three times annually with the chief executive and heads of Technology, Health, Safety and Environment and Communication and Sustainable Development.
Reports
for the committee summarise significant matters identified through Rio Tintos
assurance activities. These include reviews every four years of each business
to identify and manage strategic risks in relation to health, safety, and the
environment; audits against Rio Tinto standards; annual risk management audits;
risk reviews for specific concerns, such as cyanide management and smelter
operations; procedures and systems for reporting critical and significant issues
and incidents; completion of annual internal control questionnaires by all
Group business leaders covering the full spectrum of business and operational
risk; and findings and recommendations of the independent external assurance
and data verification programme.
Rio Tinto 2004 Form 20-F 64
Policies, programmes and results
Implementation of the policies in The way we work is discussed in the following sections named according to each policy area. Known risks arising from social and environmental matters and their management in Group businesses are described in the relevant Group operations section.
Safety
Safety is a core
value and a major priority. Rio Tinto believes that all injuries are preventable
and its goal is zero injuries. To achieve this, full and consistent implementation
of and accountability for Rio Tintos comprehensive standards, guidelines,
systems and procedures is required across the world. The Group is also building
a supportive safety culture that requires visible leadership, ongoing education
and training and a high level of participation by everyone in the workplace.
However, there is still some way to go in achieving the goal of zero. In 2004, very regrettably one contractor lost his life at a managed operation. The Group has demonstrated strong improvements in the lost time injury frequency rate (LTIFR) and all injury frequency rate (AIFR) from 2003, with reductions of 21 per cent and 15 per cent respectively. The LTIFR for 2004 was 0.65 per 200,000 hours worked by employees and contractors (2003: 0.82).
Fines for infringement of safety regulations totalled US$19,200 (2003: US$162,000).
Occupational health
Rio Tinto strives to protect physical health and well being in the workplace. This requires clear standards, consistent implementation, transfer of best practice and improvement through Group wide reporting and tracking of remedial actions.
During 2004, Group businesses worked to implement the occupational health standards and 81 per cent of employees now work at an operation where the occupational health standards have been implemented. In 2004, there were 72 new cases of occupational disease per 10,000 employees, (2003: 107).
Operations
were temporarily suspended at Energy Resources of Australias (ERA) Ranger
uranium mine in Australia during March 2004 following an incident of drinking
water contamination. The government Office of the Supervising Scientist appointed
independent health experts to investigate and advise on the potential for long
term harm to workers as a result of the water contamination. They concluded that
longer term health effects were most unlikely.
Operations
were again temporarily suspended at the end of August 2004 to review safety and
health systems following the issue of two reports from the Office of the Supervising
Scientist. One report concerned the incident of drinking water contamination
and the other concerned radiation clearance procedures for equipment leaving
site. Three Australian Government audits arising from the incidents have been
satisfactorily completed. On 1 June 2005 ERA was fined A$150,000 in the Darwin
Magistrates Court after having pleaded guilty to two charges related to these incidents Rio Tintos
southern African operations are nearing full implementation of the Group HIV/AIDS
strategy. This provides access to antiretroviral therapy that is affordable for
employees and a partner. Operations in Asia and west Africa are in the process
of refining their local strategies to meet Group requirements.
In 2004, Rio Tinto set targets to focus attention on reducing noise induced hearing loss across the Group. The target of zero exposure of employees to a noise dose of more than 82 decibels (averaged over eight hours), after allowing for the use of hearing protection was not met, with 0.5 per cent of employees still exposed to noise greater than this limit.
Fines for infringement of occupational health regulations in 2004 involved four operations, totalling US$257,000 (2003: US$900).
Environment
Wherever possible
Rio Tinto prevents, or otherwise minimises, mitigates and remediates, harmful
effects of the Groups operations on the environment.
To do this, the Group seeks to understand the environmental aspects and impacts of what it does, build what is learned into systems to manage and minimise those impacts, and set targets for improvement.
After
significant Groupwide consultation, Rio Tintos environment standards were
finalised and approved in 2003 for implementation by June 2005. During 2004,
significant work continued on ways to improve efficiency of greenhouse gas emissions,
energy use and water withdrawn from the environment.
By the end of 2004, 84 per cent of operations had implemented ISO 14001 or an equivalent environmental management system (EMS). All Rio Tinto operations are required to have a certified EMS by the end of June 2005: by the end of 2004, 72 per cent of operations had achieved this. There was no change in the number of significant environmental incidents (16) compared to 2003. There was a decrease in the number of significant spills from eight to four. Fines for infringements of environmental regulations involved three operations and totalled US$53,800 (2003: US$126,000).
Land access
Rio Tinto seeks
to ensure the widest possible support for its proposals throughout the life cycle
of the Groups activities by coordinating economic, technical, environmental
and social factors in an integrated process.
This involves negotiation of mining access agreements with indigenous landowners; responsible land management and rehabilitation; planning for closure; developing and implementing a biodiversity strategy; and forming strategic partnerships with external organisations.
Rio Tinto 2004 Form 20-F 65
Political
involvement
Rio
Tinto does not directly or indirectly participate in party politics nor make
payments to political parties or individual politicians.
A Business
integrity guidance, addressing
bribery, corruption and political involvement, was issued in 2003 to assist
managers in implementing this policy. The guidance covers questions relating
to compliance
and implementation; gifts and entertainment; the use of agents and intermediaries;
and facilitation payments.
Rio Tinto avoids making facilitation payments anywhere in the world. Bribery in any form is prohibited. Gifts and entertainment are only offered or accepted for conventional social and business purposes and then only at a level appropriate to the circumstances.
Communities
Rio
Tinto sets out to build enduring relationships with its neighbours that are characterised
by mutual respect, active partnership, and long term commitment.
Every
business unit is required to have rolling five year community plans which are
updated annually. In 2004, a series of pilot studies were completed aimed at
achieving a deeper level of understanding of the linkages between mining activities
and the economies in which they take place.
All
Group businesses produce their own reports for their local communities and other
audiences. Community assurance of the quality and content of these reports is
increasing. This provides an opportunity for engagement with the community on
their views of programmes sponsored by the operations.
Businesses managed by Rio Tinto contributed US$87.8 million to community programmes in 2004 (2003: US$70 million). Of the total contributions, US$34.2 million was community investment and US$24.1 million in direct payments made under legislation or an agreement with a local community.
Human
rights
Rio
Tinto supports human rights consistent with the Universal Declaration of Human
Rights and Rio Tinto respects those rights in conducting the Groups operations
throughout the world.
Rio
Tinto also supports the UN Secretary Generals Global Compact, the US/UK
Voluntary Principles on Security and Human Rights and the Global Sullivan Principles.
Rio
Tintos Human rights guidance is
designed to assist managers in implementing the Groups human rights policy
in complex local situations. It was revised and republished in 2003. In 2004,
a web based training module was developed to instruct managers on what the
policy means in practice and how to respond to difficult situations.
Employment
Rio
Tinto recognises that business performance is closely linked to effective people
development. It has a long term plan to strengthen approaches to the training
and development of leaders in the Group.
In
2004, a suite of formal leadership programmes was developed and implemented for
both strategic and Group business leaders. In total, ten customised leadership
development programmes, involving 225 participants, were successfully run in
2004 in partnership with leading business schools in Europe, North America and
Australia. All product groups and businesses were represented. It is planned
to run a further ten strategic and business leadership development programmes
in 2005 involving about 250 participants.
As
well as using the open programmes run by the London Business School and International
Institute for Management Development for future leaders, Rio Tinto commissioned
the design of a customised, operational leadership programme to be launched in
2005 with eight programmes involving about 240 further participants from across
the Group at manager and superintendent level.
These
programmes are all focused on ensuring that leaders, at all levels, are well
prepared for the wide range of current and future challenges they will face in
taking forward a complex and commercially successful organisation. All of these
programmes are closely integrated with the core leadership competencies Rio Tinto
has identified as necessary for effective leaders wherever they work in the organisation.
Pilot
programmes were undertaken in 2004 on the use of career development tools and
their application to new and better approaches to coaching and mentoring employees.
In 2005, Group wide workshops to improve the capability of all involved in managing
careers are being organised.
People
development in Rio Tinto is focused on ensuring technical and professional competence.
In 2004, five projects were undertaken to define these competencies in Marketing,
Finance, Human Resources, Community Relations and Health, Safety and Environment
teams. This led to a pilot development programme being successfully designed
and delivered for early career Human Resources professionals.
In
2005, all five streams will focus on implementing across the Group common professional
development tools, programmes and systems. Competency in these functions will
be extended to cover all other disciplines to ensure that the Group builds and
strengthens its skills capability at all levels and to facilitate more effective
collaboration on areas of common interest in different businesses.
In the past few years, Rio Tinto has focused on strengthening and developing leaders; in 2005 the focus will be on developing talent and potential at all levels and building a stronger alignment between individual and business performance.
Rio Tinto 2004 Form 20-F 66
Rio Tinto requires safe and effective working relationships in all its operations. Whilst respecting different cultures, traditions and employment practices, common goals are shared, in particular the elimination of workplace injuries, and commitment to good corporate values and ethical behaviour.
In
2004, Group companies employed 28,000 people (2003: 29,000) and, together with
Rio Tintos proportionate share of those employed by joint ventures and associates, the total was 33,000 (2003: 36,000) mainly concentrated in Australia and North America. Wages and salaries paid in 2004 excluding Rio Tintos
proportionate share of joint ventures and associates totalled US$1.7 billion
(2003: US$1.5 billion).
Retirement payments and benefits to dependants are provided in accordance with local conditions and good practice.
Rio
Tinto encourages the involvement of its employees in the Groups performance
through their participation in an employee share scheme. As stated in The way we work, the Group recognises the right of employees to choose whether or not they wish to be represented collectively.
Sustainable development
Rio Tinto believes that its businesses, projects, operations and products should contribute constructively to the global transition to sustainable development.
All
businesses are required to assess the sustainable development case for their
activities. Rio Tinto has committed itself to integrating the results of the
Mining, Minerals and Sustainable Development (MMSD) analysis of 2002 into the
Groups policy and objectives, and developing measures to assess their implementation.
As a founding member of the International Council on Mining and Metals, Rio Tinto
is participating in dialogue and programmes to advance industry wide progress
on key sustainable development priorities.
A Sustainable Development Leadership Panel (SDLP) was formed in 2004 to provide Group leadership and encourage businesses to make sustainable development considerations an integral part of business plans and decision making processes.
Openness and accountability
Rio Tinto conducts
the Groups affairs in an accountable and transparent manner, reflecting the interests of Rio Tinto shareholders, employees, host communities and customers as well as others affected by the Groups
activities.
Policies on transparency, business integrity, corporate governance and internal controls and reporting procedures are outlined in The way we work. In 2003, a Compliance guidance was issued to provide a framework to enable each Group business to implement and maintain a best practice compliance programme which should identify and manage risks associated with non compliance with laws, regulations, codes, standards and Rio Tinto policies.
Assurance and verification
To be accountable
and transparent, assurance is provided to the Group and others that Rio Tinto
policies are being implemented fully and consistently across the Groups
businesses and operations.
The overall objective of the external assurance and data verification programme is to provide assurance that the material in the Sustainable development review is
relevant, complete, accurate and responsive, and, in particular, that Rio Tintos policies and programmes are reflected in implementation activities at operations. In 2004, Environmental Resources Management (ERM) undertook the external assurance and data verification programme and the results are available in Rio Tintos Sustainable development review (previously the Social and environment review).
Competition
Rio Tinto has adopted a specific antitrust policy requiring all employees to compete fairly and to comply with relevant laws and regulations. Under the policy, guidance is provided on contacts with competitors and benchmarking as well as implementation of the policy in individual businesses. As integral parts of the policy, all relevant employees will receive regular training and will be required to certify annually that they are not aware of any antitrust violations.
Item 6. Directors, Senior Management and Employees
CHAIRMAN
1. Paul Skinner (age 60)
Paul Skinner was appointed chairman in November 2003. He graduated in law from Cambridge University and in business administration from Manchester Business School. A director of Rio Tinto since 2001and chairman of the Nominations committee. He
was previously a managing director of The Shell Transport and Trading
Company plc and group managing director of The Royal Dutch/Shell Group of Companies,
for whom he had worked since 1966. He is a director of Standard Chartered PLC
and the Tetra Laval Group. He is also a member of the board of INSEAD business
school. (notes b and d)
Rio Tinto 2004 Form 20-F 67
EXECUTIVE DIRECTORS
2. Leigh Clifford (age 57)
Leigh Clifford
became chief executive in 2000, having been a director of Rio Tinto plc since
1994 and Rio Tinto Limited since 1995. A mining engineer he is a bachelor of
engineering and a master of engineering science. He has held various roles
in the Groups coal and metalliferous operations since joining in 1970, including managing director of Rio Tinto Limited and chief executive of the Energy group. He is a former director of Freeport-McMoRan Copper & Gold
Inc and a non executive director of Barclays Bank plc.
3. Guy Elliott (age 49)
Guy Elliott became finance director of Rio Tinto in 2002. He holds an MA from Oxford and joined the Group in 1980 after gaining an MBA from INSEAD business school. He has subsequently held a variety of management positions, including being president of Rio Tinto Brasil from 1996 to 1999.
NON EXECUTIVE DIRECTORS
4. Ashton Calvert (age 59)
Ashton Calvert was appointed a director of Rio Tinto with effect from 1 February 2005. He recently retired as secretary of the Department of Foreign Affairs and Trade of the Government of Australia. He was educated at the University of Tasmania and, as a Rhodes scholar, also gained a doctorate in mathematics from Oxford University. During his career in the Australian foreign service he held appointments in Washington and, on four occasions, in Tokyo, where he was ambassador between 1993 and 1998 prior to his appointment as secretary. In these and other roles he developed extensive experience of the Asian countries which represent key markets for Rio Tinto. (notes b, d and e)
5. Sir David Clementi (age 56)
Sir David was appointed
a director of Rio Tinto in January 2003. He is chairman of Prudential plc, prior
to which he was Deputy Governor of the Bank of England. Sir Davids earlier
career was with Kleinwort Benson where he spent 22 years, holding various positions
including chief executive and vice chairman. A graduate of Oxford University
and a qualified chartered accountant, Sir David also holds an MBA from Harvard
Business School. (notes a, c and e)
6. Vivienne Cox (age 46)
Vivienne Cox was
appointed a director of Rio Tinto with effect from 1 February 2005. She is currently
executive vice president of BP p.l.c. for Integrated Supply and Trading and also
for Gas Power and Renewables. She is a member of the BP group chief executives
committee. She holds degrees in chemistry from Oxford University and in business
administration from INSEAD. During her career in BP she has worked in chemicals,
exploration, finance, and refining and marketing. (notes a and e)
7. Richard Goodmanson (age 57)
Richard Goodmanson was appointed a director of Rio Tinto on 1 December 2004 and is chairman of the
Committee on social and environmental accountability.
He is executive vice president and chief operating officer of DuPont and holds
degrees in civil engineering, economics, commerce and business administration.
During his career he has worked at senior levels for McKinsey & Co, PepsiCo
and American West Airlines, where he was president and CEO. He joined DuPont
in early 1999 and in his current position has responsibility for the non US operations
of DuPont with particular focus on growth in emerging markets. (notes c, d and
e)
8. Andrew Gould (age 58)
Andrew Gould was appointed a director of Rio Tinto in 2002 and is chairman of the Audit committee.
He holds a degree in economic history and is chairman and chief executive officer
of Schlumberger Limited, where he has held a succession of financial and operational
management positions, including that of executive vice president of Schlumberger
Oilfield Services and president and chief operating officer of Schlumberger Limited.
He joined Schlumberger in 1975 from Ernst & Young. (notes a, c and e)
9. Lord Kerr (age 63)
Lord Kerr was appointed
a director of Rio Tinto in 2003. He has an MA from Oxford University and was
a member of the UK Diplomatic Service for 36 years, heading the service from
1997 to 2002. On a secondment to the UK Treasury he was principal private secretary
to two Chancellors of the Exchequer. His service abroad included spells as Ambassador
to the European Union from 1990 to 1995, and to the US from 1995 to 1997. He
is chairman of the Court and Council of Imperial College, London; a director
of The Shell Transport and Trading Company plc and The Scottish American
Investment Trust plc. Lord Kerr is also a Trustee of the Rhodes Trust. (notes
a, d and e)
10. David Mayhew (age 65)
David Mayhew was appointed a director of Rio Tinto in 2000. He is chairman of Cazenove Group plc, which he joined in 1969. Cazenove is a stockbroker to Rio Tinto plc. (notes a and b)
Rio Tinto 2004 Form 20-F 68
11. Sir Richard Sykes (age 62)
Sir Richard was
appointed a director of Rio Tinto in 1997. Following Sir Richard Giordanos retirement, he will become Rio Tintos
senior independent director. He is chairman of the Remuneration committee. After reading microbiology, he obtained doctorates in microbial chemistry and in science. A former chairman of GlaxoSmithKline plc, Sir Richard is a director of Lonza Group Limited and is rector of Imperial College, London. He is a fellow of the Royal Society and a trustee of the Natural History Museum in London and of the Royal Botanic Gardens, Kew. (notes b, c and e)
Robert Adams died at his home on 27 January 2005. Robert Adams joined the Group in 1970 after reading natural sciences and economics and subsequently gaining an MSc from the London Business School. He had a long distinguished career with Rio Tinto and becoming a director of Rio Tinto plc in 1991 and of Rio Tinto Limited in 1995 with responsibility for planning and development. He was also a non executive director of Foreign & Colonial Investment Trust plc.
Sir Richard Giordano retired from the boards at the conclusion of the 2005 annual general meetings. He was previously the senior non executive director and a deputy chairman. He was also chairman of the Audit committee. He had been a director of Rio Tinto plc since 1992 and of Rio Tinto Limited since 1995. A lawyer by training, he spent 12 years at BOC Group, first as chief executive, then chairman. In 1993, Sir Richard became a director of British Gas, assuming the role of chairman in 1994. A former chairman of BG Group plc, he is a director of Georgia Pacific Corporation in the US and a trustee of Carnegie Endowment for International Peace.
Leon Davis also retired from the boards at the conclusion of the 2005 annual general meetings. He was previously the Groups Australia based non executive deputy chairman. He became a director of Rio Tinto Limited in 1994 and of Rio Tinto plc in 1995. He is a metallurgist and holds a diploma in primary metallurgy and a DSc from Curtin University and the University of Queensland. During nearly 50 years with the Group he has held a number of managerial posts around the world, ultimately as chief executive from 1997 to 2000. A former director of Codan Pty. Limited, he is chairman of Westpac Banking Corporation and a director of Huysmans Pty Limited and Trouin Pty Limited, and is also president of the board of The Walter and Eliza Hall Institute of Medical Research.
Oscar Groeneveld served as a director until 1 October 2004 when he was appointed chief executive of the Aluminium group. See Senior management on page 70 for his full biography.
John Morschel also retired from the boards at the conclusion of the 2005 annual general meetings. He was appointed to the boards of Rio Tinto in 1998. Educated in Australia and the US, he spent most of his career with Lend Lease Corporation Limited in Australia, culminating as managing director, followed by two years as an executive director of the Westpac Banking Corporation. A former chairman of CSR Limited and Leighton Holdings Limited, he is chairman of Rinker Group Limited and is a director of ANZ Banking Group Limited, Tenix Pty Limited, Gifford Communications Pty Limited and Singapore Telecommunications Limited. He is also a patron of the Property Industry Foundation.
Lord Tugendhat served as director until 22 April 2004 when he retired by rotation following the 2004 annual general meetings. He holds a BA and MA in history from Cambridge University, and became a director of Rio Tinto in 1997. A former vice president of the Commission of the European Communities, and chairman of the Civil Aviation Authority, he was chairman of Abbey National plc from 1991 until 2002 when he was appointed chairman of Lehman Brothers Europe Limited.
Notes
a) Audit committee
b) Nominations committee
c) Remuneration committee
d) Committee on social and environmental accountability
e) Independent (as defined on pages 82 and 83)
SENIOR MANAGEMENT
1. Tom Albanese (age 47)
Tom Albanese was
appointed chief executive of the Copper group and head of Exploration in 2004.
He joined Rio Tinto in 1993 on Rio Tintos acquisition of Nerco. He holds
a BS in mineral economics and an MS in mining engineering. He held a series of
management positions before being appointed chief executive of the Industrial
Minerals group in 2000.
Rio Tinto 2004 Form 20-F 69
2. Preston Chiaro (age 51)
Preston
Chiaro was appointed chief executive of the Energy group in 2003. He holds
degrees in environmental engineering. He joined the Group in 1991 at Kennecott
Utah Coppers
Bingham Canyon mine as vice president, technical services. In 1995 he became
vice president and general manager of Boron operations in California. He was
chief executive of Rio Tinto Borax from 1999 to 2003.
3. Oscar Groeneveld (age 51)
Oscar Groeneveld has been with the Group for 29 years and was appointed chief executive of the Aluminium group in October 2004. He has qualifications in engineering, science and management. He has occupied senior roles in coal, aluminium and technology and was Copper group chief executive from 1999 to 2004. Mr Groeneveld was also an executive director of the Group from 1998 to 2004.
4. Keith Johnson (age 44)
Keith Johnson was appointed chief executive, Diamonds in 2003. He holds degrees in mathematics and management and is a Fellow of the Royal Statistical Society. He joined Rio Tinto in 1991 and has held a series of management positions, most recently as managing director of Comalco Mining and Refining.
5. Andrew Mackenzie (age 48)
Andrew Mackenzie joined Rio Tinto in 2004 as chief executive Industrial Minerals. He has a BSc (geology) and a PhD (chemistry) and was previously group vice president, BP Petrochemicals. He spent 22 years with BP primarily in the UK and North America in senior positions including head of Capital Markets in BP Finance, chief reservoir engineer with oversight of oil and gas reserves and production, head of Government and Public Affairs worldwide and group vice president Technology which included responsibility for research and development and engineering.
6. Karen McLeod (age 58)
Karen McLeod was appointed head of Human Resources in 1999. She joined the Group in 1974 at Comalco, working in Aboriginal affairs. She holds a bachelor of social work and a masters in business administration and has held senior positions in human resources, business analysis, marketing and organisation development.
7. Ian Smith (age 47)
Ian Smith joined Rio Tinto in 2002 after more than 20 years in the resource industry which commenced with CRA, a Rio Tinto predecessor company. A mining engineer by profession, Ian also has qualifications in financial administration. He was appointed Head of Technology in May 2005 having previously been managing director, aluminium smelting, with Comalco in Australia.
8. Andrew Vickerman (age 50)
Andrew
Vickerman is head of Communication and Sustainable Development. His responsibilities
include media, public affairs, internal and external communications, as well
as oversight of Rio Tintos work on sustainable development and with communities.
He has BA (Hons), MA and PhD degrees in economics and, prior to joining Rio
Tinto in 1991, worked as a development economist and as a consultant for the
World
Bank and United Nations agencies. Previous roles with Rio Tinto include finance
director of Lihir Gold.
9. Sam Walsh (age 55)
Sam Walsh was appointed chief executive of the Iron Ore group in 2004. He holds a bachelor of commerce degree and joined Rio Tinto in 1991, following 20 years in the automotive industry at General Motors and Nissan Australia. He has held a number of management positions within the Group, including managing director of Comalco Foundry Products, CRA Industrial Products, Hamersley Iron Sales and Marketing, Hamersley Iron Operations, vice president of Rio Tinto Iron Ore (with responsibility for Hamersley Iron and Robe River) and from 2001 chief executive of the Aluminium group.
10.
Charles Lenegan (age
54)
Charles Lenegan joined the Group in 1981 and has worked in senior roles in diamonds, coal, salt and gold business units in Australia, Indonesia and Zimbabwe. He was appointed managing director, Rio Tinto Australia in March 2004. He has a BSc in economics and is a chartered accountant.
John OReilly joined Rio Tinto in 1987, following 20 years operations experience in Africa and the Middle East. A metallurgical engineer by profession, he has held a series of management positions within the Group, including director of Rio Tinto Technical Services, chief executive officer, Lihir Gold, and head of the former Gold and Other Minerals group, before being appointed head of Technology in 1999. He moved to a part time role at the end of April 2005 and was succeeded by Ian Smith.
Rio Tinto 2004 Form 20-F 70
COMPANY
SECRETARIES
11. Anette Lawless (age 48)
Anette Lawless joined Rio Tinto in 1998 and became company secretary of Rio Tinto plc in 2000. Before joining Rio Tinto, she spent 11 years with Pearson plc, five of which as company secretary. She qualified as a chartered secretary in 1989 and became a fellow of the ICSA in 1992. She also holds an MA from the Copenhagen Business School.
12. Stephen Consedine (age 43)
Stephen Consedine joined Rio Tinto in 1983 and has held positions in Accounting, Treasury, and Employee Services before becoming company secretary of Rio Tinto Limited in 2002. He holds a bachelor of business and is a Certified Practising Accountant.
EMPLOYEES
Information
on the Groups employees including their costs, is on pages 66 to 67and
in Note 3 to the consolidated financial statements on page A-17, in Note 30
on page A-51 and in Note 41 on page A-64.
REMUNERATION REPORT
Introduction
The
boards of Rio Tinto (the board) have pleasure in presenting the Remuneration
report to shareholders. The report covers the following information:
• | a description of the Remuneration committee and its duties; |
• | a summary of the Groups remuneration policy, including a description of the policy on directors and senior executive remuneration; |
• | a résumé of the terms of directors service contracts and letters of appointment; |
• | details of each directors and certain senior executives remuneration and awards under long term incentive plans and the link to corporate performance; |
• | details of directors interests in Rio Tinto shares; and |
• | graphs illustrating the performance of the Group, including relative to the HSBC Global Mining Companies Index. |
Remuneration committee
The following independent, non executive directors were members of the Remuneration committee during
200
• | Sir Richard Sykes (chairman); |
• | Sir David Clementi; |
• | Richard Goodmanson (from 1 December 2004); |
• | Andrew Gould; and |
• | John Morschel. |
The committee
met five times during 2004. Members attendance is set out on page 83.
The
committees responsibilities are set out in its Terms of Reference which can be viewed on Rio Tintos
website. They include:
• | recommending any changes to the chairmans fees; |
• | recommending remuneration policy relating to executive directors and senior executives to the board; |
• | reviewing and determining the remuneration of executive directors, product group chief executives and the company secretary of Rio Tinto plc; |
• | reviewing and agreeing managements strategy for remuneration and conditions of employment for executives; and |
• | monitoring the effectiveness and appropriateness of executive remuneration policy and practice. |
Advisors
Jeffery
Kortum, Group advisor, remuneration, attends the committees meetings
in an advisory capacity. The chairman, Paul Skinner, and the chief executive,
Leigh Clifford, also participated in meetings of the committee, except where
issues relating to their own remuneration were discussed. Anette Lawless,
the company secretary of Rio Tinto plc, acts as secretary to the committee
but is not present when issues relating to her own remuneration are discussed.
The committee appointed Kepler Associates, an independent
consultant with no other links to the Group, to provide advice on executive remuneration
matters.
To carry out its duties in accordance with its
terms of reference, the committee monitors global remuneration trends and developments
and draws on a range of external sources of data, including publications by remuneration
consultants Towers Perrin, Hewitt Associates, Hay Group, Watson Wyatt and Monks
Partnership.
Rio Tinto 2004 Form 20-F 71
Corporate
governance
The committee reviewed its terms of reference in 2004 and concluded that, in the course of its business, it had covered the main duties set out in the Combined Code as attached to the UKLA Listing Rules (the Code) and Principle 9 of the ASX Best Practice Corporate Governance Guidelines, and was constituted in accordance with the requirements of the Code and the ASX Best Practice Corporate Governance Guidelines.
The board considered the performance of the committee
and determined that the committee had satisfactorily performed the duties set
out in its terms of reference.
The 2004 Remuneration report was approved by shareholders
at the 2005 annual general meetings.
Executive
remuneration policy
Rio Tinto operates in a global market, where it competes for a limited resource of talented, internationally mobile executives. It recognises that to achieve its business objectives, the Group needs high quality, committed people.
Rio Tinto has, therefore, designed an executive
remuneration policy to support its business goals by enabling it to attract,
retain and appropriately reward executives of the calibre necessary to produce
very high levels of performance.
The main principles of the Groups executive
remuneration policy are:
• | to provide total remuneration which is competitive in structure and quantum with comparator companies practices in the regions and markets within which the Group operates; |
• | to achieve clear alignment between total remuneration and delivered personal and business performance, with particular emphasis on shareholder value creation; |
• | to tie variable elements of remuneration to the achievement of challenging performance criteria that are consistent with the best interests of the Group and shareholders over the short, medium and long term; |
• | to provide an appropriate balance of fixed and variable remuneration; and |
• | to provide appropriate relativities between executives globally and to support executive placements to meet the needs of the Group. |
Executive
remuneration
Total remuneration is a combination of fixed and performance related elements, each of which is described below.
The performance related, or variable, elements are the short and long term incentive plans, which are tied to the achievement of personal and business performance goals and are, therefore, at risk. The rest of the elements of the package are fixed,
as they are not at risk, although some, such as base salary, are also related
to performance.
The composition of the total remuneration package is designed to provide an appropriate balance between the fixed and variable components, in line with Rio Tintos
stated objective of aligning total remuneration with personal and business performance.
Excluding allowances and pension/superannuation
arrangements, the proportion of total direct remuneration provided by way of
variable components comprising the Short Term Incentive Plan, the Share Option
Plan and the Mining Companies Comparative Plan (STIP, SOP and MCCP) described
below, assuming target levels of performance, is currently approximately 68 per
cent for the chief executive, 62 per cent for the finance director and between
62 and 68 per cent for the product group heads.
Full details of the directors annual remuneration
before tax and excluding pension contributions are set out in Table 1 on pages
76 to 78.
Base
salary
Base
salaries for executive directors and product group chief executives are reviewed
annually, taking into account the nature of the individual executives role,
external market trends and personal and business performance. The Remuneration committee uses a range of international companies of a similar size, global reach and complexity to make this comparison.
Short
term incentive plan (STIP)
STIP provides an annual cash bonus opportunity for participants and is designed to support overall remuneration policy by:
• | focusing participants on achieving goals which contribute to sustainable shareholder value; and |
• | providing significant bonus differential based on performance against challenging personal, business, and other targets, including safety. |
The Remuneration committee reviews
and approves performance targets for executive directors and product group
chief executives annually. The executive directors STIP payments are linked to three performance criteria: Group financial performance, Group safety performance and personal performance. The product group chief executives payments
are linked to Group and product group financial performance, product group
safety performance and personal performance. These criteria are partly measured
on an actual basis and partly on a basis normalised for fluctuations of market
prices and exchange rates. The target level of bonus for these participants
for 2005 is 60 per cent of salary, the same as 2004. Executives may receive
up to twice their target for exceptional performance against all criteria.
STIP awards in respect of 2004, payable in 2005,
are included as annual cash bonus in Table 1 on page 76.
Rio Tinto 2004 Form 20-F 72
Long
term incentives
Shareholders
approved two new long term incentive plans at the annual general meetings in
2004, the Share Option Plan and the Mining Companies Comparative Plan.
The
new plans are intended to provide the Remuneration
committee with
a means of linking managements rewards to Group performance. The committee
regards total shareholder return (TSR) as the most appropriate measure of a companys
performance for the purpose of share based long term incentive plans and both
plans therefore use TSR as a performance measure.
The
new plans maintained the expected value of total executive remuneration at approximately
the same level as before, but modified the relative proportions in which share
options and performance shares may be awarded. For 2004 and 2005, this has meant
a shift towards performance shares being the primary long term incentive vehicle.
Details of awards under the long term incentive plans are set out in Table 4 on page 80.
Share Option Plan (SOP)
Each year, the Remuneration committee considers whether a grant of options should be made under the SOP, and if so, at what level. In arriving at a decision, the committee takes into consideration the personal performance of each executive as well as local remuneration practice.
No options will become exercisable unless the Group has met stretching performance conditions. For grants made prior to 2004:
• | two thirds of options vest when the Groups adjusted earnings per share growth for a three year performance period is at least nine percentage points higher than US inflation over the same period, as measured by the US Consumer Price Index; |
• | the balance of the grant vests when growth of at least 12 percentage points above US inflation has been achieved; |
• | Rio Tinto performance is tested against the performance condition after three years; and |
• | there is an annual retest on a three year rolling basis until options fully vest or lapse at the end of the option period. |
Under the rules of the new plan, approved by
shareholders at the 2004 annual general meetings, vesting will be subject
to Rio Tintos TSR, measured over three years, equalling or outperforming the HSBC Global Mining Index. Rio Tintos
TSR is calculated as a weighted average of the TSR of Rio Tinto plc and Rio
Tinto Limited. If the TSR performance equals the index, the higher of one
third of the original grant or 20,000 options will vest (subject to the actual
grant level not being exceeded). The full grant vests if the TSR performance
is equal to or greater than the HSBC Global Mining Index plus five per cent
per annum. TSR performance at this level is equivalent to the upper quartile
of the index. Between these points, options vest on a sliding scale, with
no options becoming exercisable for a three year TSR performance below the
index.
In addition, the Remuneration committee retains discretion to satisfy itself before approving any vesting that the TSR performance is a genuine reflection of underlying financial performance.
Options granted under the new plan before 31 December 2006 will be subject to a single fixed base retest five years after grant if they have not vested after the initial three year performance period, with options granted after 31 December 2006 not subject to any retest. These latter options will, therefore, lapse if they do not vest at the conclusion of the three year performance period.
Prior
to any options being released to participants for exercise, the Groups
performance against the criteria relevant to the SOP is examined and verified
by the external auditors. If there were a change of control or a company restructuring,
options would become exercisable subject to the satisfaction of the performance
condition measured at the time of the takeover or restructuring.
Where an option holder dies in service, qualifying options vest immediately, regardless of whether the performance conditions have been satisfied. The estate will have 12 months in which to exercise the options.
The maximum grant under the SOP is three times salary, based on the average share price over the previous financial year. Under the SOP no options are granted at a discount. Executive directors may, however, be granted options at a discount under the Rio Tinto Share Savings Plan, described below.
Share options granted to directors are included in Table 4 on page 80.
Mining
Companies Comparative Plan (MCCP)
Rio
Tintos performance share plan, the MCCP, provides participants with a conditional
right to receive shares. The conditional awards will only vest if performance
conditions approved by the committee are satisfied. Again, were there to be a
change of control or a company restructuring, the awards would only vest subject
to the satisfaction of the performance condition measured at the time of the
takeover or restructuring. These conditional awards are not pensionable.
The
performance condition compares Rio Tintos TSR with the TSR of a comparator
group of 15 other international mining companies over the same four year period.
The composition of this comparator group is reviewed regularly by the committee
to provide continued relevance in a consolidating industry. The current members
of this group are listed at the bottom of the table of comparators on page 74.
The maximum conditional award size under the current MCCP is two times salary (previously 70 per cent), calculated on the average share price over the previous financial year.
Rio Tinto 2004 Form 20-F 73
The following table shows the percentage of each conditional award which will be received by directors and product group chief executives based on Rio Tintos four year TSR performance relative to the comparator group for conditional awards made after 1 January 2004:
Ranking in comparator group
1st-2nd | 3rd | 4th | 5th | 6th | 7th | 8th | 9th-16th | |||||||||
% | 150 | 125 | 100 | 83.75 | 67.5 | 51.25 | 35 | - | ||||||||
The historical ranking of Rio Tinto in relation to the comparator group is shown in the following table:
Ranking of Rio Tinto versus comparator companies | ||
Period | Ranking out of 16 | |
1993 97 | 4 | |
1994 98 | 4 | |
1995 99 | 2 | |
1996 00 | 2 | |
1997 01 | 2 | |
1998 02 | 3 | |
1999 03 | 7 | |
2000 04 | 11 | |
Current comparator companies:
Alcan, Alcoa, Anglo American, Barrick Gold, BHP Billiton, Freeport, Grupo Mexico, INCO, Newmont, Noranda, Phelps Dodge, Placer Dome, Teck Cominco, WMC and Xstrata
Before awards are
released to participants, the external auditors and Kepler Associates independently
review the Groups performance compared to that of the comparator companies.
Awards are released to participants as either Rio Tinto plc or Rio Tinto Limited shares or an equivalent amount in cash. In addition, a cash payment to participants equivalent to the dividends that would have accrued on the vested number of shares over the four year period will be made.
Shares to satisfy the vesting may be acquired by purchase in the market, by subscription, or, in the case of Rio Tinto Limited, by procuring that Tinto Holdings Australia Pty Limited transfers existing shares to participants.
Performance
of Rio Tinto
To
illustrate the performance of the Companies relative to their markets, graphs
showing the performance of Rio Tinto plc compared to the FTSE 100 Index and Rio
Tinto Limited compared to the ASX All Ordinaries Index are reproduced in this
report. A comparative graph showing Rio Tintos performance relative to
the HSBC Global Mining Index is also included to illustrate the performance of
the Companies relative to other mining companies.
Other
share plans
UK executive directors can participate in:
• | the Rio Tinto plc Share Savings Plan, an Inland Revenue approved savings related plan which is open to all UK employees. Under the Plan directors can save up to £250 per month for a maximum of five years. At the end of the savings period the director may exercise an option over shares granted at a discount of up to 20 per cent to the market value at the time the savings contract is entered into. The number of options the director is entitled to is determined by the option price, the savings amount and the length of the savings contract; and |
• | the Rio Tinto Share Ownership Plan, also an Inland Revenue approved share incentive plan which was approved by shareholders at the 2001 annual general meeting and introduced in 2002. Under this plan, eligible employees can save up to £125 per month, which the plan administrator invests in Rio Tinto plc shares. Rio Tinto matches these purchases on a one for one basis. In addition, eligible employees may receive an annual award of Rio Tinto shares up to a maximum of five per cent of salary, subject to a cap of £3,000. |
Australian executive directors can participate in the Rio Tinto Limited Share Savings Plan, also introduced in 2001, which is similar to the Rio Tinto plc Share Savings Plan.
Shareholding
policy
In
2002, the committee decided that it would be appropriate to encourage executive
directors and product group chief executives to build up a substantial shareholding,
aiming to reach a holding equal in value to two times salary over five years.
Details of directors share interests in the Group are set out in Table
3 on page 79.
Pension and superannuation arrangementsUnited Kingdom
UK executive directors and senior management, like all UK staff, participate in the non contributory Rio Tinto Pension Fund, a funded, Inland Revenue approved, final salary occupational pension scheme.
The
Fund provides a pension from normal retirement age at 60 of two thirds final
pensionable salary, subject to completion of 20 years service. Proportionally lower benefits are payable for shorter service or, having attained 20 years service, retirement is taken prior to the age of 60. Spouse and dependants pensions
are also provided.
Rio Tinto 2004 Form 20-F 74
Members retiring early may draw a pension reduced by approximately four per cent a year for each year of early payment from age 50 onwards.
Under the rules of the Rio Tinto Pension Fund, all pensions are guaranteed to increase annually in line with increases in the UK Retail Price Index subject to a maximum of ten per cent per annum. Increases above this level are discretionary.
When
pensionable salary is limited by the UK Inland Revenue earnings cap,
benefits are provided from unfunded supplementary arrangements. The UK Government
has made a number of pensions related announcements over the last two years
and Rio Tinto continues to review developments in UK pensions legislation.
In February 2005, the defined benefit section of the Rio Tinto pension fund was closed to new participants. Employees joining after that date will join the new defined contributions section of the Plan.
No cash contributions were made in 2004 as the Rio Tinto Pension Fund remains fully funded.
Australia
The Australian
executive director and senior management are members of the Rio Tinto Staff Superannuation
Fund, a funded superannuation fund regulated by Australian legislation. The fund
provides both defined benefit and defined contribution benefits. The executive
director is a defined benefit member, accruing lump sums payable on retirement.
Retirement benefits are limited to a lump sum multiple of seven times final basic
salary at age 62. For retirement after 62, the benefit increases to 7.6 times
average salary at age 65.
Death in service and disablement benefits are provided as lump sums and are equal to the prospective age 65 retirement benefit. Proportionate benefits are also payable on termination of employment for ill health or resignation.
Executive
directors and senior management are not required to pay contributions. During
2004, Company cash contributions were paid into the Rio Tinto Staff Superannuation
Fund to fund members defined benefit and defined contribution benefits.
Other
pensionable benefits
As the increase in the percentage of total remuneration which is dependent on performance is substantial and has risen over recent years, the committee considers it appropriate that a proportion of this at risk pay should be pensionable. Annual STIP awards are pensionable up to a maximum value of 20 per cent of basic salary.
Details
of directors pension and superannuation entitlements are set out in Table
2 on page 78.
Service contracts and compensation payments
All executive directors
have service contracts with a one year notice period. Rio Tinto has retained
the right to pay directors in lieu of notice. Under current pension arrangements,
executive directors are normally expected to retire at the age of 60. In 2004,
Leigh Cliffords contractual retirement age was reduced from 62 to 60, with
a corresponding change to his retirement arrangements. In the event of early
termination, the Groups
policy is to act fairly in all circumstances and the duty to mitigate would
be taken into account. Compensation would not reward poor performance.
Neither of the executive directors are proposed for election or re-election at the forthcoming annual general meetings.
Notice periods: | Remaining | |||||
Name | Date of | Notice period | service period | |||
agreement | if less than | |||||
12 months | ||||||
Leigh Clifford | 30 March 2004 | 12 months | N/A | |||
Guy Elliott | 19 June 2002 | 12 months | N/A | |||
External
appointments
Executive
directors are likely to be invited to become non executive directors of other
companies.
Rio Tinto believes that such appointments can broaden their experience and
knowledge, to the benefit of the Group. It is Group policy to limit executive
directors external directorships to one FTSE 100 company or equivalent
and they are not allowed to take on the chairmanship of another FTSE 100
company. Consequently, where there is no likelihood that such directorships
will give rise to conflicts of interests, the board will normally give consent
to the appointment, with the director permitted to retain the fees earned.
Details of fees earned are set out in the notes to Table 1 on page 76.
Non
executive directors remuneration Chairmans fees and letter of appointment
It
is Rio Tintos policy that the chairman should be remunerated on a competitive
basis and at a level which reflects his contribution to the Group, as assessed
by the board. He does not participate in the Groups
incentive plans or pension arrangements. Details of his fees can be found in
Table 1 on page 76.
Paul
Skinners letter of appointment summarises his duties as chairman of the
Group and was agreed by the Remuneration committee. It stipulates that he is expected to dedicate at least three days per week on average to carry out these duties. The letter envisages that Paul Skinner will continue in the role of chairman until he reaches the age of 65 in 2009, subject to re-election as a director by shareholders.
Rio Tinto 2004 Form 20-F 75
Non executive directors fees and letters of appointment
The board as a
whole determines non executive directors fees, although non executive directors
do not vote on any increases of their own fees. Fees are set to reflect the responsibilities
and time spent by the directors on the affairs of Rio Tinto. In the light of
the increased volume of committee work following regulatory developments in the
UK, US and Australia, it was decided in October 2004 to increase the fees for
the chairmen of the Audit committee and Remuneration committee to £20,000
and £15,000
respectively. It was also agreed to increase the fees for Audit committee members
to £10,000 and introduce a £5,000 fee for Remuneration committee members.
Non
executive directors do not participate in the Groups incentive plans,
pension or superannuation arrangements or any other elements of remuneration
provided to executive directors.
Non
executive directors have a formal letter of appointment setting out their duties
and responsibilities which is available for inspection at Rio Tinto plcs
registered office and annual general meeting.
Details of non
executive directors remuneration is set out in Table 1 on page 76.
Auditable information
Tables 1, 2, 4 and 5 comprise the auditable parts of the Remuneration report, except the information in Table 1 which is required by the Australian Corporations Act (see note 16 to Table 1).
Annual general meetings
Shareholders will
be asked to vote on this Remuneration report at the Companies forthcoming
annual general meetings.
By order of the board
Anette Lawless Secretary
Remuneration committee
24 February 2005
![]() |
![]() |
![]() |
Table
1 Total remuneration of directors and senior executives
Remuneration comprising salary, bonus and benefits
Currency of | Base salary1 | Annual cash | Other benefits2 | Subtotal | |||||||
actual payment | bonus1 | ||||||||||
2004 | 2003 | ||||||||||
Stated in US$000 | US$ | US$ | US$ | US$ | US$ | ||||||
Chairman | |||||||||||
Paul Skinner | £ | 931 | | 32 | 963 | 282 | |||||
Non executive directors | |||||||||||
Sir David Clementi | £ | 110 | | | 110 | 80 | |||||
Leon Davis | £ | 275 | | | 275 | 245 | |||||
Sir Richard Giordano | £ | 191 | | | 191 | 156 | |||||
Richard Goodmanson3 | £ | 8 | | | 8 | | |||||
Andrew Gould | £ | 110 | | | 110 | 91 | |||||
Lord Kerr | £ | 115 | | | 115 | 18 | |||||
David Mayhew5 | £ | 122 | | | 122 | 91 | |||||
John Morschel | A$ | 155 | | | 155 | 123 | |||||
Sir Richard Sykes4 | £ | 127 | | | 127 | 92 | |||||
Lord Tugendhat7 | £ | 34 | | | 34 | 91 | |||||
Executive directors | |||||||||||
Robert Adams9 | £ | 911 | 789 | 59 | 1,759 | 1,334 | |||||
Leigh Clifford9 | £ | 1,428 | 1,288 | 375 | 3,091 | 2,143 | |||||
Guy Elliott | £ | 850 | 855 | 42 | 1,747 | 1,146 | |||||
Oscar Groeneveld6, 16 | A$ / £ | 776 | 649 | 485 | 1,910 | 1,223 | |||||
Five highest paid senior executives below board level16 | |||||||||||
Tom Albanese | US$ | 635 | 560 | 1,334 | 2,529 | 1,511 | |||||
Preston Chiaro | US$ | 492 | 400 | 963 | 1,855 | 870 | |||||
Keith Johnson | £ | 530 | 517 | 27 | 1,074 | 655 | |||||
Christopher Renwick | A$ | 1,000 | 672 | 1,447 | 3,119 | 1,385 | |||||
Sam Walsh | A$ | 709 | 693 | 659 | 2,061 | 1,108 | |||||
Remuneration, pension and share scheme fair values16 |
Rio Tinto 2004 Form 20-F 76
Table 1 Total remuneration of directors and senior executives
(continued)
Remuneration comprising salary, bonus and benefits
Adjusted for | ||||||||||||||||
the term of | ||||||||||||||||
the | ||||||||||||||||
Pension | Value of long term incentive | performance | Total | |||||||||||||
Subtotal | contribs10 | schemes11 | period15 | remuneration | ||||||||||||
2004 | MCCP12 | SSP13 | SOP14 | 2004 | 2003 | |||||||||||
US$ | US$ | US$ | US$ | US$ | US$ | US$ | US$ | |||||||||
Chairman | ||||||||||||||||
Paul Skinner | 963 | | | | | | 963 | 282 | ||||||||
Non executive directors | ||||||||||||||||
Sir David Clementi | 110 | | | | | | 110 | 80 | ||||||||
Leon Davis | 275 | | | | | | 275 | 245 | ||||||||
Sir Richard Giordano | 191 | | | | | | 191 | 156 | ||||||||
Richard Goodmanson3 | 8 | | | | | | 8 | | ||||||||
Andrew Gould | 110 | | | | | | 110 | 91 | ||||||||
Lord Kerr | 115 | | | | | | 115 | 18 | ||||||||
David Mayhew5 | 122 | | | | | | 122 | 91 | ||||||||
John Morschel | 155 | | | | | | 155 | 123 | ||||||||
Sir Richard Sykes4 | 127 | | | | | | 127 | 92 | ||||||||
Lord Tugendhat7 | 34 | | | | | | 34 | 91 | ||||||||
Executive directors | ||||||||||||||||
Robert Adams9 | 1,759 | | 1,451 | 2 | 2,770 | (3,081 | ) | 2,901 | 2,204 | |||||||
Leigh Clifford9 | 3,091 | 465 | 2,646 | 15 | 2,503 | (2,733 | ) | 5,987 | 4,182 | |||||||
Guy Elliott | 1,747 | | 1,118 | 12 | 1,575 | (1,874 | ) | 2,578 | 1,591 | |||||||
Oscar Groeneveld6, 16 | 1,910 | 249 | 1,212 | 8 | 2,203 | (2,494 | ) | 3,088 | 2,077 | |||||||
Five highest paid senior executives below board level16 | ||||||||||||||||
Tom Albanese | 2,529 | 48 | 1,249 | 3 | 3,171 | (3,154 | ) | 3,846 | 2,379 | |||||||
Preston Chiaro | 1,855 | 37 | 816 | 4 | 1,247 | (1,510 | ) | 2,449 | 1,178 | |||||||
Keith Johnson | 1,074 | | 584 | 6 | 520 | (807 | ) | 1,377 | 655 | |||||||
Christopher Renwick | 3,119 | 267 | 1,193 | 8 | 1,981 | (2,287 | ) | 4,281 | 2,186 | |||||||
Sam Walsh | 2,061 | 228 | 989 | 6 | 1,620 | (1,868 | ) | 3,036 | 1,722 | |||||||
Notes to Table 1 |
1. | The total remuneration is reported in US dollars. The amounts, with the exception of the annual cash bonus, can be converted into sterling at the rate of 1US$ =£0.5463 or alternatively, into Australian dollars at the rate of 1US$ = A$1.3617, each being the average exchange rate for 2004. The annual cash bonus is payable under the STIP and this may be converted at the 2004 year end exchange rate of 1US$ = £0.519 to ascertain the sterling equivalent or alternatively, 1US$ = A$1.2847 to calculate the Australian dollar value. |
2. | Other emolument items include healthcare, 401k contributions in the US where appropriate, car and fuel benefits, travel allowances to attend overseas meetings, and professional advice. Housing, relocation payments, tax equalisation adjustments and childrens education assistance are also provided for executive directors and product group executives living outside their home country. UK executive directors are also beneficiaries under the Rio Tinto All Employee Share Ownership Plan up to a maximum value of £3,000 (US$5,492) and may also contribute to the Rio Tinto Share Ownership Plan where the Company will match their personal contributions to a maximum of £1,500 (US$2,746) per annum. A payment in respect of long service leave is paid to Australian executive directors and senior executives on retirement. |
3. | Richard Goodmanson was appointed a director on 1 December 2004. |
4. | Sir Richard Sykes fees were paid direct to him up until 30 April 2004 and thereafter paid to Imperial College London. |
5. | David Mayhews fees are paid to Cazenove Group plc. |
6. | Oscar Groeneveld resigned as a director on 1 October 2004. The figures shown above relate to his total remuneration with the Group for the year. His emoluments for the period when he was a director amounted to US$1,182,341 comprising salary US$552,811, bonus US$465,237 and other benefits US$164,293. |
7. | Lord Tugendhat retired on 22 April 2004 and received a gift to the value of US$3,661. |
8. | Emoluments of US$53,022 from subsidiary and associated companies were waived by two executive directors (2003: two directors waived US$98,872). Executive directors have agreed to waive any further fees receivable from subsidiary and associated companies. |
9. | In the course of the year, Robert Adams received US$45,763 and Leigh Clifford received US$22,881 in respect of non Rio Tinto related directorships. |
10. | Includes actual contributions payable to both defined contribution and defined benefit arrangements that are required to secure the pension benefits earned in the year. |
11. | The amount of long term share based compensation represents the estimated value of awards granted under the Rio Tinto Share Option Plan (the SOP), the Share Savings Plan (the SSP) and the Mining Companies Comparative Plan (the MCCP) which had not vested at 1 January 2004 or were granted during 2004. The fair value of the SOP and SSP awards have been calculated using an independent binomial model provided by external consultants, Lane Clark and Peacock LLP. The fair value of options granted to executive directors and product group chief executives under the SOP is 17 per cent of face value. The fair value of the MCCP awards has been calculated at the date of grant by external consultants, Kepler Associates based on the share price at that date and the percentage of the conditional awards expected to be paid out. The fair value of conditional awards made to executive directors and product group chief executives under the plan is 52.5 per cent of the face value. The value of long term share based compensation has been valued in accordance with the guidelines issued by the Australian Securities & Investments Commission dated 28 June 2004 (which replaced those of 30 June 2003). The non executive directors do not participate in the long term incentive share schemes. |
12. | The number of conditional shares awarded to executive directors under the MCCP for the twelve month period ending 31 December 2004 are shown under Table 4 of this report. The figures in respect of the five highest paid senior executives of the Group are as follows: Tom Albanese 56,015, Keith Johnson 30,387 and Preston Chiaro 46,995 over Rio Tinto plc ordinary shares and Chris Renwick 44,171 and Sam Walsh 38,023 over Rio Tinto Limited shares. The market price of the Rio Tinto plc and Rio Tinto Limited shares were 1,276p and A$33.17 respectively. |
Rio Tinto 2004 Form 20-F 77
13. | The award of options to executive directors under the SSP during the 12 month period up to 31 December 2004 are shown in Table 5 of this report. During the same period, of the five highest paid executives, only Preston Chiaro subscribed for 490 Rio Tinto plc ordinary shares at an option price 1,277p. These options must be exercised in January 2006. | |
14. | The award of options to executive directors under the SOP during the twelve month period up to 31 December 2004 are shown in Table 5 of this report. During the same period options awarded to the five highest paid executives of the Group were as follows; Tom Albanese 84,020, Preston Chiaro 70,490 and Keith Johnson 43,500 over Rio Tinto plc ordinary shares and Chris Renwick 42,223 and Sam Walsh 54,400 over Rio Tinto Limited shares. The options are subject to the performance criteria explained on page 73 and are exercisable between 22 April 2007 and 21 April 2014. The exercise price was set at 1,329p per ordinary Rio Tinto plc share and A$34.406 per ordinary Rio Tinto Limited share. | |
15. | The fair value of unvested share grants is spread equally over the term of each plans performance period. This adjustment spreads the fair value of each grant of long term incentive shares over a three year period in respect of the SOP, a four year period in respect of the MCCP and the length of the relative contract period under the SSP. | |
16. | The following additional information is provided to meet the requirements of the Australian Corporations Act 2001: details about pension contributions, the value of long term incentive plans and accounting adjustments required to spread the value of long term incentive plans over the performance period; | |
• | the total remuneration of the five highest paid senior executives below board level; | |
• | the inclusion of Oscar Groenevelds earnings following his resignation from the board on 1 October 2004. | |
• | The bases for determining the figures presented in respect of pension contributions and long term incentive plans are described in notes 10, 11 and 17 respectively. | |
17. | Christopher Renwicks Other benefits included a statutory retirement payment of US$1,325,552 relating to his service with the Group. |
Table 2 Directors pension entitlements (as at 31 December 2004)
Accrued benefits | Transfer values3 | |||||||||||||||||||
Age | Years of | At 31 Dec | At 31 Dec | Change in | Change in | At 31 Dec | At 31 Dec | Change, net | Transfer | |||||||||||
service | 2003 | 2004 | accrued | accrued | 2003 | 2004 | of personal | value of | ||||||||||||
completed | benefits | benefit net | contributions | change in | ||||||||||||||||
during the | of inflation | accrued | ||||||||||||||||||
year ended | benefit net | |||||||||||||||||||
31 Dec | of inflation | |||||||||||||||||||
2004 | ||||||||||||||||||||
UK directors | £000 pa | £000 pa | £000pa | £000 pa | £000 | £000 | £000 | £000 | ||||||||||||
pension | pension | pension | pension | |||||||||||||||||
Robert Adams5 | 59 | 34 | 360 | 389 | 29 | 18 | 6,159 | 7,465 | 1,306 | 353 | ||||||||||
Guy Elliott | 49 | 24 | 212 | 256 | 44 | 37 | 2,066 | 2,915 | 849 | 429 | ||||||||||
Australian directors | A$000 | A$000 | A$000 | A$000 | A$000 | A$000 | A$000 | A$000 | ||||||||||||
Lump sum | Lump sum | Lump sum | Lump sum | |||||||||||||||||
Leigh Clifford2, 3 | 57 | 34 | 12,099 | 12,026 | (73 | ) | (1,881 | ) | 12,099 | 12,026 | (73 | ) | (1,881 | ) | ||||||
Oscar Groeneveld2, 6 | 51 | 29 | 4,661 | 5,079 | 418 | 21 | 4,661 | 5,079 | 418 | 21 | ||||||||||
Notes to Table 2 |
1. | A$76,659 and A$42,384 were credited to the respective accounts belonging to Leigh Clifford and Oscar Groeneveld in the Rio Tinto Staff Superannuation Fund in relation to the superannuable element of their 2004 performance bonus. |
2. | The changes in accrued lump sums for Australian directors are before contributions tax and exclude interest. |
3. | Transfer values are calculated in a manner consistent with Retirement Benefit Schemes Transfer Values (GN 11) published by the Institute of Actuaries and the Faculty of Actuaries and dated 4 August 2003. |
4. | During the period, Leigh Cliffords Australian superannuable salary was determined by conversion of his sterling pay to A$ through exchange rates. The reduction in his overall accrued benefits reflects the changes in the exchange rate. The Remuneration committee has resolved that in respect of 2005 Leigh Cliffords Australian superannuable salary will be uplifted by the same percentage used to uplift his sterling pay. |
5. | Robert Adams died on 27 January 2005. |
6. | Oscar Groeneveld resigned as a director on 1 October 2004. The accrued entitlement shown above represents the value at this date. |
Rio Tinto 2004 Form 20-F 78
Table 3 Directors beneficial interests in shares
1 Jan | 31 Dec | 10 Jun | |||
20042 | 20047 | 2005 | |||
Robert Adams3, 4 | 71,764 | 72,243 | n/a | ||
Ashton Calvert8 | | | | ||
Sir David Clementi | | | | ||
Leigh Clifford | 2,100 | 2,100 | 2,100 | ||
76,428 | 90,296 | 91,255 | |||
Vivienne Cox8 | | | | ||
Leon Davis | 6,100 | 6,100 | n/a | ||
187,293 | 187,293 | n/a | |||
Guy Elliott3 | 40,847 | 42,888 | 43,558 | ||
Sir Richard Giordano | 1,065 | 1,065 | n/a | ||
Richard Goodmanson | | | | ||
Andrew Gould | | 1,000 | 1,000 | ||
Oscar Groeneveld4 | 19,010 | 19,010 | n/a | ||
23,515 | 32,012 | n/a | |||
Lord Kerr | | 2,300 | 2,300 | ||
David Mayhew | 2,500 | 2,500 | 2,500 | ||
John Morschel | | 2,000 | n/a | ||
Paul Skinner | 5,140 | 5,277 | 5,349 | ||
Sir Richard Sykes | 2,359 | 2,422 | 2,455 | ||
Lord Tugendhat4 | 1,135 | 1,135 | n/a | ||
Notes to Table 3 |
1. | Rio Tinto plc ordinary shares of 10p each; Rio Tinto Limited shares stated in italics. |
2. | Or date of appointment if later. |
3. | These directors also have an interest in a trust fund containing 8,219 Rio Tinto plc shares at 31 December 2004 (1 January 2004: 21,849 Rio Tinto plc shares) as potential beneficiaries of The Rio Tinto Share Ownership Trust. At 10 June 2005 this trust fund contained 825 Rio Tinto plc shares. |
4. | Lord Tugendhat and Oscar Groeneveld retired and resigned as directors on 22 April 2004 and 1 October 2004 respectively. Robert Adams died on 27 January 2005. Leon Davis, Sir Richard Giordano and John Morschel resigned as directors on 29 April 2005. |
5. | The above includes the beneficial interests obtained through the Rio Tinto Share Ownership Plan, details of which are set out on page 73 under the heading Other share plans. |
6. | The total beneficial interest of the directors in the Group amounts to less than one per cent. |
7. | Or date of retirement or resignation if earlier. |
8. | Ashton Calvert and Vivienne Cox were appointed non executive directors on 1 February 2005. |
Rio Tinto 2004 Form 20-F 79
Table 4 Awards to directors under long term incentive plans
Plan terms and conditions | |||||||||||||||||||||||
Condi- | Perform- | Monetary | |||||||||||||||||||||
tional | ance | Market | Date | Market | value of | ||||||||||||||||||
award | period | price at | award | price at | vested | ||||||||||||||||||
Plan | 1 Jan | Awarded2 | Lapsed2 | Vested2 | 31 Dec | granted | concludes | award | vests | vesting | award | ||||||||||||
20042 | 20048 | US$000 | |||||||||||||||||||||
Leigh | MCCP | 6 Mar | 31 Dec | A$ | |||||||||||||||||||
Clifford6 | 2001 | 37,474 | | 37,474 | | | 2001 | 2004 | 34.406 | | | | |||||||||||
MCCP | 13 Mar | 31 Dec | A$ | ||||||||||||||||||||
2002 | 34,435 | | | | 34,435 | 2002 | 2005 | 39.600 | | | | ||||||||||||
MCCP | 7 Mar | 31 Dec | A$ | ||||||||||||||||||||
2003 | 36,341 | | | | 36,341 | 2003 | 2006 | 30.690 | | | | ||||||||||||
MCCP | 22 Apr | 31 Dec | A$ | ||||||||||||||||||||
2004 | | 119,581 | | | 119,581 | 2004 | 2007 | 33.170 | | | | ||||||||||||
108,250 | 119,581 | 37,474 | | 190,357 | | ||||||||||||||||||
Robert | MCCP | 6 Mar | 31 Dec | ||||||||||||||||||||
Adams9 | 2001 | 27,330 | | 27,330 | | | 2001 | 2004 | 1,310p | | | | |||||||||||
MCCP | 13 Mar | 31 Dec | 28 Jan | ||||||||||||||||||||
2002 | 25,064 | | | | 25,064 | 2002 | 2005 | 1,424p | 2005 | 1,651p | 399 | ||||||||||||
MCCP | 7 Mar | 31 Dec | 28 Jan | ||||||||||||||||||||
2003 | 26,837 | | | | 26,837 | 2003 | 2006 | 1,198p | 2005 | 1,651p | 427 | ||||||||||||
MCCP | 22 Apr | 31 Dec | 28 Jan | ||||||||||||||||||||
2004 | | 54,372 | | | 54,372 | 2004 | 2007 | 1,276p | 2005 | 1,651p | 606 | ||||||||||||
79,231 | 54,372 | 27,330 | | 106,273 | 1,431 | ||||||||||||||||||
Guy | MCCP | 6 Mar | 31 Dec | 21 Feb | |||||||||||||||||||
Elliott1&4 | 2001 | 7,845 | | 6,865 | 980 | | 2001 | 2004 | 1,310p | 2005 | 1,759p | 33 | |||||||||||
MCCP | 13 Mar | 31 Dec | |||||||||||||||||||||
2002 | 16,935 | | | | 16,935 | 2002 | 2005 | 1,424p | | | | ||||||||||||
MCCP | 7 Mar | 31 Dec | |||||||||||||||||||||
2003 | 22,923 | | | | 22,923 | 2003 | 2006 | 1,198p | | | | ||||||||||||
MCCP | 22 Apr | 31 Dec | |||||||||||||||||||||
2004 | | 51,550 | | | 51,550 | 2004 | 2007 | 1,276p | | | | ||||||||||||
47,703 | 51,550 | 6,865 | 980 | 91,408 | 33 | ||||||||||||||||||
Oscar | MCCP | 6 Mar | 31 Dec | A$ | |||||||||||||||||||
Groeneveld6 | 2001 | 20,934 | | 20,934 | | | 2001 | 2004 | 34.406 | | | | |||||||||||
MCCP | 13 Mar | 31 Dec | A$ | ||||||||||||||||||||
2002 | 20,322 | | | | 20,322 | 2002 | 2005 | 39.600 | | | | ||||||||||||
MCCP | 7 Mar | 31 Dec | A$ | ||||||||||||||||||||
2003 | 21,469 | | | | 21,469 | 2003 | 2006 | 30.690 | | | | ||||||||||||
MCCP | 22 Apr | 31 Dec | A$ | ||||||||||||||||||||
2004 | | 43,785 | | | 43,785 | 2004 | 2007 | 33.170 | | | | ||||||||||||
62,725 | 43,785 | 20,934 | | 85,576 | | ||||||||||||||||||
Notes to Table 4 | |
1. | The Rio Tinto Group's 11th place ranking against the comparator group for the MCCP 2001 award will not generate any vesting of the conditional award to any participant who was an executive director at the time of the initial grant. Guy Elliott was not an executive director at that time and along with participating senior executives of the Group, he will qualify for a 12.5 per cent vesting based on the scales applied to conditional awards made prior to 2004. |
2. | Rio Tinto plc ordinary shares of 10p each; Rio Tinto Limited shares stated in italics. |
3. | The shares awarded to Guy Elliott under the MCCP 2001 vested on 21 February 2005 but, as the performance cycle ended on 31 December 2004, they have been dealt with in this table as if they had vested on that date. |
4. | The value of the award to Guy Elliott has been based on a share price of 1,759p, being the average share price of Rio Tinto plc ordinary shares of 10p each on 21 February 2005, the day the award vested to the beneficiary. The amount in sterling has been translated into US dollars at the year end exchange rate £1.9268. |
5. | The shares awarded under the MCCP 2000 last year vested on 27 February 2004 but, as the performance cycle ended 31 December 2003, they were dealt with in the 2003 Annual report and financial statements as if they had vested on that date. The values of the awards in the 2003 Annual report and financial statements were based on share prices of 1,386p and A$35.24, being the closing share prices on 6 February 2004, the latest practicable date prior to the publication of the 2003 Annual report and financial statements. The actual share prices on 27 February 2004, when the awards vested were 1,440.5p and A$35.8327 with the result that the values of the awards had been understated in respect of Leigh Clifford by US$3,485, Robert Adams by US$17,335, Guy Elliott by US$2,663 and Oscar Groeneveld by US$1,975. |
6. | Leigh Clifford was given a conditional award over 119,581 Rio Tinto Limited shares and Oscar Groeneveld was given a conditional award over 43,785 Rio Tinto Limited shares during the year. These awards were approved by the shareholders under ASX Listing Rule 10.14 at the 2004 annual general meeting. |
7. | A full explanation of the MCCP can be found on pages 73 to 74. |
8. | Or as at date of resignation or retirement if earlier. |
9. | Robert Adams died on 27 January 2005 and the unvested conditional awards will now vest based on the assumption that Rio Tinto achieved median ranking on each of the outstanding performance cycles. This leads to a 50 per cent vesting in respect of the 2002 and 2003 awards and a 35 per cent vesting in respect of the 2004 award. The awards will be made to his estate at the earliest opportunity and, for the purpose of this report, have been valued using the closing price on 10 June 2005 (see also note 4). |
Rio Tinto 2004 Form 20-F 80
Table 5 Directors options to acquire Rio Tinto plc and Rio Tinto Limited shares
Option type | At 1 Jan | Granted | Exercised | At 31 | Option price | Market price | Date from | Expiry date | |||||||||
2004 | Dec 2004 | at date of | which first | ||||||||||||||
exercise | exercisable | ||||||||||||||||
Robert | |||||||||||||||||
Adams6 | RTPSSP | 595 | | | 595 | 976p | | 1 Jan 2005 | 31 Dec 2005 | ||||||||
431 | | | 431 | 876p | | 28 Jan 2005 | 27 Jan 2006 | ||||||||||
RTSOP | 69,878 | | 69,878 | | 820p | 1562p | 27 May 2001 | | |||||||||
72,885 | | 72,885 | | 808.8p | 1562p | 12 Mar 2002 | | ||||||||||
42,158 | | 42,158 | | 965.4p | 1562p | 7 Mar 2003 | | ||||||||||
21,080 | | | 21,080 | 965.4p | | 28 Jan 2005 | 27 Jan 2006 | ||||||||||
100,268 | | | 100,268 | 1,265.6p | | 28 Jan 2005 | 27 Jan 2006 | ||||||||||
91,320 | | | 91,320 | 1,458.6p | | 28 Jan 2005 | 27 Jan 2006 | ||||||||||
114,014 | | | 114,014 | 1,263p | | 28 Jan 2005 | 27 Jan 2006 | ||||||||||
| 77,700 | | 77,700 | 1,329p | | 28 Jan 2005 | 27 Jan 2006 | ||||||||||
Leigh | |||||||||||||||||
Clifford | RTLSSP | 959 | | | 959 | A$27.86 | |
1 Jan 2005 | 30 Jun 2005 | ||||||||
| 1,486 | | 1,486 | A$29.04 | | 1 Jan 2010 | 30 Jun 2010 | ||||||||||
RTSOP | 52,683 | | | 52,683 | A$23.4382 | | 28 May 2002 | 28 May 2009 | |||||||||
59,318 | | | 59,318 | A$24.069 | | 7 Mar 2003 | 7 Mar 2010 | ||||||||||
29,660 | | | 29,660 | A$24.069 | | 7 Mar 2005 | 7 Mar 2010 | ||||||||||
241,430 | | | 241,430 | A$33.0106 | | 6 Mar 2005 | 6 Mar 2011 | ||||||||||
208,882 | | | 208,882 | A$39.8708 | | 13 Mar 2005 | 13 Mar 2012 | ||||||||||
254,132 | | | 254,132 | A$33.336 | | 7 Mar 2006 | 7 Mar 2013 | ||||||||||
| 179,370 | | 179,370 | A$34.406 | | 22 Apr 2007 | 22 Apr 2014 | ||||||||||
Leon | |||||||||||||||||
Davis | RTSOP | 93,978 | | | 93,978 | A$23.4382 | | 28 May 2002 | 28 May 2009 | ||||||||
Guy | |||||||||||||||||
Elliott | RTPSSP | 1,431 | | | 1,431 | 1,107 | p | |
1 Jan 2009 | 30 Jun 2009 | |||||||
RTSOP | 3,807 | | | 3,807 | 965.4 | p | | 7 Mar 2005 | 7 Mar 2010 | ||||||||
13,432 | | | 13,432 | 1265.6 | | 6 Mar 2005 | 6 Mar 2011 | ||||||||||
61,703 | | | 61,703 | 1458.6 | | 13 Mar 2005 | 13 Mar 2012 | ||||||||||
97,387 | | | 97,387 | 1263 | | 7 Mar 2006 | 7 Mar 2013 | ||||||||||
| 73,700 | | 73,700 | 1329 | | 22 Apr 2007 | 22 Apr 2014 | ||||||||||
Director leaving the board in 2004 | |||||||||||||||||
Oscar | |||||||||||||||||
Groeneveld7 | RTLSSP | 1,431 | | | 1,431 | A$27.48 | | 30 Jun 2009 | |||||||||
RTSOP | 43,851 | | 43,851 | | A$23.4382 | A$38.76 | 28 May 2002 | | |||||||||
33,542 | | 33,542 | | A$24.069 | A$38.76 | 7 Mar 2003 | | ||||||||||
16,771 | | | 16,771 | A$24.069 | | 7 Mar 2005 | 7 Mar 2010 | ||||||||||
80,920 | | | 80,920 | A$33.0106 | | 6 Mar 2005 | 6 Mar 2011 | ||||||||||
73,965 | | | 73,965 | A$39.8708 | | 13 Mar 2005 | 13 Mar 2012 | ||||||||||
90,080 | | | 90,080 | A$33.336 | | 7 Mar 2006 | 7 Mar 2013 | ||||||||||
| 62,600 | | 62,600 | A$34.406 | | 22 Apr 2007 | 22 Apr 2014 | ||||||||||
Notes to Table 5 |
1. | Rio Tinto plc ordinary shares of 10p each; Rio Tinto Limited shares stated in italics. |
2. | Options have been granted under the Rio Tinto Share Option Plan, (RTSOP) the Rio Tinto plc Share Savings Plans (RTPSSP) and the Rio Tinto Limited Share Savings Plan (RTLSSP). |
3. | The closing price of Rio Tinto plc ordinary shares at 31 December 2004 was 1,533p (2003: 1,543p) and the closing price of Rio Tinto Limited shares at 31 December 2004 was A$39.12 (2003: A$37.54). The highest and lowest prices during the year were 1,574p and 1,212p respectively for Rio Tinto plc and A$40.20 and A$31.98 for Rio Tinto Limited. |
4. | No directors options lapsed during the year. |
5. | Or at date of retirement or resignation if earlier. |
6. | In accordance with the Plan rules, Robert Adams outstanding options become exercisable with immediate effect following his death. His award of options under the 2004 grant has been reduced by 17,881 to 59,819 options. |
7. | Oscar Groeneveld exercised his options after his resignation as a director. |
Rio Tintos register of directors interests, which is open to inspection, contains full details of directors shareholdings and options to subscribe for Rio Tinto shares.
Rio Tinto 2004 Form 20-F 81
CORPORATE
GOVERNANCE
The directors of Rio Tinto believe that high standards of corporate governance are critical to business integrity and performance. The following report describes how this philosophy is applied in practice.
As Rio Tintos
three main listings are in London, Melbourne and New York, the directors have
referred to the Combined Code as attached to the United Kingdom Listing Authority
Listing Rules (the Code), the Australian Stock Exchange (ASX) Best Practice Corporate
Governance Guidelines and the New York Stock Exchange (NYSE) Corporate Governance
Listing Standards, as well as the Sarbanes-Oxley Act of 2002, when formulating
this statement.
During
2004, Rio Tinto applied the principles contained in Part 1 of the Code. The detailed
provisions of Section 1 of the Code have been complied with as described below.
Rio Tinto also complied with the ASX Best Practice Corporate Governance Guidelines
and has voluntarily adopted the recommendations of the US Blue Ribbon Committee
in respect of disclosures to shareholders, as detailed in the Audit committees statement
on page 87. A statement on compliance with the New York Stock Exchanges
Corporate Governance Listing Standards is contained below in this statement.
The board
The Companies have common boards of directors which are collectively responsible for the success of the Group and accountable to shareholders for the performance of the business. Throughout the rest of this report, they will be described as the board.
The
board currently consists of 11 directors: the chairman, two executive directors
and eight non executive directors. The Nominations committee continually assesses the balance of executive and non executive directors and the composition of the board in terms of the skills and diversity required to ensure it remains relevant in the current environment.
The role and responsibilities of the board
The
role of the board is to provide the Companies with good governance and strategic
direction. The board also reviews the Groups control and accountability framework. The directors have agreed to a formal schedule of matters specifically reserved for decision by the board, including strategy, major investments and acquisitions. The full list is available on Rio Tintos
website.
Responsibility for day to day management of the business lies with the executive team, with the board agreeing annual performance targets for management against the Groups
financial plan. The board is ultimately accountable to shareholders for the performance
of the business.
To ensure an efficient process, the board meets regularly and in 2004 had eight scheduled and one special meeting. Details of directors attendance
at board and committee meetings are set out below.
The board has regular scheduled discussions on various aspects of the Groups
strategy and, in line with best practice, a dedicated annual two day meeting
at which in depth discussions of Group strategy take place.
Directors receive timely, regular and necessary management and other information to enable them to fulfil their duties. The board has agreed a procedure for the directors to have access to independent professional advice at the Groups
expense and to the advice and services of both company secretaries.
In addition to these formal processes, directors are in regular communication with senior executives from the different product groups, at formal and informal meetings, to ensure regular exchange of knowledge and experience between management and non executive directors. To continue building on the formal induction programmes, which all new non executive directors undertake, they are encouraged to take every opportunity to visit the Groups
operating locations.
The chairman also holds regular meetings with non
executive directors without the executive directors present.
Board performance
In 2004, the board conducted a further formal process to evaluate its effectiveness and that of the board committees and individual directors.
Each directors performance was appraised by the chairman and, in a meeting chaired by the senior non executive director, the non executive directors assessed the chairmans
performance, taking into consideration the views of executive colleagues. This
evaluation process takes place annually and aims to cover board dynamics, board
capability, board process, board structure, corporate governance, strategic clarity
and alignment and the performance of individual directors. Following the evaluation,
the directors believe they comply with the requirements of Clause A.6 of the
Code and Principle 8 of the ASX Best Practice Corporate Governance Guidelines.
Independence
The
board has adopted a policy on directors independence. The policy, which
contains the materiality thresholds approved by the board, can be viewed on the
Rio Tinto website.
Rio Tinto 2004 Form 20-F 82
The
tests of director independence in the jurisdictions where Rio Tinto is listed
are not wholly consistent. The board has, therefore, adopted the following
criteria for independence: independence of management, the absence of any business
relationship which could materially interfere with the directors independence
of judgement and ability to provide a strong, valuable contribution to the
boards deliberations or which could interfere with the directors
ability to act in the best interest of the Group. Where contracts in the ordinary
course of business exist between Rio Tinto and a company in which a director
has declared an interest, these are reviewed for materiality to both Companies.
Applying
these criteria, the board is satisfied that the majority of the directors,
Ashton Calvert, Sir David Clementi, Vivienne Cox, Richard Goodmanson, Andrew
Gould, Lord Kerr and Sir Richard Sykes are independent. John Morschel,
who retired at the end of the 2005 annual general meetings, was also independent.
Although Sir Richard Giordano, who also retired at the end of the 2005
annual general meetings, had served as a director since 1992, the strength,
objectivity and nature of his contribution to board and committee discussions
was fully consistent with those of an independent director. Leon Davis,
a former chief executive of the Group, and David Mayhew, who is chairman
of one of Rio Tinto plcs stockbrokers, are not independent. Leon
Davis also retired by rotation at the end of the 2005 annual general meetings.
Paul
Skinner was, until his appointment as chairman in 2003, an independent,
non executive director in compliance with the Code. He satisfies the tests
for independence under the ASX Best Practice Corporate Governance Guidelines.
The
directors biographies are set out on pages 67 to 69.
Election and re-election
Directors are elected by shareholders at the first annual general meetings after their appointment and, after that, offer themselves for reelection at least once every three years. Non executive directors are normally expected to serve at least two terms of three years and, except where special circumstances justify it, would not normally serve more than three such terms.
Chairman and chief executive
The roles of the chairman and chief executive are separate and the division of responsibilities has been formally approved by the board.
Directors attendance at board and committee meetings during 2004 | ||||||||||||||||||||
Name of Director | Board | Audit | Remuneration | Committee on | Nominations | |||||||||||||||
committee | committee | social and | committee | |||||||||||||||||
environmental | ||||||||||||||||||||
accountability | ||||||||||||||||||||
A | B | A | B | A | B | A | B | A | B | |||||||||||
Robert Adams | 9 | 8 | ||||||||||||||||||
David Clementi | 9 | 8 | 8 | 8 | 5 | 4 | ||||||||||||||
Leigh Clifford | 9 | 9 | ||||||||||||||||||
Leon Davis | 9 | 9 | 3 | 3 | ||||||||||||||||
Guy Elliott | 9 | 9 | ||||||||||||||||||
Sir Richard Giordano | 9 | 8 | 8 | 7 | 3 | 3 | 2 | 2 | ||||||||||||
Richard Goodmanson1 | | | ||||||||||||||||||
Andrew Gould | 9 | 8 | 8 | 8 | 5 | 4 | ||||||||||||||
Oscar Groeneveld2 | 7 | 7 | ||||||||||||||||||
Lord Kerr3 | 9 | 8 | 5 | 5 | 2 | 2 | ||||||||||||||
David Mayhew | 9 | 8 | 8 | 7 | 2 | 2 | ||||||||||||||
John Morschel | 9 | 9 | 5 | 5 | 3 | 3 | 2 | 2 | ||||||||||||
Paul Skinner | 9 | 9 | 3 | 3 | 2 | 2 | ||||||||||||||
Sir Richard Sykes | 9 | 8 | 5 | 5 | ||||||||||||||||
Lord Tugendhat4 | 3 | 2 | 3 | 3 | 1 | 1 | ||||||||||||||
A = Maximum number of meetings the director could have attended | |
B = Number of meetings attended | |
1. | Richard Goodmanson was appointed on 1 December 2004 |
2. | Oscar Groeneveld resigned on 1 October 2004 |
3. | Lord Kerr became a committee member on 1 June 2004 (Audit and CSEA) |
4. | Lord Tugendhat retired on 22 April 2004 |
Board committees
There are four board committees, the Nominations committee, Audit
committee, Remuneration committee and the Committee
on social and environmental accountability. Each
committee plays a vital role in ensuring that good corporate governance is
maintained throughout the Group. Committee terms of reference are reviewed
annually by the board and the committees themselves to ensure they continue
to be at the forefront of best practice and are posted on the Groups
website. Minutes of all committee meetings are circulated to the board, with
oral reports at the next board meeting. All committee members are non executive
directors.
Rio Tinto 2004 Form 20-F 83
The Audit
committees main responsibilities include the review of accounting
principles, policies and practices adopted in the preparation of public financial
information; review with management of procedures relating to financial and
capital expenditure controls, including internal audit plans and reports; review
with external auditors of the scope and results of their audit; the nomination
of auditors for appointment by shareholders; and the review of and recommendation
to the board for approval of Rio Tintos risk management policy. Its responsibilities
also include the review of corporate governance practices of Group sponsored
pension funds. The committee has a number of training sessions which may cover
new legislation and other relevant information. The external auditors, the
finance director, the Group controller and Group internal auditor attend meetings.
A copy of the Audit committee charter is reproduced on pages 88 to 89 and can be found on the Rio Tinto website.
The Audit committee is
chaired by Andrew Gould who succeeded Sir Richard Giordano on his retirement
at the end of the 2005 annual general meetings. Its other members are Sir
David Clementi, Vivienne Cox, Lord Kerr and David Mayhew. To comply with
the NYSEs rules on independence David Mayhew will cease to be a member
of the committee with effect from 31 July 2005.
The Remuneration committee is
responsible for determining the policy for executive remuneration and
for the remuneration and benefits of individual executive directors and senior
executives. Full disclosure of all elements of directors and relevant senior executives remuneration can be found in the Remuneration report on pages 71 to 81, together with details of the Groups
remuneration policies. The committee is chaired by Sir Richard Sykes
and its other members are Sir David Clementi, Richard Goodmanson and
Andrew
Gould.
The Nominations committee is
chaired by the chairman of Rio Tinto, Paul Skinner. It is the committees
responsibility to ensure that there is a clear, appropriate and transparent
process in place to source and appoint new directors. Its responsibilities
also include evaluating the balance of skills, knowledge and experience
on the board and identifying and nominating, for the approval by the board,
candidates to fill board vacancies as and when they arise. The committee
reviews the structure, size and composition of the board and makes recommendations
with regard to any changes it considers appropriate. The committee also
reviews the time required to be committed to Group business by non executive
directors and assesses whether non executive directors are devoting sufficient
time to carry out their duties. In addition to Paul Skinner, the committee
consists of Ashton Calvert, Richard Goodmanson, David Mayhew and Sir Richard
Sykes. Under the Code, two members of the committee are not considered
independent: Paul Skinner, following his appointment as chairman, and David
Mayhew. The committee composition is therefore not fully aligned with recommended
practice in the UK. The board takes the view, however, that the skills
and experience of the members of the committee, combined with the flexibility
of a relatively small committee, makes the current composition both efficient
and effective.
The Committee on social and environmental accountability reviews the effectiveness of management policies and procedures in place to deliver those standards in The way we work,
Rio Tintos statement of business practice, which are not covered
by the other board committees and, in particular, those relating to health,
safety, the environment and social issues. The overall objective of the
committee is to promote the development of high quality business practices
throughout the Group and to develop the necessary clear accountability
on these practices. Members of the committee, which is chaired by Richard
Goodmanson, are Ashton Calvert, Lord Kerr and Paul Skinner.
Executive directors other directorships
Executive directors are likely to be invited to become non executive directors of other companies. For full details of the Group policy and fees, see pages 71 to 81.
Directors dealings in shares
Rio Tinto has a Group policy in place to govern the dealing in Rio Tinto securities by directors and employees. The policy, which prohibits dealings when in possession of price sensitive information and shortly before a results announcement, can be viewed on the Rio Tinto website.
Communication
Rio Tinto recognises the importance of effective communication with shareholders and the general investment community. To ensure shareholders are kept informed in a timely manner, the Group has adopted an External disclosure guidance, which is posted on the website appended to the Corporate governance guidance.
In addition to statutory documents, Rio Tinto has
a comprehensive website featuring in depth information on health, safety and
the environment, as well as general investor information and Group policies.
Results presentations and other significant events are available as they happen
and as an archive on the website.
The
Group also produces a range of informative publications, which are available
on request. For further details, see the website.
Full
advantage is taken of the annual general meetings to inform shareholders
of current developments and to give shareholders the opportunity to ask
questions. As recommended by the ASX Best Practice Corporate Governance
Guidelines, Rio Tinto Limiteds external auditor attends the AGM and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditors
report.
The
main channels of communication with the general investment community are
through the chairman, chief executive and finance director, who conduct
regular meetings with the Companies major shareholders. Non executive
directors and the senior independent director are also available as appropriate.
The
Group also organises regular investor seminars which provide a two way
communication with investors and analysts; the valuable feedback is communicated
to the board. An annual survey of major shareholders opinion and perception of the Group is presented to the board by the Groups
investor relations advisors.
Rio Tinto 2004 Form 20-F 84
Statement of business practice
The way we work provides the directors and all Group employees with a summary of the principal policies and procedures in place to help ensure that high governance and business standards are communicated and achieved throughout the Group.
Main policies are adopted by the directors after wide consultation, externally and within the Group. Once adopted, they are communicated to business units worldwide, together with guidance and support on implementation. Business units are then required to devote the necessary effort by management to implement and report on these policies.
The following policies are currently in place: health, safety and the environment; communities; human rights; access to land; employees; business integrity; bribery and corruption; corporate governance; compliance; external disclosures, including continuous disclosure, and code of ethics covering the preparation of financial statements and political involvement. These policies apply to all Rio Tinto managed businesses.
There
is also a Group wide whistle blowing programme called Speak-OUT. Employees
are encouraged to report any concerns, including any suspicion of a violation
of the Groups financial reporting and environmental procedures, through
an independent third party and without fear of recrimination. A process has
been established for the investigation of any matters reported with clear lines
of
reporting and responsibility in each Group business.
Where
the Group does not have operating responsibility for a business, Rio Tintos
policies are communicated to the business partners and they are encouraged
to adopt similar policies of their own.
Rio
Tintos report on social and environmental matters follows the Association of British Insurers guidelines. This report can be found on pages 64 to 67. Details of the Groups overall and individual businesses social and environmental performance continue to be published on Rio Tintos
website and in the Sustainable development review.
Responsibilities of the directors
The directors are required by UK and Australian company law to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Group as at the end of the financial period and of the profit or loss and cash flows for that period. To ensure that this requirement is satisfied, the directors are responsible for establishing and maintaining adequate internal controls and procedures for financial reporting throughout the Group.
The directors consider that the financial statements present a true and fair view and have been prepared in accordance with applicable accounting standards, using the most appropriate accounting policies for Rio Tinto's business and supported by reasonable and prudent judgments. The accounting policies have been consistently applied.
The
directors have received a written statement from the chief executive and the
finance director to this effect. In accordance with ASX Best Practice Recommendation
7.2, this written statement is founded on a sound system of risk management and
internal compliance and control which implements the policies adopted by the
board and confirms that the Groups risk management and internal compliance
and control systems are operating efficiently and effectively in all material
respects.
The directors, senior executives, senior financial managers and other members of staff who are required to exercise judgement in the course of the preparation of the financial statements are required to conduct themselves with integrity and honesty and in accordance with the ethical standards of their profession and/or business.
The directors are responsible for maintaining proper accounting records, in accordance with the UK Companies Act 1985 and the Australian Corporations Act 2001. They have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of Group and to prevent and detect fraud and other irregularities.
The
directors are also responsible for the maintenance and integrity of the Groups
website. The work carried out by the auditors does not involve consideration
of this and, accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were initially
loaded on the website.
Going concern
The financial statements have been prepared on the going concern basis. The directors report that they have satisfied themselves that the Group is a going concern since it has adequate financial resources to continue in operational existence for the foreseeable future.
Boards statement on internal control
Rio Tintos
overriding corporate objective is to maximise long term shareholder value through
responsible and sustainable investment in mining and related assets. The directors
recognise that creating shareholder value is the reward for taking and accepting
risk.
The
directors are responsible for the Groups system of internal control and
for reviewing its effectiveness in providing shareholders with a return on their
investments that is consistent with a responsible assessment and mitigation of
risks. This includes reviewing financial, operational and compliance controls,
and risk management procedures. Because of the limitations inherent in any such
system this is designed to manage rather than eliminate risk. Accordingly,
it provides reasonable but not absolute assurance against material misstatement
or loss.
The directors have established a process for identifying, evaluating and managing the significant risks faced by the Group. This process was in place during 2004 and up to and including the date of approval of the 2004 Annual report and financial statements. The process is reviewed annually by the directors and accords with the guidance set out in Internal Control: Guidance for Directors on the Combined Code.
Rio Tinto 2004 Form 20-F 85
The Groups management committees review information on the Groups significant risks, with relevant control and monitoring procedures, for completeness and accuracy. This information is presented to the directors to enable them to assess the effectiveness of the internal controls. In addition, the board and their committees monitor the Groups
significant risks on an ongoing basis.
Assurance functions, including internal auditors and health, safety and environmental auditors, perform reviews of control activities and provide regular written and oral reports to directors and management committees. The directors receive and review minutes of the meetings of each board committee, in addition to oral reports from the respective chairmen at the first board meeting following the relevant committee meeting.
Certain risks, for example natural disasters, cannot be mitigated to an acceptable degree using internal controls. Such major risks are transferred to third parties in the international insurance markets, to the extent considered appropriate.
Each
year, the leaders of the Groups businesses and administrative offices complete an internal control questionnaire that seeks to confirm that adequate internal controls are in place and operating effectively. The results of this process are reviewed by the executive committee and it is then presented to the board as a further part of their review of the Groups
internal controls. This process is continually reviewed and strengthened as appropriate.
In 2002, the Group also established a Disclosure and procedures committee, which was tasked with reviewing the adequacy and effectiveness of Group controls and procedures over the public disclosure of financial and related information. The committee has been presenting the results of this process to senior management and directors and will continue to do so.
The
Group has material investments in a number of joint ventures and associated companies.
Where Rio Tinto does not have managerial control, it cannot guarantee that local
management of mining assets will comply with Rio Tinto standards or objectives.
Accordingly, the review of their internal controls is less comprehensive than
that for the Groups managed operations.
The New York Stock Exchange
In November 2003, the SEC approved the new corporate governance listing standards of the New York Stock Exchange (NYSE). The Company, as a foreign issuer with American Depositary Shares listed on the NYSE, is obliged to disclose any significant ways in which its corporate governance practices differ from these standards.
The
Company has reviewed the NYSEs listing standards and believes that its
corporate governance practices are consistent with them, with two exceptions
where the Company does not meet the strict requirements set out in these standards.
The standards state that companies must have a nominating / corporate governance committee composed entirely of independent directors and with written terms of reference which, in addition to identifying individuals qualified to become board members, develops and recommends to the board a set of corporate governance principles applicable to the Company. Rio Tinto has a Nominations committee,
information about which is set out on page 84. This committee does not develop
corporate governance principles for the boards approval. The board itself performs this task and approves the Groups
overall system of governance and internal controls.
Rio
Tintos Audit committee is
made up of a majority of independent non executive directors. However, one committee
member, David Mayhew, is technically deemed not to be independent and to comply
with the NYSEs rules on independence will cease to be a member of the committee
with effect from 31 July 2005. The board, the Audit committee and the Nominations committee are made up of a majority of independent, non executive directors as defined by the NYSE listing standards.
Principal auditors
The remuneration
of the Groups principal auditors for audit services and other services
as well as remuneration payable to other accounting firms has been set out in
Note 37 to the consolidated financial statements on page A-56.
Rio
Tinto has adopted policies designed to uphold the independence of the Groups principal auditors by prohibiting their engagement to provide a range of accounting and other professional services that might compromise their appointment as independent auditors. The engagement of the Groups
principal auditors to provide statutory audit services, certain other assurance
services, tax services and certain other specific services is pre-approved by
the Audit committee.
The engagement of the Groups principal auditors to provide other permitted
services are individually subject to the specific approval of the Audit committee or
its chairman.
Prior
to the commencement of each financial year, the Groups
finance director and its principal auditors submit to the Audit committee a schedule of the types of services that are expected to be performed during the following year for its approval. The Audit committee may
impose a US dollar limit on the total value of other permitted services that
can be provided. Any non audit service provided by the Groups principal auditors, where the expected fee exceeds a pre-determined level, must be subject to the Groups normal tender procedures. However, in exceptional circumstances the finance director is authorised to engage the Groups
principal auditors to provide such services without going to tender, but if
the fees are expected to exceed US$250,000 then the chairman of the Audit committee must approve the engagement.
The Audit committee adopted
policies for the pre-approval of permitted services provided by the Groups
principal auditors during January 2003 which were further refined and adopted
during September 2003. Engagements for services provided by the Group's principal
auditors since the adoption of these policies were either within the pre-approval
policies or approved by the Audit committee.
Rio Tinto 2004 Form 20-F 86
Audit committee
US Blue Ribbon Compliance statement
The Audit committee meets the membership requirements of the Code and the Blue Ribbon Report in the US. The Group also meets the disclosure requirements in respect of audit committees required by the Australian Stock Exchange. The Audit committee is governed by a written charter approved by the board, which the Audit committee reviews and reassesses each year for adequacy. A copy of this charter is reproduced on pages 88 to 89. With effect from 31 July 2005, the Group will become subject to the NYSE Rules on Audit Committees. The committee intends to comply with these rules when they come into force.
The Audit committee comprised
the five members set out below. The members, with the exception of David Mayhew,
are independent and are free of any relationship that would interfere with impartial
judgement in carrying out their responsibilities. David Mayhew is technically
deemed not to be independent by virtue of his professional association with the
Group in his capacity as chairman of Cazenove Group PLC, a stockbroker and financial
adviser to Rio Tinto plc. However, the board has determined that the relationship
does not interfere with David Mayhews exercise of independent judgement
and believes that his appointment is in the best interests of the Group because
of the substantial financial knowledge and expertise he brings to the committee.
Report of the Audit committee
The Audit committee met eight times in 2004. It monitors developments in corporate governance in the UK, Australia and the US, to ensure the Group continues to apply high and appropriate standards.
Many
of the new US requirements have long been best practice and are incorporated
into the committees charter, reproduced on pages 88 to 89. The charter
is subject to regular discussion and has been reviewed in the light of new requirements
and emerging best practice.
There is in place a set of procedures, including budgetary guidelines, for the appointment of the external auditor to undertake non audit work, which aims to provide the best possible services for the Group at the most advantageous price. The committee reviews the independence of the external auditors on an annual basis and a process is also in place to review their effectiveness to ensure that the Group continues to receive an efficient and unbiased service. The committee advised the directors that the Audit committee is satisfied that the provision of non audit services by the external auditors during 2004 is compatible with the general standard of independence for auditors imposed by the Australian Corporations Act 2001. Furthermore, as part of its responsibility to foster open communication, the committee meets with management, the external auditors and the internal auditor separately.
Financial expert
The Audit committee reviewed
the SEC requirements for audit committees financial experts and the Combined
Code requirement that at least one committee member should have recent and relevant
financial experience. Following an in depth assessment, the committee recommended
to the board that Sir Richard Giordano, Sir David Clementi and Andrew Gould be
identified as the Audit
committees financial experts in the 2004 Annual report and financial statements. The board has concluded that Sir Richard Giordano, Andrew Gould and Sir David Clementi possess the requisite skills, experience and background to qualify for the purpose of C.3.1. of the Code as well as fulfilling the SEC criteria.
2004 financial statements
The Audit committee has
reviewed and discussed with management the Groups audited financial statements
for the year ended 31 December 2004.
We have discussed with the external auditors the matters described in the American Institute of Certified Public Accountant Auditing Standard No. 90, Audit committee communications, and in the UK Statement of Auditing Standard No 610, Reporting to those charged with Governance (SAS 610), including
their judgements regarding the quality of the Groups accounting principles
and underlying estimates.
The
committee has discussed with the external auditors their independence, and received
and reviewed their written disclosures, as required by the US Independence Standards
Boards Standard No. 1, Independence Discussions with Audit Committees and
SAS 610.
Based on the reviews and discussions referred to above, the committee has recommended to the board of directors that the financial statements referred to above be included in this Annual report.
Sir Richard Giordano (Chairman)
Sir David Clementi
Andrew F J Gould
Lord Kerr
David L Mayhew
24 February 2005
Rio Tinto 2004 Form 20-F 87
Report
of the Nominations committee
The Nominations committee is pleased to present the report of its activities, which cover a period of considerable change in composition of the board. A number of long standing non executive directors will have retired over the period 2004/5, including Lord Tugendhat, Sir Richard Giordano, Leon Davis and John Morschel. The recruitment, with input from an external search agency, of replacements with appropriate skills and experience has been the main priority of the committee. Richard Goodmanson joined the board on 1 December 2004 and Ashton Calvert and Vivienne Cox on 1 February 2005. Each is an independent director who brings an experience profile which will ensure that the overall quality of the board is maintained. Apart from making a general overview of the composition of the board, the committee members have been directly involved in the assessment of all individuals considered for appointment. As part of his annual performance assessment of individual directors, Paul Skinner, who is chairman of the Nominations committee, has reviewed the time committed to Group business and confirmed this to be appropriate in each case.
Paul Skinner (Chairman)
Sir Richard Giordano
David L Mayhew
John Morschel
24 February 2005
Audit committee charter
Scope
and authority
The Group is required by the UK Listing Authority (UKLA), the New York Stock Exchange (NYSE), and the Australian Stock Exchange (ASX) to establish an Audit committee. Each of the UKLA, the NYSE and the ASX also lay down rules and guidelines for the composition of the committee and the work to be undertaken by it. These requirements, where not self evident, have been incorporated into this Charter.
The primary function of the Audit committee is to assist the boards of directors in fulfilling their responsibilities by reviewing:
• | the financial information that will be provided to shareholders and the public; |
• | the systems of internal controls that the boards and management have established; |
• | the Groups auditing, accounting and financial reporting processes. |
In carrying out its responsibilities, the committee has full authority to investigate all matters that fall within the terms of reference of this Charter. Accordingly, the committee may: | |
• | obtain independent professional advice in the satisfaction of its duties at the cost of the Group; |
• | have such direct access to the resources of the Group as it may reasonably require, including the external and internal auditors. |
Composition
The Audit committee shall
comprise three or more non executive directors, all of whom shall be independent.
The boards will determine each directors independence having regard to any past and present relationships with the Group which, in the opinion of the boards, could influence the directors
judgment.
All members of the committee shall have a working knowledge of basic finance and accounting practices. At least one member of the committee will have accounting or related financial management expertise, as determined by the boards.
A
quorum will comprise any two independent directors.
The committee may invite members of the management team to attend the meetings and to provide information as necessary.
Meetings
The committee shall meet not less than four times a year or more frequently as circumstances require. Audit committee minutes will be confirmed at the following meeting of the committee and tabled as soon as practicable at a meeting of the boards.
The
Groups senior financial management, external auditors and internal auditor
shall be available to attend all meetings.
As part of its responsibility to foster open communication, the committee should meet with management, the external auditors and the internal auditor, at least annually, to discuss any matters that are best dealt with privately.
Responsibilities
The boards and the external auditors are accountable to shareholders. The Audit committee is accountable to the boards. The internal auditor is accountable to the Audit committee and the finance director. To fulfil its responsibilities the committee shall:
Charter | |
• | Review and, if appropriate, update this Charter at least annually. |
Rio Tinto 2004 Form 20-F 88
Financial reporting and internal financial controls | |
• | Review with management and the external auditors the Groups financial statements, Form 20-F, stock exchange and media releases in respect of each half year and full year. |
• | Review with management and the external auditors the accounting policies and practices adopted by the Group and their compliance with accounting standards, stock exchange listing rules and relevant legislation. |
• | Discuss with management and the external auditors managements choice of accounting principles and material judgments, including whether they are aggressive or conservative and whether they are common or minority practices. |
• | Recommend to the boards that the annual and interim financial statements, and Form 20-F reviewed by the committee (or the chairman representing the committee for this purpose) be included in the Groups annual report. |
• | Review the regular reports prepared by the internal auditor including the effectiveness of the Groups internal financial controls. |
External auditors | |
• | Review and recommend to the boards the external auditors to be proposed to shareholders. |
• | Review with the external auditors the planned scope of their audit and subsequently their audit findings including any internal control recommendations. |
• | Periodically consult with the external auditors out of the presence of management about the quality of the Groups accounting principles, material judgments and any other matters that the committee deems appropriate. |
• | Review the performance of the external auditors and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements. |
• | Review and approve the fees and other compensation to be paid to the external auditors. |
• | Review and approve any non audit work and related fees to be carried out by the external auditors. |
• | Ensure that the external auditors submit a written statement outlining all of its professional relationships with the Group including the provision of services that may affect their objectivity or independence. Review and discuss with the external auditors all significant relationships they have with the company to determine their independence. |
Internal auditor | |
• | Review the qualifications, organisation, strategic focus and resourcing of internal audit. |
• | Review and approve the internal audit plans. |
• | Review internal audit performance. |
• | Periodically consult privately with the internal auditor about any significant difficulties encountered including restrictions on scope of work, access to required information or any other matters that the committee deems appropriate. |
Risk management | |
• | Review and evaluate the internal processes for determining and managing key risk areas. |
• | Ensure the Group has an effective risk management system and that macro risks are reported at least annually to the board. |
• | Require
periodic reports from nominated senior managers: - confirming the operation of the risk management system including advice that accountable management have confirmed the proper operation of agreed risk mitigation strategies and controls, and - detailing material risks. |
• | Address the effectiveness of the Groups internal control system with management and the internal and external auditors. |
• | Evaluate the process the Group has in place for assessing and continuously improving internal controls, particularly those related to areas of material risk. |
Other matters | |
The committee shall also perform any other activities consistent with this Charter that the committee or boards deem appropriate. This will include but not be limited to: | |
• | Review of the corporate governance practices of Group sponsored pension funds. |
• | Review of the Groups insurance cover. |
• | Review the Groups tax planning and compliance. |
• | Review the Groups whistle blowing procedures for financial reporting. |
Rio Tinto 2004 Form 20-F 89
Item 7. Major Shareholders and Related Party Transactions
MAJOR SHAREHOLDERS
As far
as is known, Rio Tinto plc is not directly or indirectly owned or controlled
by another corporation or by any government. The Capital Group of Companies Inc.
by way of a notice dated 6 April 2005 informed the Company of its interest in
52,882,175 ordinary shares representing 4.95 per cent of its shares as at the
date of notice. Barclays PLC, by way of a notice dated 20 April 2005 informed
the Company of its interest in 39,901,471 ordinary shares representing 3.74 per
cent of its shares as the date of notice. Rio Tinto plc does not know of any
arrangements which may result in a change in its control. As of 10 June 2005,
the total amount of the voting securities owned by the directors of Rio Tinto
plc as a group was 59,262 ordinary shares of 10p each representing less than
one per cent of the number in issue.
As far as is known, Rio Tinto Limited, with the exception of the arrangements for the dual listed companies merger described on pages 95 to 97, is not directly or indirectly owned or controlled by another corporation or by any government. As of 10 June 2005, the only person known to Rio Tinto Limited as owning more than five per cent of its shares was Tinto Holdings Australia Pty Limited, which is an indirect wholly owned subsidiary of Rio Tinto plc, with 171,072,520 shares, representing 37.48 per cent of its issued capital. Rio Tinto Limited does not know of any arrangements which may result in a change in its control. As of 10 June 2005 the total amount of the voting securities owned by the directors of Rio Tinto Limited as a group was 91,255 shares representing less than one per cent of the number in issue.
Directors interests
in Group voting securities are shown in Table 3 of the Remuneration report
on page 79. Their total beneficial interest in the Group amounts to less than
one
per cent.
Except
as provided under the DLC Merger Sharing Agreement as explained on page 97,
the Groups major shareholders have the same voting and other rights as
other shareholders.
As at 10 June 2005 there were 247 US registered shareholders holding 140,175 shares in Rio Tinto plc, and 219 US registered shareholders holding 330,380 shares in Rio Tinto Limited.
Rio Tinto share ownership
Twenty largest shareholders as at 14 February 2005
RIO TINTO PLC | RIO TINTO LIMITED | |||||||||
Number of | Percentage | Number of | Percentage | |||||||
shares | of issued | shares | of issued | |||||||
share | share | |||||||||
capital | capital | |||||||||
1 | BNY (Nominees) Limited | 128,983,028 | 12.07 | 1 | Tinto Holdings Australia Pty | 187,439,520 | 37.52 | |||
Limited | ||||||||||
2 | Chase Nominees Limited | 47,554,868 | 4.45 | 2 | National Nominees Limited | 45,071,472 | 9.02 | |||
3 | HSBC Global Custody | 28,833,545 | 2.70 | 3 | JP Morgan Nominees | 44,527,685 | 8.91 | |||
Nominee (UK) Limited | Australia Limited | |||||||||
<357206> | ||||||||||
4 | Credit Lyonnais SA | 22,438,646 | 2.1 | 4 | Westpac Custodian | 42,274,410 | 8.46 | |||
Nominees Limited | ||||||||||
5 | Prudential Client HSBC GIS | 21,436,365 | 2.00 | 5 | Citicorp Nominees Pty | 11,875,963 | 2.38 | |||
Nominee (UK) Limited | Limited | |||||||||
<PAC> | ||||||||||
6 | State Street Nominees | 19,457,648 | 1.82 | 6 | ANZ Nominees Limited | 11,019,930 | 2.21 | |||
Limited <OM02> | ||||||||||
7 | The Bank of New York | 17,435,234 | 1.63 | 7 | Cogent Nominees Pty | 7,203,002 | 1.44 | |||
(Nominees) Limited | Limited | |||||||||
8 | Nortrust Nominees Limited | 16,482,434 | 1.54 | 8 | Queensland Investment | 6,484,928 | 1.30 | |||
<SLEND> | Corporation | |||||||||
9 | Nutraco Nominees Limited | 14,215,117 | 1.33 | 9 | RBC Global Services | 3,595,894 | 0.72 | |||
Australia Nominees Pty | ||||||||||
Limited | ||||||||||
10 | Chase Nominees Limited | 13,423,782 | 1.26 | 10 | HSBC Custody Nominees | 3,585,137 | 0.72 | |||
<LEND> | (Australia) Limited | |||||||||
11 | BNY (OCS) Nominees | 11,998,130 | 1.12 | 11 | AMP Life Limited | 3,146,536 | 0.63 | |||
Limited | ||||||||||
12 | Chase Nominees Limited | 11,889,623 | 1.11 | 12 | Citicorp Nominees Pty | 3,094,846 | 0.62 | |||
<BGILIFEL> | Limited <CFS WSLE | |||||||||
GEARED SHR FND A/C> | ||||||||||
13 | Chase (GA Group) | 11,659,302 | 1.09 | 13 | Citicorp Nominees Pty | 2,890,455 | 0.58 | |||
Nominees Limited <GA> | Limited<CFS WSLE | |||||||||
IMPUTATION FND A/C> | ||||||||||
14 | HSBC Global Custody | 11,256,295 | 1.05 | 14 | UBS Nominees Pty | 2,636,088 | 0.53 | |||
Nominees (UK) Limited | Ltd<PRIME BROKING | |||||||||
<899877> | A/C> | |||||||||
15 | Nortrust Nominees Limited | 10,693,371 | 1.00 | 15 | ANZ Nominees Limited | 2,301,363 | 0.46 |
Rio Tinto 2004 Form 20-F 90
16 | State Street Nominees Limited <HG18> | 10,350,000 | 0.97 | 16 | RBC Global Services Australia Nominees Pty | 2,190,759 | 0.44 | |||
Limited <PIPOOLED A/C> | ||||||||||
17 | State Street Nominees Limited <E802> | 9,373,275 | 0.88 | 17 | IAG Nominees Pty Limited | 2,154,975 | 0.43 | |||
18 | BNP Paribas Arbitrage SNC <2890000> | 9,179,784 | 0.86 | 18 | Westpac Financial Services Limited | 2,060,695 | 0.41 | |||
19 | Chase Nominees Limited <USRESLD> | 8,748,512 | 0.82 | 19 | RBC Global Services Australia Nominees Pty Limited | 1,946,255 | 0.39 | |||
20 | Mellon Nominees (UK) Limited <BSDTGUSD> | 8,492,230 | 0.79 | 20 | Citicorp Nominees Pty Limited <CFS | 1,881,535 | 0.38 | |||
IMPUTATION FUND A/C> | ||||||||||
433,901,189 | 40.59 | 387,381,448 | 77.55 | |||||||
(a) | As far as is known, Rio Tinto is not directly or indirectly owned or controlled by another corporation or by any government. |
(b) | Rio Tinto is not aware of any arrangement which may result in a change in its control. |
(c) | Tinto Holdings Australia Pty Limited is a wholly owned subsidiary of Rio Tinto plc. |
(d) | Other large shareholders are nominees who hold securities on behalf of beneficial shareholders, for example BNY (Nominees) Limited holds Rio Tinto plc shares on behalf of the holders of American Depository Receipts that are traded on the New York Stock Exchange. |
(e) | Under the listing rules, any shareholder of Rio Tinto plc with a beneficial interest of more than three per cent, or of Rio Tinto Limited with a beneficial interest of more than five per cent, is required to provide the Companies with notice. The only shareholder to have provided such notice is The Capital Group of Companies Inc by way of a notice dated 31 January 2005 which confirmed an interest in 64,021,998 ordinary shares issued by Rio Tinto plc, representing 5.99 per cent of its shares as at the date of notice. |
Analysis of ordinary shareholders As at 14 February 2005
Rio Tinto plc | Rio Tinto Limited | |||||||||||||||
No of | % | Shares | % | No of | % | Shares | % | |||||||||
accounts | accounts | |||||||||||||||
1 to 1,000 shares | 42,642 | 67.67 | 18,272,340 | 1.71 | 55,684 | 76.35 | 22,327,099 | 4.47 | ||||||||
1,001 to 5,000 shares | 16,977 | 26.94 | 34,351,886 | 3.22 | 15,093 | 20.69 | 29,784,565 | 5.96 | ||||||||
5,001 to 10,000 shares | 1,472 | 2.34 | 10,232,719 | 0.96 | 1,315 | 1.80 | 9,157,549 | 1.83 | ||||||||
10,001 to 25,000 shares | 698 | 1.11 | 10,938,289 | 1.02 | 551 | 0.76 | 8,070,612 | 1.62 | ||||||||
25,001 to 125,000 shares | 640 | 1.01 | 36,140,355 | 3.38 | 197 | 0.27 | 9,783,825 | 1.96 | ||||||||
125,001 to 250,000 shares | 177 | 0.28 | 32,558,472 | 3.05 | 33 | 0.05 | 6,074,624 | 1.22 | ||||||||
250,001 to 1,250,000 shares | 271 | 0.43 | 150,765,734 | 14.11 | 32 | 0.04 | 16,310,955 | 3.27 | ||||||||
1,250,001 to 2,500,000 | 70 | 0.11 | 120,880,971 | 11.31 | 13 | 0.02 | 22,268,625 | 4.46 | ||||||||
2,500,001 and over | 69 | 0.11 | 525,327,145 | 49.17 | 14 | 0.02 | 374,845,866 | 75.04 | ||||||||
ADRs | 128,983,028 | 12.07 | 882,604 | 0.17 | ||||||||||||
63,016 | 100 | 1,068,450,939 | 100 | 72,932 | 100 | 499,506,324 | 100 | |||||||||
Number of holdings less than marketable parcel of A$500. | 1,566 |
RELATED PARTY TRANSACTIONS
Details of the
Groups material related party transactions are set out in Note 38 on page
A-57 of the consolidated financial statements.
Except
as explained on page 37, the Groups financial statements show the full extent of the Groups financial commitments including debt and similar exposures. It has never been the Groups practice to engineer financial structures as a way of avoiding disclosure. Substance rather than form is a fundamental principle of Rio Tintos
reporting.
Item 8. Financial Information
LEGAL PROCEEDINGS
Neither Rio Tinto
plc nor Rio Tinto Limited nor any of their subsidiaries is a defendant in any
proceedings which the directors believe will have a material effect on either
Companys financial position and results of operations.
DIVIDENDS
Both Companies
have paid dividends on their shares every year since incorporation in 1962. The
rights of Rio Tinto shareholders to receive dividends are explained under the
description of the Dual Listed Companies Structure on pages 95 to 96.
Dividend policy
The aim of Rio
Tintos progressive dividend policy is to increase the US dollar value of
dividends over time, without cutting them in economic downturns.
Rio Tinto 2004 Form 20-F 91
The rate of the total annual dividend, in US dollars, is determined taking into account the results for the past year and the outlook for the current year. The interim dividend is set at one half of the total dividend for the previous year. Under Rio Tintos dividend policy the final dividend for each year is expected to be at least equal to the interim dividend.
Dividend determination
As the majority
of the Groups sales are transacted in US dollars it is the most reliable currency in which to measure the Groups
financial performance and is its main reporting currency. So the US dollar is
the natural currency for dividend determination. Dividends determined in US dollars
are translated at exchange rates prevailing two days prior to announcement and
are then declared payable in sterling by Rio Tinto plc and in Australian dollars
by Rio Tinto Limited.
Australian shareholders of Rio Tinto plc can elect to receive dividends in Australian dollars and UK shareholders of Rio Tinto Limited can elect to receive dividends in sterling. If you would like further information contact Computershare.
2004 dividends
The 2004 interim and final dividends were determined at 32 US cents and at 45 US cents per share respectively and the applicable translation rates were US$1.8245 and US$1.8796 to the pound sterling and US$0.7029 and US$0.7720 to the Australian dollar.
Final dividends of 23.94 pence per share and 58.29 Australian cents per share were paid on 8 April 2005. A final dividend of 180 US cents per ADR (each representing four shares) was paid by JP Morgan Chase Bank NA to Rio Tinto plc ADR holders and by The Bank of New York to Rio Tinto Limited ADR holders on 11 April 2005.
The tables below set out the amounts of interim, final and total cash dividends paid on each share or ADS in respect of each financial year, but before deduction of any withholding tax.
Rio Tinto Group US cents per share | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
Interim | 19.0 | 20.0 | 29.5 | 30.0 | 32.0 | |||||
Final | 38.5 | 39.0 | 30.5 | 34.0 | 45.0 | |||||
Total | 57.5 | 59.0 | 60.0 | 64.0 | 77.0 | |||||
Rio Tinto plc UK pence per share | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
Interim | 12.66 | 14.03 | 18.87 | 18.45 | 17.54 | |||||
Final | 26.21 | 27.65 | 18.60 | 18.68 | 23.94 | |||||
Total | 38.87 | 41.68 | 37.47 | 37.13 | 41.48 | |||||
Rio Tinto Limited Australian cents per share | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
Interim | 32.68 | 39.42 | 54.06 | 45.02 | 45.53 | |||||
Final | 69.76 | 75.85 | 51.87 | 44.68 | 58.29 | |||||
Total | 102.44 | 115.27 | 105.93 | 89.70 | 103.82 | |||||
Rio Tinto plc and Rio Tinto Limited US cents per ADS | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
Interim | 76 | 80 | 118 | 120 | 128 | |||||
Final | 154 | 156 | 122 | 136 | 180 | |||||
Total | 230 | 236 | 240 | 256 | 308 | |||||
Dividend
reinvestment plan (DRP)
Rio
Tinto offers shareholders a DRP which provides the opportunity to use
cash dividends to
purchase Rio Tinto shares in the market free of commission. Please see Taxation
on page 101 for an explanation of the tax consequences. The DRP is made available
only to shareholders whose names are recorded on the respective Companys
register and due to local legislation cannot be extended to shareholders
in the US, Canada and certain other countries. Please contact Computershare
for further information.
POST BALANCE SHEET EVENTS
On 9 May 2005 Rio
Tinto Limited announced the successful result of its off-market share buy-back.
A total of approximately 27.3 million shares, representing 8.7 per cent of Rio
Tinto Limiteds publicly held issued share capital (2.0 per cent of the
Rio Tinto Group), were bought back at A$36.70 per share at a cost of approximately
A$1 billion (US$780 million). The buy-back price of A$36.70 per share represented
a 14 per cent discount to the relevant volume weighted average price of Rio Tinto
Limited shares sold on the ASX over the five trading days up to and including
the closing date of the buy-back. It also represented a discount of 15.6 per
cent to the closing price for Rio Tinto Limited shares on 6 May 2005, of A$43.50.
Under a separate buy-back, Tinto Holdings Australia accepted the same A$36.70 buy-back price for a proportion of its 37.5 per cent holding of Rio Tinto Limited shares so that there was no change in the proportional shareholding in Rio Tinto Limited as a result of the buy-back. Rio Tinto Limited therefore bought back a further 16.4 million shares at a cost of approximately A$600 million (US$470 million).
Rio Tinto 2004 Form 20-F 92
Item 9. The Offer and Listing
MARKET LISTINGS AND SHARE PRICES
Rio Tinto plc
The principal market for Rio Tinto plc shares is the London Stock Exchange (LSE).
As a constituent of the Financial Times Stock Exchange 100 index (FTSE 100), Rio Tinto plc shares trade through the Stock Exchange Electronic Trading Service (SETS) system.
Central to the SETS system is the electronic order book on which an LSE member firm can post buy and sell orders, either on its own behalf or for its clients. Buy and sell orders are executed against each other automatically in strict price, then size, priority. The order book operates from 8.00 am to 4.30 pm daily. From 7.50 am to 8.00 am orders may be added to, or deleted from the book, but execution does not occur. At 8.00 am the market opens by means of an uncrossing algorithm which calculates the greatest volume of trades on the book which can be executed, then matches the orders, leaving unexecuted orders on the book at the start of trading.
All orders placed on the order book are firm and are for standard three day settlement. While the order book is vital to all market participants, orders are anonymous, with the counterparties being revealed to each other only after execution of the trade.
Use of the order book is not mandatory but all trades, regardless of size, executed over the SETS system are published immediately. The only exception to this is where a Worked Principal Agreement (WPA) is entered into for trades greater than 8 x Normal Market Size (NMS). Rio Tinto plc has an NMS of 100,000 shares. Publication of trades entered under a WPA is delayed until the earlier of 80 per cent of the risk position assumed by the member firm taking on the trade being unwound or the end of the business day.
Closing LSE share prices are published in most UK national newspapers and are also available during the day on the Rio Tinto and other websites. Share prices are also available on CEEFAX and TELETEXT and can be obtained through the Cityline service operated by the Financial Times in the UK: telephone 0906 843 3880; calls are currently charged at 60p per minute.
Rio
Tinto plc has a sponsored American Depositary Receipt (ADR) facility with JP
Morgan Chase Bank NA under a Deposit Agreement, dated 13 July 1988, as amended
on 11 June 1990, as further amended and restated on 15 February 1999 and as further
amended and restated on 18 February 2005. JP Morgan Chase Bank NA replaced The
Bank of New York following its removal as Depositary. The ADRs evidence Rio Tinto
plc American Depositary Shares (ADS), each representing four ordinary shares.
The shares are registered with the US Securities and Exchange Commission (SEC),
are listed on the New York Stock Exchange (NYSE) and are traded under the symbol RTP.
Rio Tinto plc shares are also listed on Euronext and on Deutsche Börse.
The
following table shows share prices for the period indicated, the reported high
and low middle market quotations, which represent an average of bid and asked
prices, for Rio Tinto plcs shares on the LSE based on the LSE Daily Official
List, and the highest and lowest sale prices of the Rio Tinto plc ADSs as reported
on the NYSE composite tape.
Pence per | US$ per | |||||||
Rio Tinto plc share | Rio Tinto plc ADS | |||||||
High | Low | High | Low | |||||
2000 | 1,478 | 900 | 96.56 | 55.13 | ||||
2001 | 1,475 | 930 | 84.10 | 55.00 | ||||
2002 | 1,492 | 981 | 85.93 | 62.00 | ||||
2003 | 1,543 | 1,093 | 111.35 | 71.70 | ||||
2004 | 1,574 | 1,212 | 119.39 | 86.42 | ||||
Aug 2004 | 1,434 | 1,356 | 105.77 | 100.40 | ||||
Sept 2004 | 1,496 | 1,348 | 108.65 | 98.05 | ||||
Oct 2004 | 1,562 | 1,421 | 111.68 | 103.48 | ||||
Nov 2004 | 1,548 | 1,438 | 118.47 | 105.78 | ||||
Dec 2004 | 1,540 | 1,430 | 119.39 | 111.59 | ||||
Jan 2005 | 1,690 | 1,472 | 126.25 | 111.57 | ||||
Feb 2005 | 1,835 | 1,621 | 141.57 | 120.67 | ||||
Mar 2005 | 1,851 | 1,679 | 142.80 | 124.41 | ||||
Apr 2005 | 1,735 | 1,557 | 130.75 | 118.50 | ||||
May 2005 | 1,679 | 1,570 | 126.76 | 115.80 | ||||
2003 | ||||||||
First quarter | 1,298 | 1,093 | 83.80 | 71.70 | ||||
Second quarter | 1,272 | 1,129 | 85.26 | 72.30 | ||||
Third quarter | 1,420 | 1,132 | 93.83 | 75.31 | ||||
Fourth quarter | 1,543 | 1,290 | 111.35 | 86.85 | ||||
2004 | ||||||||
First quarter | 1,574 | 1,297 | 111.50 | 95.95 | ||||
Second quarter | 1,409 | 1,212 | 105.30 | 86.42 | ||||
Third quarter | 1,496 | 1,313 | 108.65 | 97.03 | ||||
Fourth quarter | 1,562 | 1,421 | 119.39 | 103.48 | ||||
2005 | ||||||||
First quarter | 1,851 | 1,472 | 142.80 | 111.57 | ||||
Rio Tinto 2004 Form 20-F 93
As at 10 June 2005, there were 57,585 holders of record of Rio Tinto plcs shares. Of these holders, 247 had registered addresses in the US and held a total of 140,715 Rio Tinto plc shares, representing 0.01 per cent of the total number of Rio Tinto plc shares issued and outstanding as at such date. In addition, 129 million Rio Tinto plc shares were registered in the name of a custodian account in London. These shares were represented by 32.23 million Rio Tinto plc ADSs held of record by 377 ADR holders. In addition, certain accounts of record with registered addresses other than in the US hold shares, in whole or in part, beneficially for US persons.
Rio Tinto Limited
Rio Tinto Limited shares are listed on the Australian Stock Exchange (ASX) and the New Zealand Stock Exchange. The ASX is the principal trading market for Rio Tinto Limited shares. The ASX is a national stock exchange operating in the capital city of each Australian State with an automated trading system. Although not listed, Rio Tinto Limited shares are also traded in London.
Closing ASX share prices are published in most Australian newspapers and are also available during the day on the Rio Tinto and other websites.
Rio
Tinto Limited has an ADR facility with The Bank of New York under a Deposit Agreement,
dated 6 June 1989, as amended on 1 August 1989, and as amended and restated on
2 June 1992. The ADRs evidence Rio Tinto Limiteds ADSs, each representing four shares and are traded in the over the counter market under the symbol RTOLY.
The
following tables set out for the periods indicated the high and low closing sale
prices of Rio Tinto Limited shares based upon information provided by the ASX
and the highest and lowest trading prices of Rio Tinto Limited ADSs, as advised
by The Bank of New York. There is no established trading market in the US for
Rio Tinto Limiteds shares or ADSs.
A$ per | US$ per | |||||||
Rio Tinto Limited share | Rio Tinto Limited ADS | |||||||
High | Low | High | Low | |||||
2000 | 33.54 | 22.65 | 87.50 | 50.00 | ||||
2001 | 38.62 | 28.40 | 80.55 | 54.00 | ||||
2002 | 41.35 | 29.05 | 85.24 | 63.62 | ||||
2003 | 37.54 | 28.17 | 112.42 | 73.85 | ||||
2004 | 40.20 | 31.98 | 125.00 | 91.60 | ||||
Aug 2004 | 38.35 | 35.88 | 105.00 | 103.00 | ||||
Sept 2004 | 38.60 | 35.70 | 108.20 | 102.00 | ||||
Oct 2004 | 39.63 | 36.30 | 111.60 | 107.00 | ||||
Nov 2004 | 39.52 | 36.59 | 122.20 | 110.60 | ||||
Dec 2004 | 40.20 | 37.81 | 125.00 | 108.00 | ||||
Jan 2005 | 43.80 | 38.75 | 135.00 | 118.80 | ||||
Feb 2005 | 47.28 | 42.36 | 152.00 | 129.25 | ||||
Mar 2005 | 47.93 | 44.46 | 153.00 | 137.00 | ||||
Apr 2005 | 45.90 | 41.40 | 142.50 | 129.45 | ||||
May 2005 | 44.91 | 41.40 | 139.90 | 127.50 | ||||
2003 | ||||||||
First quarter | 35.25 | 30.69 | 83.22 | 73.85 | ||||
Second quarter | 33.26 | 29.21 | 84.00 | 74.53 | ||||
Third quarter | 35.31 | 28.17 | 94.00 | 76.55 | ||||
Fourth quarter | 37.54 | 32.32 | 112.42 | 88.22 | ||||
2004 | ||||||||
First quarter | 38.50 | 33.80 | 115.00 | 99.45 | ||||
Second quarter | 36.18 | 31.98 | 108.00 | 91.60 | ||||
Third quarter | 38.60 | 35.56 | 108.20 | 102.00 | ||||
Fourth quarter | 40.20 | 36.30 | 125.00 | 107.00 | ||||
2005 | ||||||||
First quarter | 47.93 | 38.75 | 153.00 | 118.80 | ||||
As at 10 June 2005, a total of 330,380 Rio Tinto Limited shares were held of record by 219 persons with registered addresses in the US, which represented approximately 0.70 per cent of the total number of Rio Tinto Limited shares issued and outstanding as of such date. In addition, an aggregate of 269,413 Rio Tinto Limited ADSs were outstanding, representing 1,077,652 Rio Tinto Limited shares, and were held of record by 28 persons with registered addresses in the US, which represented less than one per cent of the total number of Rio Tinto Limited shares issued and outstanding. In addition, nominee accounts of record with registered addresses other than in the US may hold Rio Tinto Limited shares, in whole or in part, beneficially for US persons.
ADR holders
ADR holders may instruct either JPMorgan Chase Bank NA or The Bank of New York as appropriate as to how the shares represented by their ADRs should be voted.
Rio Tinto 2004 Form 20-F 94
Registered holders of ADRs will have the Annual review and interim reports mailed to them at their record address. Brokers or financial institutions, which hold ADRs for shareholder clients, are responsible for forwarding shareholder information to their clients and will be provided with copies of the Annual review and interim reports for this purpose.
Rio
Tinto is subject to the US Securities and Exchange Commission (SEC) reporting
requirements for foreign companies. This Form 20-F corresponds with the Form-10K
which US public companies are required to file with the SEC. Rio Tintos
Form 20-F and other filings can be viewed on the SEC web site at www.sec.gov.
Investment warning
Past performance of shares is not necessarily a guide to future performance. The value of investments and any income from them is not guaranteed and can fall as well as rise depending on market movements. You may not get back the original amount invested.
Item 10. Additional Information
DUAL LISTED COMPANIES STRUCTURE
On 20 December 1995, Rio Tinto shareholders approved the terms of the dual listed companies merger (the DLC merger) which was designed to place the shareholders of both Companies in substantially the same position as if they held shares in a single enterprise owning all of the assets of both Companies. As a condition of its approval of the DLC merger, the Australian Government required Rio Tinto plc to reduce its shareholding in Rio Tinto Limited to 39 per cent by the end of 2005. The current holding is approximately 37.6 per cent.
Following the approval of the DLC merger, both Companies entered into a DLC Merger Sharing Agreement (the Sharing Agreement) through which each Company agreed:
• | to ensure that the businesses of Rio Tinto plc and Rio Tinto Limited are managed on a unified basis, |
• | to ensure that the boards of directors of each Company is the same, and |
• | to give effect to certain arrangements designed to provide shareholders of each Company with a common economic interest in the combined enterprise. |
Dividend rights
The Sharing Agreement provides for dividends paid on Rio Tinto plc and Rio Tinto Limited shares to be equalised on a net cash basis, that is without taking into account any associated tax credits. Dividends are determined in US dollars and are then, except for ADR holders, translated and paid in sterling and Australian dollars. The Companies are also required to announce and pay their dividends and other distributions as close in time to each other as possible.
In the unlikely event that one Company did not have sufficient distributable reserves to pay the equalised dividend or the equalised capital distribution, it would be entitled to receive a top up payment from the other Company. The top up payment could be made as a dividend on the DLC Dividend Share, on the Equalisation Share if on issue or by way of a contractual payment.
If the payment of an equalised dividend would contravene the law applicable to one of the Companies, then they may depart from the Equalisation Ratio. However, should such a departure occur then the relevant Company will put aside reserves to be held for payment on the relevant shares at a later date.
Rio Tinto shareholders have no direct rights to enforce the dividend equalisation provisions of the Sharing Agreement.
Rio Tinto 2004 Form 20-F 95
The DLC Dividend Share can also be utilised to provide the Group with flexibility for internal funds management by allowing dividends to be paid between the two parts of the Group. Such dividend payments are of no economic significance to the shareholders of either Company, as they will have no effect on the Group's overall resources.
Voting rights
In principle, the Sharing Agreement provides for the public shareholders of Rio Tinto plc and Rio Tinto Limited to vote as a joint electorate on all matters which affect shareholders of both Companies in similar ways. These are referred to as Joint Decisions. Such Joint Decisions include the creation of new classes of share capital, the appointment or removal of directors and auditors and the receiving of annual financial statements. Joint Decisions are voted on a poll.
The Sharing Agreement also provides for the protection of the public shareholders of each Company by treating the shares issued by each Company as if they were separate classes of shares issued by a single company. So decisions that do not affect the shareholders of both Companies equally require the separate approval of the shareholders of both Companies. Matters requiring this approval procedure are referred to as Class Rights Actions and are voted on a poll.
Thus, the interests of the shareholders of each Company are protected against decisions which affect them and the shareholders in the other company differently, by requiring their separate approval. For example, fundamental elements of the DLC merger cannot be changed unless approved by shareholders under the Class Rights Action approval procedure.
Exceptions to these principles can arise in situations such as where legislation requires the separate approval of a decision by the appropriate majority of shareholders in one Company and where approval of the matter by shareholders of the other Company is not required.
Where a matter has been expressly categorised as either a Joint Decision or a Class Rights Action, the directors do not have the power to change that categorisation. If a matter falls within both categories, it is treated as a Class Rights Action. In addition, the directors can determine that matters not expressly listed in either category should be put to shareholders for their approval under either procedure.
To facilitate the joint voting arrangements each Company has entered into shareholder voting agreements. Each Company has issued a Special Voting Share to a special purpose company held in trust by a common Trustee.
Rio Tinto plc has issued its Special Voting Share (RTP Special Voting Share) to RTL Shareholder SVC and Rio Tinto Limited has issued its Special Voting Share (RTL Special Voting Share) to RTP Shareholder SVC. The total number of votes cast on Joint Decisions by the public shareholders of one Company are voted at the parallel meeting of the other Company. The role of these special purpose companies in achieving this is described below.
In
exceptional circumstances, certain public shareholders of the Companies can be
excluded from voting at the respective Companys general meetings because
they have acquired shares in one Company in excess of a given threshold without
making an offer for all the shares in the other Company. If this should occur,
the votes cast by these excluded shareholders will be disregarded.
Following
the Companies general meetings the overall results of the voting on Joint
Decisions and the results of voting on separate decisions will be announced to
the stock exchanges, published on the Rio Tinto website and advertised in the
Financial Times and Australian newspapers.
Rio Tinto plc
At a Rio Tinto
plc shareholders meeting at which a Joint Decision will be considered, each Rio Tinto plc share will carry one vote and the holder of its Special Voting Share will have one vote for each vote cast by the public shareholders of Rio Tinto Limited. The holder of the Special Voting Share is required to vote strictly and only in accordance with the votes cast by public shareholders for and against the equivalent resolution at the parallel Rio Tinto Limited shareholders meeting.
The holders of Rio Tinto Limited ordinary shares do not actually hold any voting shares in Rio Tinto plc by virtue of their holding in Rio Tinto Limited and cannot enforce the voting arrangements relating to the Special Voting Share.
Rio Tinto Limited
At a Rio Tinto
Limited shareholders meeting at which a Joint Decision will be considered, each Rio Tinto Limited share will carry one vote and, together with the Rio Tinto Limited ordinary shares held by Tinto Holdings Australia, the holder of its Special Voting Share will carry one vote for each vote cast by the public shareholders of Rio Tinto plc in their parallel meeting. Tinto Holdings Australia and the holder of the Special Voting Share are required to vote strictly, and only, in accordance with the votes cast for and against the equivalent resolution at the parallel Rio Tinto plc shareholders meeting.
The holders of Rio Tinto plc ordinary shares do not actually hold any voting shares in Rio Tinto Limited by virtue of their holding in Rio Tinto plc and cannot enforce the voting arrangements relating to the Special Voting Share.
Rio Tinto 2004 Form 20-F 96
Capital distribution rights
If either of the Companies goes into liquidation, the Sharing Agreement provides for a valuation to be made of the surplus assets of both Companies. If the surplus assets available for distribution by one Company on each of the shares held by its public shareholders exceed the surplus assets available for distribution by the other Company on each of the shares held by its public shareholders, then an equalising payment between the two Companies shall be made, to the extent permitted by applicable law, such that the amount available for distribution on each share held by public shareholders of each Company conforms to the Equalisation Ratio. The objective is to ensure that the public shareholders of both Companies have equivalent rights to the assets of the combined Group on a per share basis, taking account of the Equalisation Ratio.
The Sharing Agreement does not grant any enforceable rights to the shareholders of either Company upon liquidation of a Company.
Limitations on ownership of shares and merger obligations
The laws and regulations of the UK and Australia impose certain restrictions and obligations on persons who control interests in public quoted companies in excess of certain thresholds that, under certain circumstances, include obligations to make a public offer for all of the outstanding issued shares of the relevant company. The threshold applicable to Rio Tinto plc under UK law and regulations is 30 per cent and to Rio Tinto Limited under Australian laws and regulations is 20 per cent.
As
part of the DLC merger, the memorandum and articles of association of Rio Tinto
plc and the constitution of Rio Tinto Limited were amended with the intention
of extending these laws and regulations to the combined enterprise and, in particular,
to ensure that a person cannot exercise control over one Company without having
made offers to the public shareholders of both Companies. It is consistent with
the creation of the single economic enterprise and the equal treatment of the
two sets of shareholders, that these laws and regulations should operate in this
way. The articles of association of Rio Tinto plc and the constitution of Rio
Tinto Limited impose restrictions on any person who controls, directly or indirectly,
20 per cent or more of the votes on a Joint Decision. If, however, such a person
only has an interest in Rio Tinto Limited or Rio Tinto plc, then the restrictions
will only apply if they control, directly or indirectly, 30 per cent or more
of the votes at that Companys general meetings.
If one of the thresholds specified above is breached then, subject to certain limited exceptions and notification by the relevant Company, such persons
• | may not attend or vote at general meetings of the relevant Company; |
• | may not receive dividends or other distributions from the relevant Company; and |
• | may be divested of their interest by the directors of the relevant Company. |
Guarantees
In December 1995, each Company entered into a Deed Poll Guarantee in favour of creditors of the other Company. Pursuant to the Deed Poll Guarantees, each Company guaranteed the contractual obligations of the other Company and the obligations of other persons which are guaranteed by the other Company, subject to certain limited exceptions. Beneficiaries under the Deed Poll Guarantees may make demand upon the guarantor thereunder without first having recourse to the Company or persons whose obligations are being guaranteed. The obligations of the guarantor under each Deed Poll Guarantee expire upon termination of the Sharing Agreement and under other limited circumstances, but only in respect of obligations arising after such termination and, in the case of other limited circumstances, the publication and expiry of due notice. The shareholders of the Companies cannot enforce the provision of the Deed Poll Guarantees.
MEMORANDUM AND ARTICLES OF ASSOCIATION
Rio Tinto plc adopted
new Articles of Association by Special Resolution passed on 11 April 2002 and
amended on 14 April 2005; and Rio Tinto Limited amended its Constitution by Special
Resolution on 18 April 2002 and on 29 April 2005. The resolutions passed during
April 2005 were in consequence to a growing market practice in Australia for
companies to undertake off market tender buy backs where the buy back price is
below the prevailing market prices. Subject to obtaining regulatory relief, such
buy backs do not require shareholder approval. The effect of the resolutions
was to make it clear that, provided a buy back complied with all applicable laws,
it would not require additional shareholder approval for purposes of the dual
listed companies (DLC).
Rio Tinto 2004 Form 20-F 97
Introduction
As explained on pages 95 to 97 under the terms of the DLC merger the shareholders of Rio Tinto plc and of Rio Tinto Limited entered into certain contractual arrangements which are designed to place the shareholders of both Companies in substantially the same position as if they held shares in a single enterprise which owned all of the assets of both Companies. Generally and as far as is permitted by the UK Companies Act and the Australian Corporations Law this principle is reflected in the Memorandum and Articles of Association of Rio Tinto plc and in the Constitution of Rio Tinto Limited. The summaries below include descriptions of material rights of the shareholders of both Rio Tinto plc and Rio Tinto Limited. Unless stated otherwise the Memorandum and Articles of Association of and Constitution are identical.
Rio
Tinto plc is incorporated under the name Rio Tinto plc and is registered in England and Wales with registered number 719885 and Rio Tinto Limited is incorporated under the name Rio Tinto Limited and
is registered in Australia with ACN Number 004458404.
No holder of shares, which may be held in either certificated or uncertificated form, will be required to make any additional contributions of capital.
Objects
The objects of Rio Tinto plc are set out in the fourth clause of its Memorandum of Association and the objects of Rio Tinto Limited are set out in the second clause of its Constitution. Included in these objects is the right for each Company to enter into, with one another, operate and carry into effect an Agreement known as the DLC Merger Sharing Agreement and a Deed Poll Guarantee.
Other objects of Rio Tinto plc include provisions: | |
• | to carry on as an Investment Holding Company; |
• | to subscribe for, sell, exchange or dispose of any type of security or investment; |
• | to purchase any estate or interest in property or assets; |
• | to borrow and raise money to secure or discharge any debt or obligation of or binding on the Company; |
• | to draw, make or deal in negotiable or transferable instruments; |
• | to amalgamate with and co-operate with or assist or subsidise any company, firm or person and to purchase or otherwise acquire or undertake all or any part of the business property or liabilities of any person, body or company carrying on any business which this Company is authorised to carry on; |
• | to promote the Company; |
• | to lend money and guarantee contracts or obligations of the Company and to give all kinds of indemnities; |
• | to sell, lease, grant licences and other rights over any part of the Company; |
• | to procure the registration of the Company outside England; |
• | to subscribe or guarantee money to any national, charitable, benevolent, public, general or exhibition which may further the objects of the Company or the interest of its members; |
• | to grant pensions or gratuities to employees, ex-employees, officers and ex-officers; |
• | to establish any scheme or trust which may benefit employees; |
• | to lend money to employees to purchase Company shares; |
• | to purchase and maintain insurance for employees and to carry on the objects of the Company in any part of the world either as principals, agents, contractors, trustees or otherwise. |
Other objects of Rio Tinto Limited include the powers: | |
• | to prospect for, explore, quarry, develop, excavate, dredge for, open, work, win, purchase or otherwise obtain all minerals, metals and substances; |
• | to carry on business as proprietors of and to purchase, take on, lease or in exchange or otherwise acquire and control mineral and other properties, lands and hereditaments of any tenure, mines and other rights or options thereon; |
• | to raise, win, get, quarry, crush, smelt, calcine, refine, dress, amalgamate, manipulate and otherwise treat, prepare, sell and deal in ores, metals and other products of mines; |
• | to carry on business as ship owners, railway proprietors, motor car, lorry and coach proprietors, and garage proprietors, carriers and hauliers, bankers, storekeepers, wharfingers, cartage, storage, building and general contractors and to buy and sell or otherwise deal in real or personal property of any kind; |
• | to carry on business as manufacturers of and dealers in and exporters and importers of goods and merchandise of all kinds and merchants generally; and |
• | to guarantee the payment of premiums on any sinking fund or endowment policy or policies taken out by any company having objects similar to the objects of the Company. |
Directors
Under Rio Tinto plc's Articles of Association a director may not
vote in respect of any proposal in which he or any other person connected with
him, has any material interest other than by virtue of his interests in shares
or debentures or other securities of or otherwise in or through the Company,
except where resolutions:
(a) | indemnify him or a third party in respect of obligations incurred by the director on behalf of, or for the benefit of, the Company, or in respect of obligations of the Company, for which the director has assumed responsibility under an indemnity, security or guarantee; |
(b) | relate to an offer of securities in which he may be interested as a holder of securities or as an underwriter; |
Rio Tinto 2004 Form 20-F 98
(c) | concern another body corporate in which the director is beneficially interested in less than one per cent of the issued shares of any class of shares of such a body corporate; |
(d) | relate to an employee benefit in which the director will share equally with other employees; and |
(e) | relate to liability insurance that the Company is empowered to purchase for the benefit of directors of the Company in respect of actions undertaken as directors (or officers) of the Company. |
Rights attaching to shares
Under English law, dividends on shares may only be paid out of profits available for distribution, as determined in accordance with generally accepted accounting principles and by the relevant law. Shareholders are entitled to receive such dividends as may be declared by the directors. The directors may also pay shareholders such interim dividends as appear to them to be justified by the financial position of the Group.
Any Rio Tinto plc dividend unclaimed after 12 years from the date the dividend was declared, or became due for payment, will be forfeited and returned to the Company. Any Rio Tinto Limited dividend unclaimed may be invested or otherwise made use of by the board for the benefit of the Company until claimed or otherwise disposed of according to Australian law.
Voting rights
Voting at any general meeting of shareholders is by a show of hands unless on a poll, being a written vote, that has been duly demanded. On a show of hands, every shareholder who is present in person or by proxy at a general meeting has one vote regardless of the number of shares held. On a poll, every shareholder who is present in person or by proxy has one vote for every ordinary share or share for which he or she is the holder and, in the case of Joint Decisions, the holder of the Special Voting Share has one vote for each vote cast by the public shareholders at the parallel meeting of shareholders. The voting rights attached to the Special Voting Share have been set out on page 96. A poll may be demanded by any of the following:
• | the chairman of the meeting; |
• | at least five shareholders entitled to vote at the meeting; |
• | any shareholder or shareholders representing in the aggregate not less than one tenth (Rio Tinto plc) or one twentieth (Rio Tinto Limited) of the total voting rights of all shareholders entitled to vote at the meeting; |
• | any shareholder or shareholders holding shares conferring a right to vote at the meeting on which there have been paid-up sums in the aggregate equal to not less than one tenth of the total sum paid up on all the shares conferring that right; or |
• | the holder of the Special Voting Share. |
Rio Tinto 2004 Form 20-F 99
• | an ordinary resolution, which includes resolutions for the election of directors, the receiving of financial statements, the cumulative annual payment of dividends, the appointment of auditors, the increase of authorised share capital or the grant of authority to allot shares; |
• | a special resolution, which includes resolutions amending the Companys Memorandum and Articles of Association, disapplying statutory pre-emption rights or changing the Companys name; and |
• | an extraordinary resolution, which includes resolutions modifying the rights of any class of the Companys shares at a meeting of the holders of such class or relating to certain matters concerning the Companys winding up. |
Variation of Rights
If,
at any time, the share capital is divided into different classes of shares, the
rights attached to any class may be varied, subject to the provisions of the
relevant legislation, with the consent in writing of holders of three fourths
in value of the shares of that class or upon the adoption of an extraordinary
resolution passed at a separate meeting of the holders of the shares of that
class. At every such separate meeting, all of the provision of the Articles of
Association and Constitution relating to proceedings at a general meeting apply,
except that the quorum is to be the number of persons (which must be two or more)
who hold or represent by proxy not less than one third in nominal value of the
issued shares of the class.
The
DLC Merger Sharing Agreement provides for the protection of the public shareholders
of both Companies and so any variations of rights would be dealt with as Class Rights Actions that
require the separate approval of the shareholders of both Companies.
Rights
in a Winding-up
Except as the shareholders have agreed or may otherwise agree, upon a winding up, the balance of assets available for distribution:
• | after the payment of all creditors including certain preferential creditors, whether statutorily preferred creditors or normal creditors; and |
• | subject to any special rights attaching to any class of shares; |
Limitations
on Voting and Shareholding
There are no limitations imposed by either law or Rio Tinto plc's Memorandum or Articles of Association or Rio Tinto Limited's Constitution on the right of non-residents or foreign persons to hold or vote the ordinary shares or ADSs, other than the limitations that would generally apply to all shareholders and those that arise from the DLC merger.
There
are no restrictions under Rio Tinto plcs Memorandum and Articles of Association or under English law that limit the right of non resident or foreign owners to hold or vote its shares. Nor are there any restrictions under Rio Tinto Limiteds
constitution or under Australian law that limit the right of non residents to
hold or vote its shares, other than under the Foreign Acquisitions and Takeovers
Act 1975, see Limitations on ownership of shares and merger obligations on page
97 for details. A description of the change in control provisions triggered by
significant share ownership is also set out on page 97.
Rio Tinto 2004 Form 20-F 100
TAXATION
UK resident individuals
Taxation
of dividends
Dividends carry a tax credit equal to one ninth of the dividend. Individuals who are not liable to income tax at the higher rate will have no further tax to pay. Higher rate taxpayers are liable to tax on UK dividends at 32.5 per cent which, after taking account of the tax credit, produces a further tax liability of 25 per cent of the dividend received.
Reclaiming
income tax on dividends
Tax credits on dividends are no longer recoverable. However, tax credits on dividends paid into Personal Equity Plans or Individual Savings Accounts will be refunded on dividends paid prior to 6 April 2004.
Dividend
reinvestment plan (DRP)
The taxation effect of participation in the DRP will depend on individual circumstances. Shareholders will generally be liable for tax on dividends reinvested in the DRP on the same basis as if they had received the cash and arranged the investment. The dividend should, therefore, be included in the annual tax return in the normal way.
The shares acquired should be added to shareholdings at the date and at the net cost shown on the share purchase advice. The actual cost of the shares, for Rio Tinto plc shareholders including the stamp duty/stamp duty reserve tax, will form the base cost for capital gains tax purposes.
Capital
gains tax
Shareholders who have any queries on capital gains tax issues are advised to consult their financial adviser.
A leaflet which includes details of relevant events since 31 March 1982 and provides adjusted values for Rio Tinto plc securities as at that date is available from the company secretary.
Australian resident individuals
Taxation
of dividends
The basis of the Australian dividend imputation system is that when Australian resident shareholders receive dividends from Rio Tinto Limited, they may be entitled to a credit for the tax paid by the Group in respect of that income, depending on the tax status of the shareholder.
The
application of the system results in tax paid by the Group being allocated to
shareholders by way of franking credits attaching to the dividends they receive.
Such dividends are known as franked dividends. A dividend may be partly or fully
franked. The current Rio Tinto Limited dividend is fully franked and the franking
credits attached to the dividend are shown in the distribution statement provided
to shareholders.
The
extent to which a company can frank a dividend depends on the credit balance
in its franking account. Credits to this account can arise in a number of ways,
including when a company pays company tax or receives a franked dividend from
another company. The dividend is required to be included in a resident individual
shareholders assessable income. In addition, an amount equal to the franking
credit attached to the franked dividend is also included in the assessable
income of the resident individual, who may then be entitled to a rebate of
tax equal
to the franking credit amount included in their income. Should the franking
credits exceed the tax due, the excess is refunded to the resident individual.
The effect of the dividend imputation system on non resident shareholders is that, to the extent that the dividend is franked, no Australian tax will be payable and there is an exemption from dividend withholding tax.
A
withholding tax is normally levied at the rate of 15 per cent when unfranked
dividends are paid to residents of countries with which Australia has a taxation
treaty. Most Western countries have a taxation treaty with Australia. A rate
of 30 per cent applies to countries where there is no taxation treaty.
Since
1988, all dividends paid by Rio Tinto Limited have been fully franked. It is
the Groups policy to pay fully franked dividends whenever possible.
Dividend
reinvestment plan (DRP)
Shareholders
will generally be liable for tax on dividends reinvested in the DRP on the same
basis as if they had received the cash and arranged the investment. The dividend
should therefore be included in the annual tax return in the normal way.
The shares acquired should be added to the shareholding at the date of acquisition at the actual cost of the shares, which is the amount of the dividend applied by the shareholder to acquire shares and any incidental costs associated with the acquisition, including stamp duty, will form part of the cost base or reduced cost base of the shares for capital gains tax purposes.
Capital
gains tax
The
Australian capital gains tax legislation is complex. Shareholders are advised
to seek the advice of an independent taxation consultant on any possible capital
gains tax exposure.
If shareholders have acquired shares after 19 September 1985 they may be subject to capital gains tax on the disposal of those shares.
Rio Tinto 2004 Form 20-F 101
US
resident individuals
The
following is a summary of the principal UK tax, Australian tax and US Federal
income tax consequences of the ownership of Rio Tinto plc ADSs, Rio Tinto plc
shares, Rio Tinto Limited ADSs and Rio Tinto Limited shares (the Groups ADSs and Shares)
by a US holder as defined below. It is not intended to be a comprehensive description
of all the tax considerations that are relevant to all classes of taxpayer.
It
is based in part on representations by the Groups depositary banks as
Depositaries for the ADRs evidencing the ADSs and assumes that each obligation
in the deposit
agreements will be performed in accordance with its terms.
You
are a US holder if you are a beneficial owner of the Groups
ADSs and Shares and you are:
• | a citizen or resident of the United States; |
• | a corporation created or organised under the laws of the United States or any of its political subdivision; |
• | an estate whose income is subject to United States federal income tax regardless of its source; or |
• | a trust if a United States court can exercise primary supervision over the trusts administration and one or more United States persons are authorised to control all substantial decisions of the trust. |
This section does not apply to you if you are a member of a special class of holders subject to special rules, including: | |
• | a dealer in securities; |
• | a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings; |
• | a tax-exempt organisation; |
• | a life insurance company; |
• | a person liable for alternative minimum tax; |
• | a person that actually or constructively owns 10% or more of our voting stock; |
• | a person that holds the Groups ADSs and Shares as a part of a straddle or a hedging or conversion transaction; or |
• | a person whose functional currency is not the US dollar. |
This section
is based on the Internal Revenue Code of 1986, as amended, its legislative
history, existing and proposed regulations, published rulings and court decisions,
and on the convention between the United States of America and United Kingdom,
that was ratified and came in force on 31 March 2003, and the convention
between the United States of America and Australia (the Conventions) which may affect the tax consequences of the ownership of the Groups
ADSs and Shares. These laws are subject to change, possibly on a retroactive
basis.
US
holders should consult their tax advisers regarding United States federal,
state and local and other tax consequences of owning and disposing of the
Groups ADSs and Shares in their particular circumstances.
UK taxation
of shareholdings in Rio Tinto plc
Taxation of dividends
US holders do not suffer deductions of UK withholding tax on dividends paid by Rio Tinto plc. Dividends carry a tax credit equal to one ninth of the net dividend, or ten per cent of the net dividend plus the tax credit. The tax credit is not repayable to US holders.
Capital
gains
A US holder will not normally be liable to UK tax on capital gains realised on the disposition of Rio Tinto plc ADSs or shares unless the holder carries on a trade, profession or vocation in the UK through a permanent establishment in the UK and the ADSs or shares have been used for the purposes of the trade, profession or vocation or are acquired, held or used for the purposes of such a permanent establishment.
Inheritance
tax
Under
the UK Estate Tax Treaty, a US holder, who is domiciled in the US and is not
a national of the UK, will not be subject to UK inheritance tax upon the holders death or on a transfer during the holders
lifetime unless the ADSs and shares form part of the business property of a permanent
establishment in the UK or pertain to a fixed base situated in the UK used in
the performance of independent personal services. In the exceptional case where
ADSs or shares are subject both to UK inheritance tax and to US Federal gift
or estate tax, the UK Estate Tax Treaty generally provides for tax payments to
be relieved in accordance with the priority rules set out in the Treaty.
Stamp
duty and stamp duty reserve tax
Transfers
of Rio Tinto plc ADSs will not be subject to UK stamp duty provided that the
transfer instrument is not executed in, and at all times remains outside, the
UK.
Purchases
of Rio Tinto plc shares are subject either to stamp duty at a rate of 50 pence
per £100 or to stamp duty reserve tax (SDRT) at a rate of 0.5 per cent.
Conversions of Rio Tinto plc shares into Rio Tinto plc ADSs will be subject to
additional SDRT at a rate of 1.5 per cent on all transfers to the Depositary
or its nominee.
Australian
taxation of shareholdings in Rio Tinto Limited
Taxation of dividends
US holders are not normally liable to Australian withholding tax on dividends paid by Rio Tinto Limited because such dividends are normally fully franked under the Australian dividend imputation system, meaning that they are paid out of income that has borne Australian income tax. Any unfranked dividends would suffer Australian withholding tax which under the Australian income tax convention is limited to 15 per cent of the gross dividend.
Rio Tinto 2004 Form 20-F 102
Capital gains
US holders are not normally subject to any Australian tax on the disposal of Rio Tinto Limited ADSs or shares unless they have been used in carrying on a trade or business wholly or partly through a permanent establishment in Australia, or the gain is in the nature of income sourced in Australia.
Gift, estate and inheritance tax
Australia does not impose any gift, estate or inheritance taxes in relation to gifts of shares or upon the death of a shareholder.
Stamp duty
An issue or transfer of Rio Tinto Limited ADSs or a transfer of Rio Tinto Limited shares does not require the payment of Australian stamp duty.
US Federal income tax
Dividends
Dividends on the
Groups ADSs and shares will generally be treated as dividend income for
purposes of US Federal income tax. In the case of Rio Tinto Limited, the income
will be the net dividend plus, in the event of a dividend not being fully franked,
the withholding tax.
Dividend
income will not be eligible for the dividends received deduction allowed to US
corporations. Dividends paid by Qualified Foreign Corporations (QFCs) are subject to a maximum rate of income tax of 15 per cent. This maximum rate applies to taxable years beginning after 31 December 2002 and ending before 1 January 2009. Both Rio Tinto plc and Rio Tinto Limited expect to be QFCs throughout this period. To qualify for the 15 per cent maximum income tax rate on dividends the stock of the QFC must be held for more than 60 days during the 121 day period beginning on the date which is 60 days before the ex-dividend date.
EXCHANGE CONTROLS
Rio Tinto plc
At present, there
are no UK foreign exchange controls or other restrictions on the export or import
of capital or on the payment of dividends to non resident holders of Rio Tinto
plc shares or the conduct of Rio Tinto plcs operations. The Bank of England,
however, upholds international law and maintains financial sanctions against
specified terrorist organisations and specific targets related to Myanmar, Federal
Republic of Yugoslavia and Serbia, Iraq, Liberia and Zimbabwe.
There
are no restrictions under Rio Tinto plcs memorandum and articles of association or under English law that limit the right of non resident or foreign owners to hold or vote Rio Tinto plcs
shares.
Rio Tinto Limited
Under existing Australian legislation, the Reserve Bank of Australia does not restrict the import and export of funds and no permission is required by Rio Tinto Limited for the movement of funds into or out of Australia, except that restrictions apply to certain transactions relating to the following:
• | supporters of the former government of the Federal Republic of Yugoslavia; and |
• | ministers and senior officials of the Government of Zimbabwe. |
Rio Tinto 2004 Form 20-F 103
In the context of the Takeovers Act, a foreign person is: | |
• | an individual not ordinarily resident in Australia; and |
• | any corporation or trust in which there is a substantial foreign interest. |
DOCUMENTS ON DISPLAY
Rio Tinto plc and
Rio Tinto Limited file reports and other information with the SEC. You may read
without charge and copy at prescribed rates any document filed at the public
reference facilities of the SECs principal office at 450 Fifth Street,
NW, Washington, D.C. 20549, United States of America. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
facilities.
Item
11. Quantitative and Qualitative Disclosures about
Market Risk
The Rio Tinto Group's policies for currency, interest rate and commodity price exposures, and the use of derivative financial instruments are discussed in the financial review on pages 37 to 40. In addition, the Group's quantitive and qualitative disclosures about market risk are set out in Note 28 on pages A-44 to A-49. The discussion regarding market risk contains certain forward looking statements and attention is drawn to the Cautionary statement on page 10.
Item 12. Description of Securities
other than Equity Securities
Not applicable.
PART II
Item
13. Defaults, Dividend Arrearages and Delinquencies
There are no defaults, dividend arrearages or delinquencies.
Item
14. Material Modifications to the Rights of Security
Holders and Use of Proceeds
There are no material modifications to the rights of security holders.
Item
15. Controls and Procedures
In designing and evaluating the disclosure controls and procedures of each of Rio Tinto plc and Rio Tinto Limited, the common management of each of Rio Tinto plc and Rio Tinto Limited, including their common chief executive and finance director, recognised that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the management of each of Rio Tinto plc and Rio Tinto Limited necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within each of Rio Tinto plc and Rio Tinto Limited have been detected.
The common management of each of Rio Tinto plc and Rio Tinto Limited with the participation of their common chief executive and finance director have evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the period covered by the Annual report. Based on that evaluation, the common chief executive and finance director of each of Rio Tinto plc and Rio Tinto Limited have concluded that these disclosure controls and procedures are effective at the reasonable assurance level.
Rio Tinto 2004 Form 20-F 104
There were no significant changes in the internal controls or in other factors that could significantly affect internal controls of each of Rio Tinto plc and Rio Tinto Limited subsequent to the date of their most recent evaluation.
Item
16A. Audit Committee Financial Expert
See Corporate governance on page 87 for information regarding the identification of the Audit committee financial expert.
Item 16B. Code of Ethics
The way we work,
Rio Tintos statement of business practice, summarises the Groups
principles and policies for all directors and employees.
Since the first edition of The way we work in
1998, expectations of corporate responsibilities have increased. Although the
Groups values and objectives are unchanged its responses have evolved and
have been further developed and reflected in a revised 2003 edition.
The way we work is supported by supplementary guidance documents and applies to all Rio Tinto managed businesses.
The way we work and
the supplementary guidance documents are discussed more fully under Corporate
governance on page 85. They can be viewed on Rio Tintos website: www.riotinto.com
and will be provided to any person without charge upon written request received
by one the company secretaries.
Item
16C. Principal Accountant Fees and Services
Auditors remuneration
including audit fees, audit related fees, further assurance services, taxation
services and all other fees have been dealt with in Note 37 to the consolidated
financial statements on page A-56.
Rio
Tinto has adopted policies designed to uphold the independence of the Groups principal auditors by prohibiting their engagement to provide a range of accounting and other professional services that might compromise their appointment as independent auditors. The engagement of the Groups principal auditors to provide statutory audit services, certain other assurance services, tax services and certain limited other services are pre approved. The engagement of the Groups
principal auditors to provide other permitted services are individually subject
to the specific approval of the Audit committee or its chairman.
Prior
to the commencement of each financial year the Groups Finance director and its principal auditors submit to the Audit committee a schedule of the types of services that are expected to be performed during the following year for its approval. The Audit committee may impose a US dollar limit on the total value of other permitted services that can be provided. Any non audit service provided by the Groups principal auditors, where the expected fee exceeds a pre determined level, must be subject to the Groups normal tender procedures. However, in exceptional circumstances the Finance director is authorised to engage the Groups
principal auditors to provide such services without going to tender, but if the
fees are expected to exceed $250,000 then the chairman of the audit committee
must approve the engagement.
The
Audit committee adopted policies for the pre approval of permitted services provided
by the Groups principal auditors during January 2003 which were further
refined and adopted during September 2003. All of the engagements for services
provided by the Group's principal auditors since the adoption of these policies
were either within the pre approval policies or approved by the Audit committee.
Item
16D. Exemptions from the Listing Standards for Audit
Committees
Not applicable.
Item
16E. Purchases of Equity Securities by the Issuer
and Affiliated Purchasers
Not applicable.
PART III
Item
17. Financial Statements
Not applicable.
Item
18. Financial Statements
The 2004 financial
statements are included as the A pages to this annual report.
Rio Tinto 2004 Form 20-F 105
Item 19. Exhibits
Exhibits marked * have been filed as exhibits to this annual report on Form 20-F and other exhibits have been incorporated by reference as indicated.
Index
Exhibit
Number
Description
1.1* | Memorandum and Articles of Association of Rio Tinto plc (adopted by special resolution passed on 11 April 2002 and amended on 14 April 2005) |
1.2* | Constitution of Rio Tinto Limited (ACN 004 458 404) (as adopted by special resolution passed on 24 May 2000 and amended by special resolution on 18 April 2002 and 29 April 2005) |
3.1 | DLC Merger Implementation Agreement, dated 3 November 1995 between CRA Limited and The RTZ Corporation PLC relating to the implementation of the DLC merger (incorporated by reference to Exhibit 2.1 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 1995, File No. 1-10533) |
3.2* | DLC Merger Sharing Agreement, dated 21 December 1995 and amended on 29 April 2005 between CRA Limited and The RTZ Corporation PLC relating to the ongoing relationship between CRA and RTZ following the DLC merger |
3.3 | RTZ Shareholder Voting Agreement, dated 21 December 1995 between The RTZ Corporation PLC, RTZ Shareholder SVC Pty. Limited, CRA Limited, R.T.Z. Australian Holdings Limited and The Law Debenture Trust Corporation p.l.c. (incorporated by reference to Exhibit 2.3 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 1995, File No. 1-10533) |
3.4 | CRA Shareholder Voting Agreement, dated 21 December 1995 between CRA Limited, CRA Shareholder SVC Limited, The RTZ Corporation PLC and The Law Debenture Trust Corporation p.l.c., relating to the RTZ Special Voting Share (incorporated by reference to Exhibit 2.4 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 1995, File No. 1-10533) |
4.01 | Letter dated 1 January 1992 to Mr R Adams about supplementary pension arrangements (incorporated by reference to Exhibit 4.23 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
4.02 | Supplementary letter dated 1 January 1992 to Mr R Adams about pension arrangements (incorporated by reference to Exhibit 4.24 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
4.03 | Letter dated 22 November 1994 to Mr R Adams about supplementary pension arrangements (incorporated by reference to Exhibit 4.29 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
4.04 | Letter dated 20 January 1997 to Mr R Adams about directors' pension arrangements (incorporated by reference to Exhibit 4.32 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2001, File No. 1-10533). |
4.05 | Service Agreement dated 15 April 2003 between Mr R Adams and Rio Tinto London Limited (incorporated by reference to Exhibit 4.30 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2002, File No. 1-10533) |
4.06 | Memorandum effective 1 March 2004 to Service Agreement dated 15 April 2003 between Mr R Adams and Rio Tinto London Limited (incorporated by reference to Exhibit 4.06 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2003, File No. 1-10533) |
4.07* | Service Agreement dated 30 March 2004 between Mr R L Clifford and Rio Tinto Limited |
4.08* | Supplemental letter dated 30 March 2004 to Service Agreement dated 30 March 2004 between Mr R L Clifford and Rio Tinto Limited |
4.09* | Memorandum effective 1 March 2005 to Service Agreement dated 30 March 2004 between Mr R L Clifford and Rio Tinto Limited |
4.10 | Service Agreement dated 19 June 2002 between Mr G R Elliott and Rio Tinto London Limited (incorporated by reference to Exhibit 4.31 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2002, File No. 1-10533) |
4.11 | Memorandum effective 1 March 2003 to Service Agreement dated 19 June 2002 between Mr G R Elliott and Rio Tinto Limited (incorporated by reference to Exhibit 4.32 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2002, File No. 1-10533) |
4.12 | Memorandum effective 1 March 2004 to Service Agreement dated 19 June 2002 between Mr G R Elliott and Rio Tinto London Limited (incorporated by reference to Exhibit 4.32 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2002, File No. 1-10533) |
4.13* | Memorandum effective 1 March 2005 to Service Agreement dated 19 June 2002 between Mr G R Elliott and Rio Tinto London Limited |
4.14 | Service Agreement dated 19 January 1999 between Mr O L Groeneveld and Rio Tinto Limited (incorporated by reference to Exhibit 4.53 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
Rio Tinto 2004 Form 20-F 106
4.15 | Memorandum effective 1 April 1999 to Service Agreement dated 19 January 1999 between Mr O L Groeneveld and Rio Tinto Limited (incorporated by reference to Exhibit 4.54 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
4.16 | Memorandum effective 1 April 2000 to Service Agreement dated 19 January 1999 between Mr O L Groeneveld and Rio Tinto Limited (incorporated by reference to Exhibit 4.55 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
4.17 | Memorandum effective 1 April 2001 to Service Agreement dated 19 January 1999 between Mr O L Groeneveld and Rio Tinto Limited (incorporated by reference to Exhibit 4.56 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
4.18 | Memorandum effective 1 March 2002 to Service Agreement dated 19 January 1999 between Mr O L Groeneveld and Rio Tinto Limited (incorporated by reference to Exhibit 4.61 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2001, File No. 1-10533) |
4.19 | Memorandum effective 1 March 2003 to Service Agreement dated 19 January 1999 between Mr O L Groeneveld and Rio Tinto Limited (incorporated by reference to Exhibit 4.38 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2002, File No. 1-10533) |
4.20 | Service Agreement dated 19 January 2004 between Mr O L Groeneveld and Rio Tinto Limited. Limited (incorporated by reference to Exhibit 4.23 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2003, File No. 1-10533) |
4.21 | Memorandum effective 1 March 2004 to Service Agreement dated 19 January 2004 between Mr O L Groeneveld and Rio Tinto Limited. Limited (incorporated by reference to Exhibit 4.24 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2003, File No. 1-10533) |
4.22 | Mining Companies Comparative Plan (incorporated by reference to Exhibit 4.65 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
4.23 | Share Option Plan (incorporated by reference to Exhibit 4.66 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
4.24 | Medical expenses plan (incorporated by reference to Exhibit 4.67 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
4.25 | Pension plan (incorporated by reference to Exhibit 4.68 of Rio Tinto plc's Annual report on Form 20-F for the financial year ended 31 December 2000, File No. 1-10533) |
8.1* | List of subsidiary companies. |
12.1* | Certifications pursuant to Rule 13a-14(a) of the Exchange Act. |
13.1* | Certifications furnished pursuant to Rule 13a-14(b) of the Exchange Act (such certificate is not deemed filed for purpose of Section 18 of the Exchange Act and not incorporated by reference with any filing under the Securities Act). |
15.1* | Consent of Independent Accountants. |
Rio Tinto 2004 Form 20-F 107
SIGNATURE
The Registrants hereby certify that they meet all of the requirements for filing on Form 20-F and that they have duly caused and authorised the undersigned to sign this Annual Report on their behalf.
Rio Tinto plc | Rio Tinto Limited |
(Registrant) | (Registrant) |
/s/ Anette Lawless | /s/ Anette Lawless |
Name: Anette Lawless | Name: Anette Lawless |
Title: Secretary | Title: Assistant Secretary |
Date: 27 June 2005 | Date: 27 June 2005 |
Rio Tinto 2004 Form 20-F 108
GLOSSARY
NON MINING DEFINITIONS
Throughout this document, the collective expressions Rio Tinto, Rio Tinto Group and Group are used for convenience only. Depending on the context in which they are used, they mean Rio Tinto plc and/or Rio Tinto Limited and/or one or more of the individual companies in which Rio Tinto plc and/or Rio Tinto Limited directly or indirectly own investments, all of which are separate and distinct legal entities.
Unless the context indicates otherwise, the following terms have the meanings shown below:
ADR | American Depositary Receipt evidencing American Depositary Shares (ADS). | |
Australian dollars | Australian currency. Abbreviates to A$ | |
Australian GAAP | Generally accepted accounting principles in Australia. | |
Billion | One thousand million. | |
Canadian dollars | Canadian currency. Abbreviates to C$ | |
Company/Companies | Means, as the context so requires, Rio Tinto plc and/or Rio Tinto Limited. | |
DLC merger | Refers to the dual listed companies merger (1995). | |
IFRS | International Financial Reporting Standards. | |
LME | London Metal Exchange. | |
New Zealand dollars | New Zealand currency. Abbreviates to NZ$ | |
Pounds sterling | UK currency. Abbreviates to pence or p. | |
Public shareholders | The holders of Rio Tinto plc shares that are not companies in the Rio Tinto Limited Group and the holders of Rio Tinto Limited shares that are not companies in the Rio Tinto plc Group. | |
Rand | South African currency. Abbreviates to R. | |
Rio Tinto Limited | Refers to Rio Tinto Limited, and, where the context permits, its subsidiaries, joint ventures and associated companies. | |
Rio Tinto Limited ADS | An American Depositary Share representing the right to receive four Rio Tinto Limited shares. | |
Rio Tinto Limited Group | Rio Tinto Limited and its subsidiaries, joint ventures and associated companies. | |
Rio Tinto Limited shareholders | The holders of Rio Tinto Limited shares. | |
Rio Tinto Limited shares | The ordinary shares in Rio Tinto Limited. | |
Rio Tinto Limited Shareholder | The agreement, dated 21 December 1995, between Rio Tinto plc, Rio Tinto Limited, RTL Shareholder | |
Voting Agreement | SVC Limited and the Law Debenture Trust Corporation p.l.c. relating to the voting rights of the Rio Tinto plc Special Voting Share at meetings of shareholders of Rio Tinto plc. | |
Rio Tinto Limited/RTL Special Voting Share | The Special Voting Share in Rio Tinto Limited. | |
Rio Tinto plc | Rio Tinto plc and its subsidiaries, joint ventures and associated companies. | |
Rio Tinto plc ADS | An American Depositary Share representing the right to receive four Rio Tinto plc ordinary shares. | |
Rio Tinto plc Group | Rio Tinto plc and its subsidiaries, joint ventures and associated companies. | |
Rio Tinto plc ordinary shares | The ordinary shares of 10p each in Rio Tinto plc. | |
Rio Tinto plc shareholders | The holders of Rio Tinto plc shares. | |
Rio Tinto Shareholder Voting Agreement | The agreement, dated 21 December 1995, between Rio Tinto plc, Rio Tinto Australian Holdings Limited, RTP Shareholder SVC Pty Limited, Rio Tinto Limited and the Law Debenture Trust Corporation p.l.c. relating to the voting rights of the Rio Tinto Limited shares held by the Rio Tinto plc Group and the Rio Tinto Limited Special Voting Share at meetings of Rio Tinto Limited shareholders. | |
Rio Tinto 2004 Form 20-F 109
Rio Tinto plc shares | Rio Tinto plc ordinary shares. | |
Rio Tinto plc/RTP Special Voting | The Special Voting Share of 10p in Rio Tinto plc. | |
Share/shares | Rio Tinto Limited shares or Rio Tinto plc ordinary shares, as the context requires. | |
Sharing Agreement | The agreement, dated 21 December 1995, as amended between Rio Tinto Limited and Rio Tinto plc relating to the regulation of the relationship between Rio Tinto Limited and Rio Tinto plc following the DLC merger. | |
UK GAAP | Generally accepted accounting principles in the UK. | |
US dollars | United States currency. Abbreviates to dollars, $ or US$ and US cents. | |
US GAAP | Generally accepted accounting principles in the United States. | |
MINING AND TECHNICAL DEFINITIONS | ||
Alumina | Aluminium oxide. It is extracted from bauxite in a chemical refining process and is subsequently the principal raw material in the electro-chemical process by which aluminium is produced. | |
Anode copper | At the final stage of the smelting of copper concentrates, molten copper is cast into specially shaped slabs called anodes for subsequent electrolytic refining to produce refined cathode copper. | |
Bauxite | Mainly hydrated aluminium oxides (Al2O3.2H2 O). Principal ore of alumina, the raw material from which aluminium is made. | |
Beneficiated bauxite | Bauxite ore that has been treated to remove waste material to improve its physical or chemical characteristics. | |
Bioleaching | The deliberate use of bacteria to speed the chemical release of metals from ores. | |
Block caving | An underground bulk mining method. It involves undercutting the orebody to induce ore fracture and collapse by gravity. The broken ore is recovered mechanically through draw points below. | |
Borates | A generic term for mineral compounds which contain boron and oxygen. | |
Cathode copper | Refined copper produced by electrolytic refining of impure copper or by electrowinning. | |
Classification | Separating crushed and ground ore into portions of different size particles. | |
Coking coal | Also referred to as metallurgical coal. By virtue of its carbonisation properties, it is used in the manufacture of coke, which is used in the steel making process. | |
Concentrate | The product of a physical concentration process, such as flotation or gravity concentration, which involves separating ore minerals from unwanted waste rock. Concentrates require subsequent processing, such as smelting or leaching, to break down or dissolve the ore minerals and obtain the desired elements, usually metals. | |
Cutoff grade | The lowest grade of mineralised material considered economic to process. It is used in the calculation of the quantity of ore present in a given deposit. | |
Doré | A precious metal alloy which is produced by smelting. refined to produce pure gold and silver. | |
DWT | Dead weight tons is the combined weight in long tons (2,240 pounds weight) of cargo, fuel and fresh water that a ship can carry. | |
Flotation | A method of separating finely ground minerals using a froth created in water by specific reagents. In the flotation process certain mineral particles are induced to float by becoming attached to bubbles of froth whereas others, usually unwanted, sink. | |
Grade | The proportion of metal or mineral present in ore, or any other host material, expressed in this document as per cent, grams per tonne or ounces per tonne. | |
Head grade | The average grade of ore delivered to the mill. | |
Rio Tinto 2004 Form 20-F 110
Ilmenite | Mineral composed of iron, titanium and oxygen. | |
Ore | A rock from which a metal(s) or mineral(s) can be economically extracted. | |
Ore milled | The quantity of ore processed. | |
Ore hoisted | The quantity of ore which is removed from an underground mine for processing. | |
Ore reserve | That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. | |
Pressure oxidation | A method of treating sulphide ores. In the case of refractory gold ores, the object is to oxidise the sulphides to sulphates and hence liberate the gold for subsequent cyanide leaching. The technique involves reaction of the ore with sulphuric acid under pressure in the presence of oxygen gas. | |
Probable ore reserves | Reserves for which quantity and grade and/or quality are computed from information similar to that used for proved reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proved reserves, is high enough to assume continuity between points of observation. | |
Proved ore reserves | Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established. | |
Rock mined | The quantity of ore and waste rock excavated from the mine. In this document, the term is only applied to surface mining operations. | |
Rutile | A mineral composed of titanium and oxygen (TiO2). | |
Stripping ratio | The tonnes of waste material which must be removed to allow the mining of one tonne of ore. | |
Solvent extraction and electrowinning (SX-EW) | Processes for extracting metal from an ore and producing pure metal. First the metal is leached into solution; the resulting solution is then purified in the solvent extraction process; the solution is then treated in an electro-chemical process (electrowinning) to recover cathode copper. | |
Tailing | The rock wastes which are rejected from a concentrating process after the recoverable valuable minerals have been extracted. | |
Thermal coal | Also referred to as steam or energy coal. It is used as a fuel source in electrical power generation, cement manufacture and various industrial applications. | |
Titanium dioxide feedstock | A feedstock rich in titanium dioxide, produced, in Rio Tintos case, by smelting ores containing titanium minerals. | |
Zircon | Zirconium mineral (ZrSiO4). |
Rio Tinto 2004 Form 20-F 111
CONVERSION OF WEIGHTS AND MEASURES | |
1 troy ounce = 31.1 grams | |
1 kilogram = 32.15 troy ounces | |
1 kilogram = 2.2046 pounds | |
1 metric tonne = 1,000 kilograms | |
1 metric tonne = 2,204.6 pounds | |
1 metric tonne = 1.1023 short tons | |
1 short ton = 2,000 pounds | |
1 long ton = 2,240 pounds | |
1 gram per metric tonne = 0.02917 troy ounces per short ton | |
1 gram per metric tonne = 0.03215 troy ounces per metric tonne | |
1 kilometre = 0.6214 miles | |
1 megajoule per kilogram = 430.2 British thermal units (btu) per pound (coal) |
EXCHANGE
RATES
The following
table shows, for the periods and dates indicated, certain information regarding
the exchange rates for the pound sterling and the Australian dollar, based on
the Noon Buying Rates for pounds sterling and Australian dollars expressed in
US dollars per £1 and per A$1.00.
Pounds sterling | Australian dollars | |||||||||||||||
Year ended 31 December* | Period | Average | High | Low | Year ended 31 December* | Period | Average | High | Low | |||||||
end | rate | end | rate | |||||||||||||
2004 | 1.93 | 1.83 | 1.95 | 1.76 | 2004 | 0.783 | 0.737 | 0.798 | 0.686 | |||||||
2003 | 1.78 | 1.63 | 1.79 | 1.55 | 2003 | 0.749 | 0.648 | 0.752 | 0.562 | |||||||
2002 | 1.61 | 1.50 | 1.61 | 1.41 | 2002 | 0.563 | 0.544 | 0.575 | 0.506 | |||||||
2001 | 1.45 | 1.44 | 1.50 | 1.37 | 2001 | 0.512 | 0.517 | 0.571 | 0.483 | |||||||
2000 | 1.49 | 1.52 | 1.65 | 1.40 | 2000 | 0.556 | 0.579 | 0.672 | 0.511 | |||||||
* The Noon Buying Rate on such dates differed slightly from the rates used in the preparation of Rio Tintos consolidated financial statements as of such date. No representation is made that pound sterling and Australian dollar amounts have been, could have been or could be converted into dollars at the Noon Buying Rate on such dates or at any other dates.
Rio Tinto 2004 Form 20-F 112
REPORT OF THE INDEPENDENT ACCOUNTANTS
To the members of Rio Tinto plc and Rio Tinto Limited
We have audited the financial statements of the Rio Tinto Group ("the Group") and of the Rio Tinto plc and Rio Tinto Limited parts of the Group (see "Accounting Presentation" on page A-10) set out on pages A-2.2004 to A-84, which are expressed in US dollars. These consolidated financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Auditing Standards generally accepted in the United Kingdom and Auditing Standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion the consolidated financial statements set out on pages A-2.2004 to A-84 present fairly, in all material respects, the financial position of the Rio Tinto Group and of the Rio Tinto plc and Rio Tinto Limited parts of the Group at 31 December 2004 and 2003 and their results of operations and cash flows for each of the three years in the period ended 31 December 2004, in conformity with accounting principles generally accepted in the United Kingdom.
Accounting principles generally accepted in the United Kingdom vary in certain significant respects from those generally accepted in the United States of America. The application of the latter would have affected the determination of consolidated net income for each of the three years in the period ended 31 December 2004 and the determination of consolidated shareholders' funds at 31 December 2004, 2003 and 2002 to the extent summarised in Note 42 to the consolidated financial statements.
As discussed in Note 42 to the consolidated financial statements, the Group changed its method of accounting for asset retirement obligations, in accordance with US GAAP, with effect from 1 January 2003.
/s/ PricewaterhouseCoopers LLP | /s/ PricewaterhouseCoopers |
PricewaterhouseCoopers LLP | PricewaterhouseCoopers |
Chartered Accountants and Registered Auditors | Chartered Accountants |
London, England | Perth, Australia |
27 June 2005 | 27 June 2005 |
In respect of the members of Rio Tinto plc | In respect of the members of Rio Tinto Limited |
A-1
RIO TINTO PLC - RIO TINTO LIMITED
PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2004
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio Tinto Group |
|||||
2004 | 2004 | 2004 | |||||
Note | US$m | US$m | US$m | ||||
Gross turnover (including share of joint | |||||||
ventures and associates) (c) | 9,606 | 7,544 | 14,608 | ||||
Share of joint ventures' turnover (c) | (1,418 | ) | (957 | ) | (2,375 | ) | |
Share of associates' turnover (c) | (2,913 | ) | (63 | ) | (434 | ) | |
Consolidated turnover | 5,275 | 6,524 | 11,799 | ||||
2 | Net operating costs (c) | (4,986 | ) | (5,091 | ) | (10,077 | ) |
Group operating profit | 289 | 1,433 | 1,722 | ||||
Share of operating profit of joint ventures | 762 | 290 | 1,052 | ||||
Share of operating profit of associates | 768 | 9 | 156 | ||||
Profit on disposal of interests in operations | 833 | 139 | 920 | ||||
Profit on ordinary activities before interest | 2,652 | 1,871 | 3,850 | ||||
5 | Net interest payable | (69 | ) | (121 | ) | (149 | ) |
6 | Amortisation of discount | (76 | ) | (46 | ) | (105 | ) |
Profit on ordinary activities before taxation | 2,507 | 1,704 | 3,596 | ||||
7 | Taxation | (534 | ) | (477 | ) | (841 | ) |
Profit on ordinary activities after taxation | 1,973 | 1,227 | 2,755 | ||||
Attributable to outside shareholders | 100 | (42 | ) | 58 | |||
Profit for the financial year (net earnings) | 2,073 | 1,185 | 2,813 | ||||
4 | Exceptional items | ||||||
Profit on disposal of interests in operations | 833 | 139 | 920 | ||||
Asset write downs and provision for contract obligation | (558 | ) | - | (558 | ) | ||
Environmental remediation charge | - | - | - | ||||
Taxation | 98 | (2 | ) |
97 | |||
Attributable to outside equity shareholders | 133 | - | 133 | ||||
506 | 137 | 592 | |||||
Adjusted earnings | 1,567 | 1,048 | 2,221 | ||||
8 | Dividends to shareholders | (822 | ) | (385 | ) | (1,062 | ) |
Retained profit/(loss) for the financial year | 1,251 | 800 | 1,751 | ||||
9 | Earnings per ordinary share (US cents) | 194.2c | 237.4c | 204.0c | |||
9 | Adjusted earnings per ordinary share (US cents) | 146.8c | 210.0c | 161.0c | |||
9 | Diluted earnings per ordinary share (US cents) | 193.9c | 236.9c | 203.6c | |||
9 | Diluted adjusted earnings per ordinary share (US cents) | 146.6c | 209.5c | 160.8c | |||
Dividends per share | |||||||
8 | Rio Tinto Group (US cents) | 77.00c | 77.00c | 77.00c | |||
8 | Rio Tinto plc (pence) | 41.48p | 41.48p | ||||
8 | Rio Tinto Limited (Australian cents) | 103.82c | 103.82c |
The notes on pages A-10 to A-84 form part of these accounts. Material variations
from accounting principles generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-2.2004
RIO TINTO PLC - RIO TINTO LIMITED
PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2003
Rio
Tinto plc - part of Rio Tinto Group |
Rio Tinto Limited
- part of Rio Tinto Group |
Rio Tinto Group | |||||
2003 | 2003 | 2003 | |||||
Note | US$m | US$m | US$m | ||||
Gross turnover (including share of joint | |||||||
ventures and associates) (c) | 7,988 | 6,253 | 12,119 | ||||
Share of joint ventures' turnover (c) | (1,128 | ) | (703 | ) | (1,831 | ) | |
Share of associates' turnover (c) | (2,768 | ) | (74 | ) | (720 | ) | |
Consolidated turnover | 4,092 | 5,476 | 9,568 | ||||
2 | Net operating costs (c) | (3,724 | ) | (4,348 | ) | (8,072 | ) |
Group operating profit | 368 | 1,128 | 1,496 | ||||
Share of operating profit of joint ventures | 419 | 117 | 536 | ||||
Share of operating profit of associates | 678 | 20 | 234 | ||||
Profit on disposal of interests in operations | 47 | 126 | 126 | ||||
Profit on ordinary activities before interest | 1,512 | 1,391 | 2,392 | ||||
5 | Net interest payable | (138 | ) | (100 | ) | (206 | ) |
6 | Amortisation of discount | (69 | ) | (36 | ) | (92 | ) |
Profit on ordinary activities before taxation | 1,305 | 1,255 | 2,094 | ||||
7 | Taxation | (341 | ) | (360 | ) | (567 | ) |
Profit on ordinary activities after taxation | 964 | 895 | 1,527 | ||||
Attributable to outside shareholders | (8 | ) | (11 | ) | (19 | ) | |
Profit for the financial year (net earnings) | 956 | 884 | 1,508 | ||||
4 | Exceptional items | ||||||
Profit on disposal of interests in operations | 47 | 126 | 126 | ||||
Asset write downs and provision for contract obligation | - | - | - | ||||
Environmental remediation charge | - | - | - | ||||
Taxation | - | - | - | ||||
Attributable to outside equity shareholders | - | - | - | ||||
47 | 126 | 126 | |||||
Adjusted earnings | 909 | 758 | 1,382 | ||||
8 | Dividends to shareholders | (683 | ) | (320 | ) | (882 | ) |
Retained profit/(loss) for the financial year | 273 | 564 | 626 | ||||
9 | Earnings per ordinary share (US cents) | 89.7c | 177.2c | 109.5c | |||
9 | Adjusted earnings per ordinary share (US cents) | 85.3c | 151.9c | 100.3c | |||
9 | Diluted earnings per ordinary share (US cents) | 89.5c | 176.9c | 109.3c | |||
9 | Diluted adjusted earnings per ordinary share (US cents) | 85.1c | 151.7c | 100.2c | |||
Dividends per share | |||||||
8 | Rio Tinto Group (US cents) | 64.00c | 64.00c | 64.00c | |||
8 | Rio Tinto plc (pence) | 37.13p | 37.13p | ||||
8 | Rio Tinto Limited (Australian cents) | 89.70c | 89.70c |
The notes on pages A-10
to A-84 form part of these accounts. Material variations from accounting
principles generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-2.2003
RIO TINTO PLC - RIO TINTO LIMITED
PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2002
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio
Tinto Group |
|||||
2002 | 2002 | 2002 | |||||
Note | US$m | US$m | US$m | ||||
Gross turnover (including share of joint | |||||||
ventures and associates) (c) | 7,367 | 5,678 | 11,119 | ||||
Share of joint ventures' turnover (c) | (859 | ) | (808 | ) | (1,667 | ) | |
Share of associates' turnover (c) | (2,515 | ) | (148 | ) | (737 | ) | |
Consolidated turnover | 3,993 | 4,722 | 8,715 | ||||
2 | Net operating costs (c) | (4,012 | ) | (3,867 | ) | (7,884 | ) |
Group operating profit | (19 | ) | 855 | 831 | |||
Share of operating profit of joint ventures | 258 | 274 | 532 | ||||
Share of operating profit of associates | 671 | 51 | 239 | ||||
Profit on disposal of interests in operations | - | - | - | ||||
Profit on ordinary activities before interest | 910 | 1,180 | 1,602 | ||||
5 | Net interest payable | (156 | ) | (124 | ) | (237 | ) |
6 | Amortisation of discount | (39 | ) | (23 | ) | (54 | ) |
Profit on ordinary activities before taxation | 715 | 1,033 | 1,311 | ||||
7 | Taxation | (442 | ) | (423 | ) | (708 | ) |
Profit on ordinary activities after taxation | 273 | 610 | 603 | ||||
Attributable to outside shareholders | (78 | ) | 126 | 48 | |||
Profit for the financial year (net earnings) | 195 | 736 | 651 | ||||
4 | Exceptional items | ||||||
Profit on disposal of interests in operations | - | - | - | ||||
Asset write downs and provision for contract obligation | (639 | ) | (433 | ) | (978 | ) | |
Environmental remediation charge | (116 | ) | - | (116 | ) | ||
Taxation | 9 | 42 | 42 | ||||
Attributable to outside equity shareholders | 7 | 166 | 173 | ||||
(739 | ) | (225 | ) | (879 | ) | ||
Adjusted earnings | 934 | 961 | 1,530 | ||||
8 | Dividends to shareholders | (639 | ) | (299 | ) | (826 | ) |
Retained profit/(loss) for the financial year | (444 | ) | 437 | (175 | ) | ||
9 | Earnings per ordinary share (US cents) | 18.3c | 147.6c | 47.3c | |||
9 | Adjusted earnings per ordinary share (US cents) | 87.7c | 192.7c | 111.2c | |||
9 | Diluted earnings per ordinary share (US cents) | 18.3c | 147.4c | 47.2c | |||
9 | Diluted adjusted earnings per ordinary share (US cents) | 87.5c | 192.4c | 110.0c | |||
Dividends per share | |||||||
8 | Rio Tinto Group (US cents) | 60.00c | 60.00c | 60.00c | |||
8 | Rio Tinto plc (pence) | 37.47p | 37.47p | ||||
8 | Rio Tinto Limited (Australian cents) | 105.93c | 105.93c |
The notes on pages A-10
to A-84 form part of these accounts. Material variations from accounting
principles generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-2.2002
Footnotes to the profit and loss accounts
(a) | The results for all years relate wholly to continuing operations. |
(b) | The profit for each year is stated after the exceptional items set out in the box above. 'Adjusted earnings' excludes these items where they are of such magnitude that their exclusion is necessary in order that 'Adjusted earnings' fulfil its purpose of reflecting the underlying performance of the Group. See note 4 for further details. |
(c) | Turnover and operating costs have been adjusted to reclassify, as turnover, certain amounts charged to customers for freight and handling costs, which previously were deducted from operating costs. The effect was to increase Gross turnover in 2004 by US$473 million (2003: US$364 million, 2002: US$291 million) and increase Net operating costs in 2004 by US$455 million (2003: US$340 million, 2002: US$272 million). |
The separate financial statements for Rio Tinto plc and 100 per cent of Rio Tinto Limited shown above are prepared on the basis of the legal ownership of the various operations within each part of the Group. The distinction between the legal and economic interests represented by Rio Tinto plc and Rio Tinto Limited shareholdings is explained on page A-10. The amounts attributable to the economic interests of Rio Tinto plc shareholders and shareholders of Rio Tinto Limited other than Rio Tinto plc are as follows:
Rio
Tinto plc shareholders |
Rio
Tinto Limited shareholders other than Rio Tinto plc |
Rio
Tinto Group |
||||
2004 | 2004 | 2004 | ||||
US$m | US$m | US$m | ||||
Economic interests in profit for the financial year | 2,177 | 636 | 2,813 | |||
Average percentage of Rio Tinto Limited held by | ||||||
shareholders other than Rio Tinto plc | 62.5 | % |
Rio
Tinto plc shareholders |
Rio
Tinto Limited shareholders other than Rio Tinto plc |
Rio
Tinto Group |
||||
2003 | 2003 | 2003 | ||||
US$m | US$m | US$m | ||||
Economic interests in profit for the financial year | 1,167 | 341 | 1,508 | |||
Average percentage of Rio Tinto Limited held by | ||||||
shareholders other than Rio Tinto plc | 62.4 | % |
Rio
Tinto plc shareholders |
Rio
Tinto Limited shareholders other than Rio Tinto plc |
Rio
Tinto Group |
||||
2002 | 2002 | 2002 | ||||
US$m | US$m | US$m | ||||
Economic interests in profit for the financial year | 504 | 147 | 651 | |||
Average percentage of Rio Tinto Limited held by | ||||||
shareholders other than Rio Tinto plc | 62.4 | % |
The notes on pages A-10
to A-84 form part of these accounts. Material variations from accounting
principles generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-2.Footnotes
RIO TINTO PLC - RIO TINTO LIMITED
PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2004 (US GAAP format)
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio
Tinto Group |
|||||
2004 | 2004 | 2004 | |||||
Note | US$m | US$m | US$m | ||||
Revenues (b) | 5,275 | 6,524 | 11,799 | ||||
Operating costs and expenses | |||||||
Costs and expenses applicable to revenues (exclusive
of depreciation and amortisation shown separately below) (b) |
(2,957 | ) | (3,497 | ) | (6,454 | ) | |
Depreciation of fixed assets and amortisation of goodwill | (488 | ) | (716 | ) | (1,204 | ) | |
Fixed asset write downs and provision for contract obligation | (558 | ) | - | (558 | ) | ||
Environmental remediation costs | - | - | - | ||||
Selling, general and administrative expenses | (552 | ) | (525 | ) | (1,077 | ) | |
Royalties | (256 | ) | (230 | ) | (486 | ) | |
Exploration, research & development | (133 | ) | (77 | ) | (210 | ) | |
Bad and doubtful debts | 16 | (1 | ) | 15 | |||
Foreign currency exchange gain/(loss) | (32 | ) | (1 | ) | (33 | ) | |
Other operating income/(expense) | (26 | ) | (44 | ) | (70 | ) | |
(4,986 | ) | (5,091 | ) | (10,077 | ) | ||
Non operating income/(expenses) | |||||||
Gain on sale of fixed asset investments | 781 | 139 | 920 | ||||
Interest expense & amortisation of discount on provisions | (49 | ) | (164 | ) | (213 | ) | |
Income before income tax, minority | |||||||
interest and equity income | 1,021 | 1,408 | 2,429 | ||||
Income tax expense | (102 | ) | (386 | ) | (488 | ) | |
Minority interest in income of consolidated subsidiaries | 100 | (42 | ) |
58 | |||
Equity income of unconsolidated joint ventures and affiliates | 1,054 | 205 | 814 | ||||
Net income | 2,073 | 1,185 | 2,813 | ||||
Earnings per ordinary share (US cents) | 194.2 | c | 237.4 | c | 204.0 | c | |
Diluted earnings per ordinary share (US cents) | 193.9 | c | 236.9 | c | 203.6 | c | |
(a) | These Condensed Income Statements are in the format prescribed by the SEC as referred to in note 4 on page A-19. |
(b) | Revenue and Operating costs and expenses have been adjusted to reclassify, as revenue, certain amounts charged to customers for freight and handling costs, which previously were deducted from Operating costs and expenses. The effect was to increase revenue and to increase Operating costs and expenses in 2004 by US$455 million. |
The notes on pages A-10 to
A-84 form part of these accounts. Material variations from accounting principles
generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-3.2004
RIO TINTO PLC - RIO TINTO LIMITED
PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2003 (US GAAP format)
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio
Tinto Group |
|||||
2003 | 2003 | 2003 | |||||
Note | US$m | US$m | US$m | ||||
Revenues (b) | 4,092 | 5,476 | 9,568 | ||||
Operating costs and expenses | |||||||
Costs and expenses applicable to revenues
(exclusive of depreciation and amortisation shown separately below) (b) |
(2,460 | ) | (3,030 | ) | (5,490 | ) | |
Depreciation of fixed assets and amortisation of goodwill | (385 | ) | (621 | ) | (1,006 | ) | |
Fixed asset write downs and provision for contract obligation | - | - | - | ||||
Environmental remediation costs | - | - | - | ||||
Selling, general and administrative expenses | (460 | ) | (357 | ) | (817 | ) | |
Royalties | (220 | ) | (219 | ) | (439 | ) | |
Exploration, research & development | (107 | ) | (43 | ) | (150 | ) | |
Bad and doubtful debts | (28 | ) | (3 | ) | (31 | ) | |
Foreign currency exchange gain/(loss) | (40 | ) | (83 | ) | (123 | ) | |
Other operating income/(expense) | (24 | ) | 8 | (16 | ) | ||
(3,724 | ) | (4,348 | ) | (8,072 | ) | ||
Non operating income/(expenses) | |||||||
Gain on sale of fixed asset investments | - | 126 | 126 | ||||
Interest expense & amortisation of discount on provisions | (97 | ) | (131 | ) | (228 | ) | |
Income before income tax, minority | |||||||
interest and equity income | 271 | 1,123 | 1,394 | ||||
Income tax expense | (7 | ) | (318 | ) | (325 | ) | |
Minority interest in income of consolidated subsidiaries | (8 | ) | (11 | ) |
(19 | ) |
|
Equity income of unconsolidated joint ventures and affiliates | 700 | 90 | 458 | ||||
Net income | 956 | 884 | 1,508 | ||||
Earnings per ordinary share (US cents) | 89.7 | c | 177.2 | c | 109.5 | c | |
Diluted earnings per ordinary share (US cents) | 89.5 | c | 176.9 | c | 109.3 | c | |
(a) | These Condensed Income Statements are in the format prescribed by the SEC as referred to in note 4 on page A-19. |
(b) | Revenue and Operating costs and expenses have been adjusted to reclassify, as revenue, certain amounts charged to customers for freight and handling costs, which previously were deducted from Operating costs and expenses. The effect was to increase revenue and to increase Operating costs and expenses in 2003 by US$340 million. |
The notes on pages A-10
to A-84 form part of these accounts. Material variations from accounting
principles generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-3.2003
RIO TINTO PLC - RIO TINTO LIMITED
PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2002 (US GAAP format)
Rio
Tinto plc -part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio
Tinto Group |
|||||
2002 | 2002 | 2002 | |||||
Note | US$m | US$m | US$m | ||||
Revenues (b) | 3,993 | 4,722 | 8,715 | ||||
Operating costs and expenses | |||||||
Costs and expenses applicable to revenues
(exclusive of depreciation and amortisation shown separately below) (b) |
(2,226 | ) | (2,383 | ) | (4,609 | ) | |
Depreciation of fixed assets and amortisation of goodwill | (423 | ) | (531 | ) | (954 | ) | |
Fixed asset write downs and provision for contract obligation | (529 | ) | (433 | ) | (962 | ) | |
Environmental remediation costs | (116 | ) | - | (116 | ) | ||
Selling, general and administrative expenses | (380 | ) | (276 | ) | (656 | ) | |
Royalties | (204 | ) | (186 | ) | (390 | ) | |
Exploration, research & development | (111 | ) | (44 | ) | (155 | ) | |
Bad and doubtful debts | (2 | ) | (13 | ) | (15 | ) | |
Foreign currency exchange gain/(loss) | (28 | ) | (13 | ) | (41 | ) | |
Other operating income/(expense) | 7 | 12 | 14 | ||||
(4,012 | ) | (3,867 | ) | (7,884 | ) | ||
Non operating income/(expenses) | |||||||
Gain on sale of fixed asset investments | - | - | - | ||||
Interest expense & amortisation of discount on provisions | (82 | ) | (131 | ) | (213 | ) | |
Income before income tax, minority | |||||||
interest and equity income | (101 | ) | 724 | 618 | |||
Income tax expense | (142 | ) | (341 | ) | (483 | ) | |
Minority interest in income of consolidated subsidiaries | (78 | ) | 126 | 48 | |||
Equity income of unconsolidated joint ventures and affiliates | 516 | 227 | 468 | ||||
Net income | 195 | 736 | 651 | ||||
Earnings per ordinary share (US cents) | 18.3 | c | 147.6 | c | 47.3 | c | |
Diluted earnings per ordinary share (US cents) | 18.3 | c | 147.4 | c | 47.2 | c | |
(a) | These Condensed Income Statements are in the format prescribed by the SEC as referred to in note 4 on page A-19. |
(b) | Revenue and Operating costs and expenses have been adjusted to reclassify, as revenue, certain amounts charged to customers for freight and handling costs, which previously were deducted from Operating costs and expenses. The effect was to increase revenue and to increase Operating costs and expenses in 2002 by US$272 million. |
The notes on pages A-10 to
A-84 form part of these accounts. Material variations from accounting principles
generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-3.2002
RIO TINTO PLC - RIO TINTO LIMITED
CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio
Tinto Group |
|||||
2004 | 2004 | 2004 | |||||
|
|||||||
Note | US$m | US$m | US$m | ||||
Cash flow from operating activities (see page A-4.2002-2004) | 1,284 | 2,337 | 3,621 | ||||
Dividends from joint ventures | 469 | 279 | 748 | ||||
Dividends from associates | 198 | 6 | 80 | ||||
|
|||||||
Total cash flow from operations | 1,951 | 2,622 | 4,449 | ||||
Interest received | 87 | 8 | 23 | ||||
Interest paid | (81 | ) | (159 | ) | (168 | ) | |
Dividends paid to outside shareholders | (31 | ) | (30 | ) | (61 | ) | |
|
|||||||
Returns on investment and servicing of finance | (25 | ) | (181 | ) | (206 | ) | |
Taxation | (205 | ) | (670 | ) | (875 | ) | |
Purchase of property, plant and equipment | (595 | ) | (1,569 | ) | (2,164 | ) | |
Funding of Group share of joint ventures' and | |||||||
associates' capital expenditure | (12 | ) | (21 | ) | (33 | ) | |
Payments from/(other funding of) joint ventures | |||||||
and associates | 15 | - | 15 | ||||
11 | Exploration and evaluation expenditure | (123 | ) | (70 | ) | (193 | ) |
Sale of property, plant and equipment | 12 | 28 | 40 | ||||
Sales less purchases of other investments | 140 | 110 | 250 | ||||
Loans (to)/repaid by Rio Tinto Limited | (1,423 | ) | - | - | |||
Purchase of redeemable preference shares | |||||||
in a Rio Tinto Limited subsidiary by a Rio Tinto | |||||||
plc subsidiary | - | - | - | ||||
|
|||||||
Capital expenditure and financial investment | (1,986 | ) | (1,522 | ) | (2,085 | ) | |
Purchase of subsidiaries, joint arrangements, | |||||||
joint ventures and associates | - | - | |||||
35 | Sale of interests in operations | 1,306 | 205 | 1,511 | |||
Purchases/sales of subsidiaries between | |||||||
Rio Tinto Limited and Rio Tinto plc | - | - | - | ||||
Receipt of share buy back proceeds from Rio | |||||||
Tinto Limited | - | - | - | ||||
|
|||||||
Disposals less acquisitions | 1,306 | 205 | 1,511 | ||||
Equity dividends paid - Rio Tinto plc and | |||||||
Rio Tinto Limited shareholders | (700 | ) | (330 | ) | (906 | ) | |
Cash inflow/(outflow) before management | |||||||
of liquid resources and financing | 341 | 124 | 1,888 | ||||
23 | Net cash inflow/(outflow) from management of | ||||||
liquid resources | 96 | (6 | ) | 90 | |||
Ordinary shares in Rio Tinto issued for cash | 21 | 5 | 26 | ||||
Ordinary shares in subsidiaries issued to | |||||||
outside shareholders | 1 | 6 | 7 | ||||
23 | Loans (repaid) less received | (415 | ) | (1,418 | ) | (1,833 | ) |
Payment of share buy back proceeds to Rio Tinto plc | - | - | - | ||||
Loans received from/(repaid to) Rio Tinto plc | - | 1,423 | - | ||||
Purchase of redeemable preference shares | |||||||
in a Rio Tinto Limited subsidiary by a Rio Tinto plc | |||||||
subsidiary | - | - | - | ||||
|
|||||||
Management of liquid resources and financing | (297 | ) | 10 | (1,710 | ) | ||
|
|||||||
23 |
Increase/(decrease) in cash per UK GAAP | 44 | 134 | 178 | |||
|
The notes on pages A-10 to
A-84 form part of these accounts. Material variations from accounting principles
generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-4.2004
RIO TINTO PLC - RIO TINTO LIMITED
CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio
Tinto Group |
|||||
2003 | 2003 | 2003 | |||||
|
|
|
|||||
Note | US$m | US$m | US$m | ||||
Cash flow from operating activities (see page A-4.2002-2004) | 975 | 1,913 | 2,888 | ||||
Dividends from joint ventures | 338 | 132 | 470 | ||||
Dividends from associates | 397 | 8 | 128 | ||||
|
|
|
|||||
Total cash flow from operations | 1,710 | 2,053 | 3,486 | ||||
Interest received | 48 | 13 | 30 | ||||
Interest paid | (121 | ) | (141 | ) | (231 | ) | |
Dividends paid to outside shareholders | (47 | ) | (29 | ) | (76 | ) | |
|
|
|
|||||
Returns on investment and servicing of finance | (120 | ) | (157 | ) | (277 | ) | |
Taxation | (182 | ) | (735 | ) | (917 | ) | |
Purchase of property, plant and equipment | (559 | ) | (974 | ) | (1,533 | ) | |
Funding of Group share of joint ventures' and | |||||||
associates' capital expenditure | (13 | ) | (81 | ) | (94 | ) | |
Payments from/(other funding of) joint ventures | |||||||
and associates | (18 | ) | - | (18 | ) | ||
11 | Exploration and evaluation expenditure | (88 | ) | (42 | ) | (130 | ) |
Sale of property, plant and equipment | 9 | 10 | 19 | ||||
Sales less purchases of other investments | 67 | 16 | 83 | ||||
Loans (to)/repaid by Rio Tinto Limited | 5 | - | - | ||||
Purchase of redeemable preference shares | |||||||
in a Rio Tinto Limited subsidiary by a Rio Tinto | |||||||
plc subsidiary | (500 | ) | - | - | |||
|
|
|
|||||
Capital expenditure and financial investment | (1,097 | ) | (1,071 | ) | (1,673 | ) | |
Purchase of subsidiaries, joint arrangements, | |||||||
joint ventures and associates | - | - | - | ||||
35 | Sale of interests in operations | - | 405 | 405 | |||
Purchases/sales of subsidiaries between | |||||||
Rio Tinto Limited and Rio Tinto plc | 1 | (1 | ) | - | |||
Receipt of share buy back proceeds from Rio | |||||||
Tinto Limited | 1,208 | - | - | ||||
|
|
|
|||||
Disposals less acquisitions | 1,209 | 404 | 405 | ||||
Equity dividends paid - Rio Tinto plc and | |||||||
Rio Tinto Limited shareholders | (645 | ) | (465 | ) | (833 | ) | |
Cash inflow/(outflow) before management | |||||||
of liquid resources and financing | 875 | 29 | 191 | ||||
23 | Net cash inflow/(outflow) from management of | ||||||
liquid resources | (110 | ) | 5 | (105 | ) | ||
Ordinary shares in Rio Tinto issued for cash | 20 | 5 | 25 | ||||
Ordinary shares in subsidiaries issued to | |||||||
outside shareholders | - | 8 | 8 | ||||
23 | Loans (repaid) less received | (794 | ) | 592 | (202 | ) | |
Payment of share buy back proceeds to Rio Tinto plc | - | (1,208 | ) | - | |||
Loans received from/(repaid to) Rio Tinto plc | - | (5 | ) | - | |||
Purchase of redeemable preference shares | |||||||
in a Rio Tinto Limited subsidiary by a Rio Tinto plc | |||||||
subsidiary | - | 500 | - | ||||
|
|
|
|||||
Management of liquid resources and financing | (884 | ) | (103 | ) | (274 | ) | |
|
|
|
|||||
23
|
Increase/(decrease) in cash per UK GAAP | (9 | ) | (74 | ) | (83 | ) |
|
|
|
The notes on pages A-10
to A-84 form part of these accounts. Material variations from accounting
principles generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-4.2003
RIO TINTO PLC - RIO TINTO LIMITED
CASH FLOW STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2002
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio
Tinto Group |
|||||
2002 | 2002 | 2002 | |||||
|
|
|
|||||
Note | US$m | US$m | US$m | ||||
Cash flow from operating activities (see page A-4.2002-2004) | 1,380 | 1,754 | 3,134 | ||||
Dividends from joint ventures | 228 | 285 | 513 | ||||
Dividends from associates | 368 | 4 | 96 | ||||
|
|
|
|||||
Total cash flow from operations | 1,976 | 2,043 | 3,743 | ||||
Interest received | 46 | 52 | 80 | ||||
Interest paid | (109 | ) | (173 | ) | (264 | ) | |
Dividends paid to outside shareholders | (78 | ) | (39 | ) | (117 | ) | |
|
|
|
|||||
Returns on investment and servicing of finance | (141 | ) | (160 | ) | (301 | ) | |
Taxation | (240 | ) | (482 | ) | (722 | ) | |
Purchase of property, plant and equipment | (667 | ) | (629 | ) | (1,296 | ) | |
Funding of Group share of joint ventures' and | |||||||
associates' capital expenditure | (28 | ) | (109 | ) | (137 | ) | |
Payments from/(other funding of) joint ventures | |||||||
and associates | (7 | ) | 1 | (6 | ) | ||
11 | Exploration and evaluation expenditure | (89 | ) | (35 | ) | (124 | ) |
Sale of property, plant and equipment | 3 | 13 | 16 | ||||
Sales less purchases of other investments | (330 | ) | 7 | (323 | ) | ||
Loans (to)/repaid by Rio Tinto Limited | (87 | ) | - | - | |||
Purchase of redeemable preference shares | |||||||
in a Rio Tinto Limited subsidiary by a Rio Tinto | |||||||
plc subsidiary | - | - | - | ||||
|
|
|
|||||
Capital expenditure and financial investment | (1,205 | ) | (752 | ) | (1,870 | ) | |
Purchase of subsidiaries, joint arrangements, | |||||||
joint ventures and associates | (1 | ) | (105 | ) | (106 | ) | |
35 | Sale of interests in operations | 3 | 230 | 233 | |||
Purchases/sales of subsidiaries between | |||||||
Rio Tinto Limited and Rio Tinto plc | (13 | ) | 13 | - | |||
Receipt of share buy back proceeds from Rio | |||||||
Tinto Limited | 115 | - | - | ||||
|
|
|
|||||
Disposals less acquisitions | 104 | 138 | 127 | ||||
Equity dividends paid - Rio Tinto plc and | |||||||
Rio Tinto Limited shareholders | (729 | ) | (495 | ) | (948 | ) | |
Cash inflow/(outflow) before management | |||||||
of liquid resources and financing | (235 | ) | 292 | 29 | |||
23 | Net cash inflow/(outflow) from management of | ||||||
liquid resources | 142 | 71 | 213 | ||||
Ordinary shares in Rio Tinto issued for cash | 10 | 5 | 15 | ||||
Ordinary shares in subsidiaries issued to | |||||||
outside shareholders | - | 22 | 22 | ||||
23 | Loans (repaid) less received | 67 | (476 | ) | (409 | ) | |
Payment of share buy back proceeds to Rio Tinto plc | - | (115 | ) | - | |||
Loans received from/(repaid to) Rio Tinto plc | - | 87 | - | ||||
Purchase of redeemable preference shares | |||||||
in a Rio Tinto Limited subsidiary by a Rio Tinto plc | |||||||
subsidiary | - | - | - | ||||
|
|
|
|||||
Management of liquid resources and financing | 219 | (406 | ) | (159 | ) | ||
|
|
|
|||||
23
|
Increase/(decrease) in cash per UK GAAP | (16) | (114 | ) | (130 | ) | |
|
|
|
The notes on pages A-10
to A-84 form part of these accounts. Material variations from accounting
principles generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-4.2002
RIO TINTO PLC - RIO TINTO LIMITED
CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio
Tinto Group |
|||||
2004 | 2004 | 2004 | |||||
|
|
|
|||||
US$m | US$m | US$m | |||||
Cash flow from operating activities | |||||||
Group operating profit | 289 | 1,433 | 1,722 | ||||
Asset write downs and provision for contract | |||||||
obligation | 558 | - | 558 | ||||
2 | Depreciation and amortisation | 488 | 716 | 1,204 | |||
11 | Exploration & evaluation charged against profit | 116 | 71 | 187 | |||
20 | Provisions (excluding exceptional items) | 109 | 38 | 147 | |||
20 | Utilisation of provisions | (101 | ) | (85 | ) | (186 | ) |
Change in inventories | (101 | ) | (78 | ) | (179 | ) | |
Change in accounts receivable & prepayments | (200 | ) | 43 | (48 | ) | ||
Change in accounts payable and accruals | 95 | 182 | 168 | ||||
Other items | 31 | 17 | 48 | ||||
Cash flow from operating activities | 1,284 | 2,337 | 3,621 | ||||
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio
Tinto Group |
|||||
2003 | 2003 | 2003 | |||||
|
|
|
|||||
US$m | US$m | US$m | |||||
Cash flow from operating activities | |||||||
Group operating profit | 368 | 1,128 | 1,496 | ||||
Asset write downs and provision for contract | |||||||
obligation | - | - | - | ||||
2 | Depreciation and amortisation | 385 | 621 | 1,006 | |||
11 | Exploration & evaluation charged against profit | 90 | 37 | 127 | |||
20 | Provisions (excluding exceptional items) | 60 | 94 | 154 | |||
20 | Utilisation of provisions | (62 | ) | (97 | ) | (159 | ) |
Change in inventories | (85 | ) | 42 | (43 | ) | ||
Change in accounts receivable & prepayments | (52 | ) | (58 | ) | 154 | ||
Change in accounts payable and accruals | 180 | 150 | 66 | ||||
Other items | 91 | (4 | ) | 87 | |||
Cash flow from operating activities | 975 | 1,913 | 2,888 | ||||
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio
Tinto Group |
|||||
2002 | 2002 | 2002 | |||||
|
|
|
|||||
US$m | US$m | US$m | |||||
Cash flow from operating activities | |||||||
Group operating profit | (19 | ) | 855 | 831 | |||
Asset write downs and provision for environmental remediation | 645 | 433 | 1,078 | ||||
2 | Depreciation and amortisation | 423 | 531 | 954 | |||
11 | Exploration & evaluation charged against profit | 94 | 36 | 130 | |||
20 | Provisions (excluding exceptional items) | 33 | 25 | 58 | |||
20 | Utilisation of provisions | (35 | ) | (83 | ) | (118 | ) |
Change in inventories | 42 | 43 | 85 | ||||
Change in accounts receivable & prepayments | 113 | 23 | 158 | ||||
Change in accounts payable and accruals | 81 | (116 | ) | (57 | ) | ||
Other items | 3 | 7 | 15 | ||||
Cash flow from operating activities | 1,380 | 1,754 | 3,134 | ||||
The notes on pages A-10
to A-84 form part of these accounts. Material variations from accounting
principles generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-4.2002-2004
RIO TINTO PLC - RIO TINTO LIMITED
BALANCE SHEETS FOR THE YEAR ENDED 31 DECEMBER 2004
Rio
Tinto plc -
part of Rio Tinto Group |
Rio
Tinto Limited -
part of Rio Tinto Group |
Rio
Tinto Group
|
|||||
Note | 2004 | 2004 | 2004 | ||||
US$m | US$m | US$m | |||||
Intangible fixed assets | |||||||
10 | Goodwill | 215 | 924 | 1,139 | |||
11 | Exploration and evaluation | 27 | 70 | 97 | |||
242 | 994 | 1,236 | |||||
Tangible fixed assets | |||||||
12 | Property, plant and equipment | 5,972 | 10,633 | 16,605 | |||
Investments | |||||||
13 | Share of gross assets of joint ventures | 2,027 | 1,448 | 3,475 | |||
13 | Share of gross liabilities of joint ventures | (749 | ) | (294 | ) | (1,043 | ) |
1,278 | 1,154 | 2,432 | |||||
13 | Investments in associates/other investments | 3,168 | 72 | 385 | |||
Total investments | 4,446 | 1,226 | 2,817 | ||||
Total fixed assets | 10,660 | 12,853 | 20,658 | ||||
Current assets | |||||||
15 | Inventories | 1,099 | 927 | 2,026 | |||
Accounts receivable and prepayments | |||||||
16 | Falling due within one year | 1,083 | 1,031 | 1,723 | |||
16 | Falling due after more than one year | 540 | 296 | 836 | |||
Total accounts receivable | 1,623 | 1,327 | 2,559 | ||||
38 | Loans made to Rio Tinto Limited and its subsidiaries | 1,875 | - | - | |||
17 | Investments | 78 | - | 78 | |||
17 | Cash | 181 | 209 | 390 | |||
Total current assets | 4,856 | 2,463 | 5,053 | ||||
Current liabilities | |||||||
18 | Short term borrowings | (232 | ) | (574 | ) | (806 | ) |
38 | Loans made by Rio Tinto plc and its subsidiaries | - | (1,875 | ) | - | ||
19 | Accounts payable and accruals | (1,529 | ) | (1,736 | ) | (2,589 | ) |
Total current liabilities | (1,761 | ) | (4,185 | ) | (3,395 | ) | |
Net current assets/(liabilities) | 3,095 | (1,722 | ) | 1,658 | |||
Total assets less current liabilities | 13,755 | 11,131 | 22,316 | ||||
Liabilities due after one year | |||||||
22 | Medium and long term borrowings | (1,452 | ) | (1,885 | ) | (3,337 | ) |
19 | Accounts payable and accruals | (175 | ) | (226 | ) | (401 | ) |
20 | Provisions for liabilities and charges | (2,870 | ) | (2,188 | ) | (5,058 | ) |
Outside shareholders' interests | (119 | ) | (1,317 | ) | (936 | ) | |
Net assets | 9,139 | 5,515 | 12,584 | ||||
Capital and reserves | |||||||
Share capital | |||||||
24 | - Rio Tinto plc | 155 | - | 155 | |||
24 | - Rio Tinto Limited (excl. Rio Tinto plc interest) | - | 1,336 | 1,133 | |||
25 | Share premium account | 1,650 | - | 1,650 | |||
25 | Other reserves | 248 | 125 | 326 | |||
25 | Profit and loss account | 7,086 | 4,054 | 9,320 | |||
Equity shareholders' funds | 9,139 | 5,515 | 12,584 | ||||
The separate financial statements for Rio Tinto plc and 100 per cent of Rio Tinto Limited shown above are prepared on the basis of the legal ownership of the various operations within each part of the Group. The distinction between the legal and economic interests represented by Rio Tinto plc and Rio Tinto Limited shareholdings is explained on page A-10. The amounts of the consolidated shareholders' funds attributable to the economic interests of Rio Tinto plc shareholders and the shareholders of RioTinto Limited other than Rio Tinto plc are as follows:
Rio Tinto Limited |
|||||||
Rio Tinto plc |
shareholders other |
||||||
shareholders |
than Rio Tinto plc |
Rio Tinto Group |
|||||
2004 | 2004 | 2004 | |||||
US$m | US$m | US$m | |||||
Economic interests in consolidated shareholders' funds |
9,740 | 2,844 | 12,584 | ||||
Closing percentage
of Rio Tinto Limited held by shareholders other than Rio Tinto plc |
62.5 | % |
The notes on pages A-10 to A-84 form part of these accounts. Material variations
from accounting principles generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-5.2004
RIO TINTO PLC - RIO TINTO LIMITED
BALANCE SHEETS FOR THE YEAR ENDED 31 DECEMBER 2003
Rio
Tinto plc -
part of Rio Tinto Group |
Rio
Tinto Limited -
part of Rio Tinto Group |
Rio
Tinto Group
|
|||||
Note | 2003 | 2003 | 2003 | ||||
US$m | US$m | US$m | |||||
Intangible fixed assets | |||||||
10 | Goodwill | 253 | 932 | 1,185 | |||
11 | Exploration and evaluation | 2 | 67 | 69 | |||
255 | 999 | 1,254 | |||||
Tangible fixed assets | |||||||
12 | Property, plant and equipment | 6,095 | 9,095 | 15,196 | |||
Investments | |||||||
13 | Share of gross assets of joint ventures | 1,845 | 1,388 | 3,233 | |||
13 | Share of gross liabilities of joint ventures | (731 | ) | (279 | ) | (1,010 | ) |
1,114 | 1,109 | 2,223 | |||||
13 | Investments in associates/other investments | 2,680 | 62 | 517 | |||
Total investments | 3,794 | 1,171 | 2,740 | ||||
Total fixed assets | 10,144 | 11,265 | 19,190 | ||||
Current assets | |||||||
15 | Inventories | 968 | 815 | 1,783 | |||
Accounts receivable and prepayments | |||||||
16 | Falling due within one year | 991 | 1,070 | 1,674 | |||
16 | Falling due after more than one year | 555 | 254 | 809 | |||
Total accounts receivable | 1,546 | 1,324 | 2,483 | ||||
38 | Loans made to Rio Tinto Limited and its subsidiaries | 563 | - | - | |||
17 | Investments | 230 | - | 230 | |||
17 | Cash | 257 | 138 | 395 | |||
Total current assets | 3,564 | 2,277 | 4,891 | ||||
Current liabilities | |||||||
18 | Short term borrowings | (542 | ) | (1,652 | ) | (2,194 | ) |
38 | Loans made by Rio Tinto plc and its subsidiaries | - | (563 | ) | - | ||
19 | Accounts payable and accruals | (1,325 | ) | (1,291 | ) | (2,140 | ) |
Total current liabilities | (1,867 | ) | (3,506 | ) | (4,334 | ) | |
Net current assets/(liabilities) | 1,697 | (1,229 | ) | 557 | |||
Total assets less current liabilities | 11,841 | 10,036 | 19,747 | ||||
Liabilities due after one year | |||||||
22 | Medium and long term borrowings | (1,559 | ) | (2,290 | ) | (3,849 | ) |
19 | Accounts payable and accruals | (156 | ) | (166 | ) | (322 | ) |
20 | Provisions for liabilities and charges | (2,543 | ) | (1,993 | ) | (4,536 | ) |
Outside shareholders' interests | (240 | ) | (1,263 | ) | (1,003 | ) | |
Net assets | 7,343 | 4,324 | 10,037 | ||||
Capital and reserves | |||||||
Share capital | |||||||
24 | - Rio Tinto plc | 155 | - | 155 | |||
24 | - Rio Tinto Limited (excl. Rio Tinto plc interest) | - | 1,280 | 1,085 | |||
25 | Share premium account | 1,629 | - | 1,629 | |||
25 | Other reserves | 261 | 117 | 334 | |||
25 | Profit and loss account | 5,298 | 2,927 | 6,834 | |||
Equity shareholders' funds | 7,343 | 4,324 | 10,037 | ||||
The separate financial statements for Rio Tinto plc and 100 per cent of Rio Tinto Limited shown above are prepared on the basis of the legal ownership of the various operations within each part of the Group. The distinction between the legal and economic interests represented by Rio Tinto plc and Rio Tinto Limited shareholdings is explained on page A-10. The amounts of the consolidated shareholders' funds attributable to the economic interests of Rio Tinto plc shareholders and the shareholders of RioTinto Limited other than Rio Tinto plc are as follows:
Rio
Tinto Limited |
||||||
Rio
Tinto plc |
shareholders
other |
|||||
shareholders |
than
Rio Tinto plc |
Rio
Tinto Group |
||||
2003 | 2003 | 2003 | ||||
US$m | US$m | US$m | ||||
Economic interests in
consolidated shareholders' funds |
7,767 | 2,270 | 10,037 | |||
Closing percentage of Rio Tinto Limited
held by shareholders other than Rio Tinto plc |
62.4 | % |
The notes on pages A-10 to
A-84 form part of these accounts. Material variations from accounting principles
generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-5.2003
RIO TINTO PLC - RIO TINTO LIMITED
RECONCILIATION WITH AUSTRALIAN GAAP AT 31 DECEMBER
Rio Tinto Group | ||||
2004 | 2003 | |||
US$m | US$m | |||
Net earnings under UK GAAP | 2,813 | 1,508 | ||
Increase/(decrease) net of tax in respect of: | ||||
Goodwill amortisation | (139 | ) | (164 | ) |
Profit on sale of operations | 99 | - | ||
Contributions to fixed asset additions | 99 | - | ||
Taxation | (23 | ) | (5 | ) |
Other | - | 7 | ||
Net earnings attributable to members under Australian GAAP | 2,849 | 1,346 | ||
Earnings per ordinary share under Australian GAAP | 206.6 | c | 97.7 | c |
Diluted earnings per share under Australian GAAP | 206.3 | c | 97.5 | c |
Rio Tinto Group | ||||
2004 | 2003 | |||
US$m | US$m | |||
Shareholders' funds under UK GAAP | 12,584 | 10,037 | ||
Increase/(decrease) net of tax in respect of: | ||||
Goodwill | 601 | 872 | ||
Taxation | 46 | 69 | ||
Dividend | 626 | 469 | ||
Contributions to fixed asset additions | 105 | - | ||
Other | (26 | ) | (24 | ) |
Shareholders' funds under Australian GAAP | 13,936 | 11,423 | ||
The Groups financial statements have been prepared in accordance with UK GAAP, which differs in certain respects from Australian GAAP. These differences relate principally to the following items, and the effect of each of the adjustments to net earnings and shareholders funds that would be required under Australian GAAP is set out above.
Goodwill
For 1997 and prior years, UK GAAP permitted the write off of purchased goodwill on acquisitions directly against reserves. Under Australian GAAP, goodwill is capitalised and amortised by charges against income over the period during which it is expected to be of benefit, subject to a maximum of 20 years. Goodwill previously written off directly to reserves in the UK GAAP accounts has been reinstated and amortised for the purpose of the reconciliation statements. For acquisitions in 1998 and subsequent years, goodwill is capitalised under UK GAAP, in accordance with FRS 10. Adjustments are required for Australian GAAP purposes where such capitalised goodwill is amortised over periods exceeding 20 years in the UK GAAP accounts.
Profit on sale of operations
Under UK GAAP, goodwill previously written off to reserves is reinstated for the purpose of calculating profit on the sale of an operation. Under Australian GAAP, the equivalent goodwill is capitalised and is subject to amortisation. The adjustment to the profit on sale of operations under Australian GAAP reflects the lower book value of goodwill for operations sold under Australian GAAP compared with UK GAAP, which results from the above amortisation.
Contributions to fixed asset additions
Under UK GAAP, contributions made by governments to the cost of acquiring fixed assets are deferred on the balance sheet and credited to the profit and loss account over the expected useful economic life of the fixed assets to which they relate. Under Australian GAAP, such contributions are recognised immediately in the profit and loss account.
Taxation
Under UK GAAP, provision for taxes arising on remittances of earnings can be made only if the dividends have been accrued or if there is a binding agreement for the distribution of the earnings. Under Australian GAAP, provision must be made for tax arising on expected future remittances of past earnings.
Under UK GAAP, tax benefits associated with goodwill charged directly to reserves, in 1997 and previous years, must be accumulated in the deferred tax provision. This means that the tax benefits are not included in earnings until the related goodwill is charged through the profit and loss account, on disposal or closure. For Australian GAAP, no provision is required for such deferred tax because the goodwill that gave rise to these tax benefits was capitalised and gives rise to amortisation charges against profit.
Dividends
Under UK GAAP, ordinary dividends are recognised in the financial year in respect of which they are paid. Under Australian GAAP, such dividends are not recognised until they are declared, determined or publicly recommended by the Board of directors. Prior to 1 January 2003, Australian GAAP was consistent with UK GAAP.
Exceptional items
Earnings under UK GAAP, stated above, include exceptional net gains of US$592 million (2003 US$126 million) relating to profits on disposal of interests in operations less asset write downs and a provision for a contract obligation.
A-6
RIO TINTO PLC - RIO TINTO LIMITED
STATEMENTS OF
TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEARS ENDED 31 DECEMBER
Rio Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio Tinto Group | ||||
2004 | 2004 | 2004 | ||||
US$m | US$m | US$m | ||||
Profit for the financial year | ||||||
Parent companies and subsidiaries |
1,019 | 980 | 1,999 | |||
Joint ventures | 510 | 199 | 709 | |||
Associates | 544 | 6 | 105 | |||
2,073 | 1,185 | 2,813 | ||||
Adjustment on currency translation (a) |
||||||
Parent companies and subsidiaries |
156 | 383 | 537 | |||
Joint ventures | - | 1 | 1 | |||
Associates | 140 | 2 | 4 | |||
296 | 386 | 542 | ||||
Total recognised gains and losses relating to the financial year |
||||||
Parent companies and subsidiaries |
1,175 | 1,363 | 2,536 | |||
Joint ventures | 510 | 200 | 710 | |||
Associates | 684 | 8 | 109 | |||
2,369 | 1,571 | 3,355 | ||||
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio Tinto Group | |||||
2003 | 2003 | 2003 | |||||
US$m | US$m | US$m | |||||
Profit for the financial year | |||||||
Parent companies and subsidiaries |
256 | 794 | 1,050 | ||||
Joint ventures | 284 | 76 | 360 | ||||
Associates | 416 | 14 | 98 | ||||
956 | 884 | 1,508 | |||||
Adjustment on currency translation (a) |
|||||||
Parent companies and subsidiaries |
553 | 1,353 | 1,864 | ||||
Joint ventures | - | 53 | 53 | ||||
Associates | 495 | 3 | 7 | ||||
1,048 | 1,409 | 1,924 | |||||
Total recognised gains and losses relating to the financial year |
|||||||
Parent companies and subsidiaries |
809 | 2,147 | 2,914 | ||||
Joint ventures | 284 | 129 | 413 | ||||
Associates | 911 | 17 | 105 | ||||
2,004 | 2,293 | 3,432 | |||||
The
notes on pages A-10 to A-84 form part of these accounts. Material variations
from accounting principles generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-7
RIO TINTO PLC - RIO TINTO LIMITED
STATEMENTS OF TOTAL RECOGNISED
GAINS AND LOSSES
FOR THE YEARS ENDED 31 DECEMBER
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio Tinto Group | |||||
2002 | 2002 | 2002 | |||||
US$m | US$m | US$m | |||||
Profit for the financial year | |||||||
Parent companies and subsidiaries |
(321 | ) | 509 | 183 | |||
Joint ventures | 159 | 180 | 339 | ||||
Associates | 357 | 47 | 129 | ||||
195 | 736 | 651 | |||||
Adjustment on currency translation (a) |
|||||||
Parent companies and subsidiaries |
198 | 374 | 560 | ||||
Joint ventures | 3 | 11 | 13 | ||||
Associates | 137 | 1 | 6 | ||||
338 | 386 | 579 | |||||
Total recognised gains and losses relating to the financial year |
|||||||
Parent companies and subsidiaries |
(123 | ) | 883 | 743 | |||
Joint ventures | 162 | 191 | 352 | ||||
Associates | 494 | 48 | 135 | ||||
533 | 1,122 | 1,230 | |||||
(a) | Adjustment on currency translation' is net of current and deferred tax charges (see note 7). |
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR YEAR ENDED 31 DECEMBER
2004
Rio Tinto plc - | Rio Tinto Limited - | |||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||
2004 | 2004 | 2004 | ||||
US$m | US$m | US$m | ||||
Profit for the financial year | 2,073 | 1,185 | 2,813 | |||
Dividends | (822 | ) | (385 | ) | (1,062 | ) |
1,251 | 800 | 1,751 | ||||
Adjustment
on currency translation
|
296 | 386 | 542 | |||
Goodwill
written back on disposal of interest in operation
|
228 | - | 228 | |||
Shares
issued by Rio Tinto plc and Rio Tinto Limited (b)
|
21 | 5 | 26 | |||
Dividend
on DLC share from Rio Tinto Limited
|
- | - | - | |||
1,796 | 1,191 | 2,547 | ||||
Opening shareholders' funds | 7,343 | 4,324 | 10,037 | |||
Closing shareholders' funds | 9,139 | 5,515 | 12,584 | |||
(a) | A reconciliation of each individual reserve within shareholders' funds is shown in note 25. |
(b) | The carrying value of Rio Tinto plc's investment in Rio Tinto Limited increased by US$nil in 2004 (2003: US$1 million) as a result of the Rio Tinto Limited share issues during the year. In 2003, Rio Tinto plc's share of the proceeds received exceeded the dilution of its interest resulting from the share issues. |
The notes on pages A-10 to A-84
form part of these accounts. Material variations from accounting principles
generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-8
RIO TINTO PLC - RIO TINTO LIMITED
RECONCILIATION OF
MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR YEARS ENDED 31 DECEMBER
Rio Tinto plc - | Rio Tinto Limited - | ||||||
part
of Rio Tinto Group |
part of Rio Tinto Group | Rio Tinto Group | |||||
2003 | 2003 | 2003 | |||||
US$m | US$m | US$m | |||||
Profit for the financial year | 956 | 884 | 1,508 | ||||
Dividends | (683 | ) | (320 | ) | (882 | ) | |
273 | 564 | 626 | |||||
Adjustment
on currency translation
|
1,048 | 1,409 | 1,924 | ||||
Goodwill
written back on disposal of interest in operation
|
- | - | - | ||||
Shares
issued by Rio Tinto plc and Rio Tinto Limited (b)
|
21 | 5 | 25 | ||||
Dividend
on DLC share from Rio Tinto Limited
|
102 | (164 | ) | - | |||
1,444 | 1,814 | 2,575 | |||||
Opening shareholders' funds | 5,899 | 2,510 | 7,462 | ||||
Closing shareholders' funds | 7,343 | 4,324 | 10,037 | ||||
(a) | A reconciliation of each individual reserve within shareholders' funds is shown in note 25. |
(b) | The carrying value of Rio Tinto plc's investment in Rio Tinto Limited increased by US$nil in 2004 (2003: US$1 million) as a result of the Rio Tinto Limited share issues during the year. In 2003, Rio Tinto plc's share of the proceeds received exceeded the dilution of its interest resulting from the share issues. |
Rio Tinto plc - | Rio Tinto Limited - | |||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||
2002 | 2002 | 2002 | ||||
US$m | US$m | US$m | ||||
Profit for the financial year | 195 | 736 | 651 | |||
Dividends | (639 | ) | (299 | ) | (826 | ) |
(444 | ) | 437 | (175 | ) | ||
Adjustment
on currency translation
|
338 | 386 | 579 | |||
Goodwill
written back on disposal of interest in operation
|
- | - | - | |||
Shares
issued by Rio Tinto plc and Rio Tinto Limited
|
12 | 5 | 15 | |||
Dividend
on DLC share from Rio Tinto Limited
|
91 | (146 | ) | - | ||
(3 | ) | 682 | 419 | |||
Opening shareholders' funds | 5,902 | 1,828 | 7,043 | |||
Closing shareholders' funds | 5,899 | 2,510 | 7,462 | |||
The notes on pages A-10 to A-84
form part of these accounts. Material variations from accounting principles
generally
accepted in the United States are set out on pages A-65.2004 to A-84.
A-9
RIO TINTO PLC - RIO TINTO LIMITED
OUTLINE OF DUAL LISTED COMPANIES STRUCTURE
AND BASIS OF FINANCIAL STATEMENTS
Product and geographical analyses of the Group's Operating assets, Turnover, Profit before tax and Net earnings are shown in notes 26 and 27 respectively.
As a result, Rio Tinto plc and Rio Tinto Limited and their respective groups operate together as a single economic enterprise, with neither assuming a dominant role. In particular, the arrangements:
- | confer upon the shareholders of Rio Tinto plc and Rio Tinto Limited a common economic interest in both groups; |
- | provide for common boards of directors and a unified management structure; |
- | provide for equalised dividends and capital distributions; and |
- | provide for the shareholders of Rio Tinto plc and Rio Tinto Limited to take key decisions, including the election of directors, through an electoral procedure in which the public shareholders of the two Companies effectively vote on a joint basis. |
The merger involved no change in the legal ownership of any assets of Rio Tinto plc or Rio Tinto Limited, nor any change in the ownership of any existing shares or securities of Rio Tinto plc or Rio Tinto Limited, nor the issue of any shares, securities or payment by way of consideration, save for the issue by each company of one special voting share to a trustee company which provides the joint electoral procedure for public shareholders. During 2002, each of the parent Companies issued a DLC Dividend Share to facilitate the efficient management of funds within the DLC structure.
For the purposes of their filings in the United States under the requirements of the Securities and Exchange Commission, the primary financial statements of the Rio Tinto plc and Rio Tinto Limited parts of the Group are their separate consolidated financial statements prepared on the basis of the legal ownership of the various operations within each part of the Group. Accordingly, the consolidated financial statements for Rio Tinto Limited consolidate Rio Tinto Limited with the Group undertakings under its legal ownership; and the consolidated financial statements for Rio Tinto plc consolidate Rio Tinto plc with the Group undertakings under its legal ownership; Rio Tinto Limited is included on an equity basis that reflects Rio Tinto plc's average 37.5 per cent (2003: 37.6 per cent) ownership of Rio Tinto Limited during the year as shown in the table below.
Net
earnings
|
Shareholders' funds | |||||||||
2004 |
2003 |
2002 |
2004 |
2003 |
||||||
US$m |
US$m |
US$m |
US$m |
US$m |
||||||
Rio Tinto plc - part of Rio Tinto Group (a) | 2,073 | 956 | 195 | 9,139 | 7,343 | |||||
Rio Tinto Limited - part of Rio Tinto Group | 1,185 | 884 | 736 | 5,515 | 4,324 | |||||
Elimination (b) | (445 | ) | (332 | ) | (280 | ) | (2,070 | ) | (1,630 | ) |
Rio Tinto Group | 2,813 | 1,508 | 651 | 12,584 | 10,037 | |||||
(a) | Rio Tinto plc Equity shareholders' funds and Net earnings include its share of Rio Tinto Limited. |
(b) | The Elimination removes Rio Tinto plc's equity interest in Rio Tinto Limited |
The DLC merger between Rio Tinto plc and Rio Tinto Limited has the effect that their shareholders have substantially the same economic interests as if they held shares in a single enterprise which owned all of the assets of both companies. The Directors therefore consider that the combined financial statements of the Rio Tinto Group provide the most meaningful financial representation of the state of affairs, profit and cash flows.
The financial statements are presented in US dollars as most Group revenues are denominated in US dollars, as are many of the Group's costs. In explaining key features and trends of Group financial performance, the US dollar provides a more consistent view which should correspond more closely to underlying business performance.
A-10
RIO TINTO PLC - RIO TINTO LIMITED
OUTLINE OF DUAL LISTED COMPANIES STRUCTURE
AND BASIS OF FINANCIAL
STATEMENTS (continued)
The financial statements are drawn up in accordance with an order, under section 340 of the Australian Corporations Act 2001, issued by the Australian Securities and Investments Commission ('ASIC') on 21 July 2003. The main provisions of the order are that the financial statements are:
- | to be made out in accordance with United Kingdom requirements applicable to consolidated accounts; |
- | to be expressed in United States dollars, but may also be expressed in United Kingdom and Australian currencies; and |
- | to include a reconciliation from United Kingdom GAAP to Australian GAAP (see page A-65.2004). |
The main consequence of adopting merger rather than acquisition accounting is that the balance sheet of the merged Group includes the assets and liabilities of Rio Tinto plc and Rio Tinto Limited at their carrying values prior to the merger, subject to adjustments to achieve uniformity of accounting policies, rather than at their fair values at the date of the merger.
In the particular circumstances of the merger, the effect of applying acquisition accounting cannot reasonably be quantified.
A-11
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS
1 Principal accounting policies
a Basis of preparation
The Group's accounting policies comply with applicable United Kingdom accounting standards and are consistent with last year. As explained in the section headed 'Outline of dual listed companies structure and basis of financial statements', the accounting policies depart from the requirements of the UK Companies Act 1985 in order to provide a true and fair view of the merger between Rio Tinto plc and Rio Tinto Limited. The financial statements are prepared on the historical cost basis. Turnover has been adjusted to reclassify, as turnover, certain amounts charged to customers for freight and handling costs, which previously were deducted from operating costs.
b Basis of consolidation
The financial statements consist of the consolidation of the
accounts of Rio Tinto plc and Rio Tinto Limited and their respective subsidiary
undertakings ('subsidiaries'). The financial statements of the Rio Tinto
plc part of the Group consist of the consolidation of the accounts of Rio
Tinto plc and its subsidiaries. Within these financial statements, Rio Tinto
plc 'equity accounts' for its 37.5 per cent interest in Rio Tinto Limited.
The financial statements of the Rio Tinto Limited part of the Group consists
of the consolidation of the accounts of Rio Tinto Limited and its subsidiaries.
Subsidiaries: A subsidiary is an entity which is controlled by one of the parent companies. Control exists where the parent owns the majority of the voting rights (which does not always equate to percentage ownership) in another entity, except where severe permanent or long-term restrictions substantially hinder the exercise of the parent's rights over the assets or management of the entity (which includes the veto rights held by joint venture partners). Control can also arise in other situations, for example where the parent has the right to control board decisions or otherwise exercise dominant influence over the entity. The consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the parent and its subsidiaries after eliminating intercompany balances and transactions. For partly owned subsidiaries, the net assets and net earnings attributable to other shareholders are presented as 'outside shareholders' interests ' on the consolidated balance sheet and consolidated profit and loss account.
Associated undertakings ('associates'): An associate is an entity in which the Group has a participating interest, and over whose operating and financial policies it exercises significant influence. Significant influence is presumed to exist where an ownership interest of between 20 per cent and 50 per cent is held, but can also arise where the Group holds less than 20 per cent if it is actively involved and influential in policy decisions affecting the entity. The Group's share of the net assets, results and reserves of associates are included in the financial statements using the equity accounting method. This involves recording the investment initially at cost to the Group and then, going forward, adjusting the carrying amount of the investment to reflect the Group's share of the associate's results less any amortisation or impairment of goodwill and any other changes to the associate's net assets such as dividends.
Joint ventures: A joint venture is an entity in which a long-term interest is held and which is jointly controlled by the Group and one or more other venturers under a contractual arrangement (such that significant operating and financial decisions affecting the entity require the consent of all venturers that together jointly control the entity). Joint ventures are accounted for using the gross equity accounting method. This is the same as the equity accounting method, except the Group's share of a joint venture's assets and liabilities are separately disclosed on the balance sheet.
Joint arrangements that are not entities ('joint arrangements'): The Group has certain contractual arrangements under which the participants engage in joint activities that do not create an entity carrying on a trade or business of its own. This includes situations where the participants derive benefit from the joint activity through a share of the production, rather than by receiving a share in the results of trading. The Group's proportionate interest in the assets, liabilities, revenues, expenses and cash flows of joint arrangements are incorporated into the Group's financial statements under the appropriate headings.
Acquisitions and disposals: The results of acquired businesses are brought into the consolidated financial statements from the date of acquisition; the results of businesses sold during the year are included in the consolidated financial statements for the period up to the date of disposal. Gains or losses on disposal are calculated as the difference between the sale proceeds (net of expenses) and the net assets attributable to the interest which has been sold (including any goodwill which has been capitalised but not amortised and any goodwill previously written off through reserves). Where a disposal has a material effect on the nature or focus of the Group's operations, the operating results attributable to the disposal are shown separately in the consolidated profit and loss account under the heading 'discontinued operations'.
A-12
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS
1 Principal accounting policies (continued)
c Turnover |
|
A large proportion of Group production is sold under medium to long term contracts, but turnover is only recognised on individual sales when persuasive evidence exists indicating that all of the following criteria are met: | |
– | there has been a transfer of risks and benefits to the customer and in exchange the Group has received the right to consideration |
– | the product requires no further work or processing by the Group |
– | the quantity and quality of the goods has been determined with reasonable accuracy |
– | the selling price is fixed or determinable |
– | collection of the sale proceeds is reasonably assured. |
These conditions are generally satisfied when title passes to the customer. In most instances turnover is recognised when the product is delivered to the destination specified by the customer, which is typically the vessel on which it will be shipped, the destination port or the customer's premises. | |
The turnover from sales of many products is subject to adjustment based on a survey of the product by the customer. In such cases, turnover is initially recognised on a provisional basis using the Group's best estimate of the contained metal. Any subsequent adjustments to the initial estimate of metal content are recorded in turnover once they have been determined. | |
Certain products are 'provisionally priced', i.e. the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 180 days after delivery to the customer, based on the market price at the relevant quotation point stipulated in the contract. Turnover is initially recognised when the conditions set out above have been met, using market prices at that date. At each reporting date the provisionally priced metal is marked to market, with adjustments recorded in turnover, based on the forward selling price for the quotational period stipulated in the contract until the quotational period expires. For this purpose, the selling price is considered determinable for those products, such as copper, for which there exists an active and freely traded commodity market such as the London Metals Exchange and the value of the product sold by the Group is directly linked to the form in which it is traded on that market. | |
Gross turnover shown in the profit and loss account includes the Group's share of the turnover of joint ventures and associates. | |
d Shipping and handling costs All shipping and handling costs incurred by the Group are recognised as operating costs. Amounts billed to customers in respect of shipping and handling, where the Group is responsible for the carriage, insurance and freight, are classified as turnover. If, however, the Group is acting solely as an agent, amounts billed to customers are credited to operating costs. Turnover has been adjusted to reclassify certain amounts charged to customers for freight and handling costs, which previously were deducted from operating costs. |
|
e Currency translation | |
Transactions in foreign currencies are translated at the exchange rate ruling at the date of transaction or, where foreign currency forward contracts have been arranged, at contractual rates. Monetary assets and liabilities denominated in foreign currencies are retranslated at year-end exchange rates, or at a contractual rate if applicable. | |
On consolidation, profit and loss account items are translated into US dollars at average rates of exchange. Balance sheet items are translated into US dollars at year end exchange rates. Certain non-United States resident companies, whose functional currency is the US dollar, account in that currency. | |
The Group finances its operations primarily in US dollars and the majority of the Group's US dollar debt is located in subsidiaries having functional currencies other than the US dollar. Exchange gains and losses relating to US dollar debt impact on the profit and loss accounts of such subsidiaries. However, such exchange gains and losses are excluded from the Group's profit and loss account on consolidation, with a corresponding adjustment to reserves. This means that financing in US dollars impacts in a consistent manner on the Group's consolidated accounts irrespective of the functional currency of the particular subsidiary where the debt is located. Exchange differences on the translation of the net operating assets of companies with functional currencies other than the US dollar, less offsetting exchange differences on net debt in currencies other than the US dollar financing those net assets, are dealt with through reserves. | |
All other exchange differences are charged or credited to the profit and loss account in the year in which they arise, except as set out below in note (q) relating to derivative contracts. | |
f Goodwill and intangible assets | |
Goodwill represents the difference between the cost of acquisition and the fair value of the identifiable net assets acquired. Goodwill and intangible assets arising on acquisitions after 31 December 1997 are capitalised in accordance with FRS 10. The goodwill and intangible assets are amortised over their useful economic lives. The amortisation period may exceed 20 years where the lives of the relevant operations are sufficient to justify this, supported by ore reserves (and, for some operations, mineral resources). | |
In 1997 and previous years, goodwill was eliminated against reserves in the year of acquisition as a matter of accounting policy. Such goodwill was not reinstated on implementation of FRS 10; but on sale or closure of a business, any related goodwill eliminated against reserves is charged to the profit and loss account. |
A-13
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS
1 Principal accounting policies (continued)
g Exploration and evaluation |
Exploration and evaluation expenditure comprises costs which are directly attributable to: researching and analysing existing exploration data; conducting geological studies, exploratory drilling and sampling; examining and testing extraction and treatment methods; and compiling pre-feasibility and feasibility studies. Exploration and evaluation expenditure also includes the costs incurred in acquiring mineral rights, the entry premiums paid to gain access to areas of interest and amounts payable to third parties to acquire interests in existing projects. |
During the initial stage of a project, full provision is made for the costs thereof by charge against profits for the year. Expenditure on a project after it has reached a stage at which there is a high degree of confidence in its viability is carried forward and transferred to tangible fixed assets if the project proceeds. If a project does not prove viable, all irrecoverable costs associated with the project are written off. If an undeveloped project is sold, any gain or loss is included in operating profit, such transactions being a normal part of the Group's activities. Where expenditure is carried forward in respect of a project which may not proceed to commercial development for some time, provision is made against the possibility of non-development by charge against profits over a period of up to seven years. When it is decided to proceed with development, any provisions made in previous years are reversed to the extent that the relevant costs are recoverable. |
h Tangible fixed assets |
The cost of a tangible fixed asset comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use. Once a mining project has been established as commercially viable, expenditure other than that on land, buildings, plant and equipment is capitalised under mining properties and leases together with any amount transferred from exploration and evaluation. This includes costs incurred in preparing the site for mining operations, including stripping costs (see below). Costs associated with a start up period are capitalised where the asset is available for use but incapable of operating at normal levels without a commissioning period. Development costs incurred after the commencement of production are capitalised to the extent they give rise to a future economic benefit. Pre-tax interest payable on borrowings related to construction or development projects is capitalised until the point when substantially all the activities that are necessary to make the asset ready for use are complete. |
i Mining properties and leases |
As noted above, stripping (i.e. overburden and other waste removal) costs incurred in the development of a mine before production commences are capitalised as part of the cost of constructing the mine and subsequently amortised over the life of the operation. |
The Group defers stripping costs incurred during the production stage of its operations for those operations where this is the most appropriate basis for matching the costs against the related economic benefits because of fluctuations in stripping costs over the life of the mine, and the effect is material. Deferred stripping costs are presented within "mining properties and leases". The amount of stripping costs deferred is based on the ratio ('Ratio') obtained by dividing the tonnage of waste mined either by the quantity of ore mined or by the quantity of minerals contained in the ore. Stripping costs incurred in the period are deferred to the extent that the current period Ratio exceeds the life of mine Ratio. Such deferred costs are then charged against reported profits to the extent that, in subsequent periods, the Ratio falls short of the life of mine Ratio. The life of mine Ratio is based on proven and probable reserves of the operation. |
In some operations, there are distinct periods of new development during the production stage of the mine. These may, for example, relate to a separate ore body or discrete section of the ore body. The new development will be characterised by a major departure from the life of mine Ratio. Excess stripping costs during such periods are deferred and charged against reported profits in subsequent periods, on a units of production basis. |
If the Group were to expense stripping costs as incurred, there would be greater volatility in the year-to-year results from operations and excess stripping costs would be expensed at an earlier stage of a mine's operations. |
Deferred stripping costs form part of the total investment in the relevant income generating unit, which is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. |
Amortisation of deferred stripping costs is included in depreciation of property, plant and equipment or in the Group's share of the results of its equity accounted operations, as appropriate. Changes to the life of mine stripping ratio are accounted for prospectively. |
A-14
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS
1 Principal accounting policies (continued)
j Depreciation and carrying values of fixed assets |
Assets are fully depreciated over their economic lives, or over the remaining life of the mine if shorter. The major categories of fixed assets are depreciated on a units of production and/or straight-line basis as follows: |
Units
of production basis
For mining properties
and leases and certain mining equipment, the economic benefits from the asset
are consumed in a pattern which is linked to the production level. Except as
noted below, such assets are depreciated on a units of production basis.
Straight
line basis
Assets within operations
for which production is not expected to fluctuate significantly from one year
to another or which have a physical life shorter than the related mine are
depreciated on a straight line basis as follows:
Buildings | 10 to 40 years |
Property, plant and equipment | 3 to 35 years |
Land | Not depreciated |
Changes to the estimated economic life of fixed assets are accounted for prospectively. In applying the units of production method, depreciation is normally calculated using the quantity of material extracted from the mine in the period as a percentage of the total quantity of material to be extracted in current and future periods based on proven and probable reserves (and, for some mines, mineral resources). Development costs that relate to a discrete section of an ore body and which only provide benefit over the life of those reserves, are depreciated over the estimated life of that discrete section. Development costs incurred which benefit the entire ore body are depreciated over the estimated life of the ore body.
Tangible and intangible fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. This applies to the Group's share of the fixed assets held by associates, joint ventures and joint arrangements as well as the fixed assets held by the Group itself. In addition, goodwill is reviewed for impairment at the end of the first complete financial year after the relevant acquisition and, where the goodwill is being amortised over a period exceeding 20 years, annually thereafter. When a review for impairment is conducted, the recoverable amount is assessed by reference to the net present value of expected future cash flows of the relevant income generating unit, or disposal value if higher. Future cash flows are based on estimates of the quantities of ore reserves and certain mineral resources for which there is a high degree of confidence of economic extraction, future production levels, future commodity prices (assuming that the current market prices will revert to the Group's assessment of the long-term average price, generally over a period of three to five years), future exchange rates (which are assessed using historical average exchange rates as a starting point), and future cash costs of production, capital, close down, restoration and environmental clean up. For operations with a functional currency other than the US dollar, the impairment review is undertaken in the relevant functional currency. These estimates are based on detailed mine plans and operating budgets, modified as appropriate to meet the requirements of FRS 11.
The discount rate applied is based upon the Groups weighted average cost of capital with appropriate adjustment for the risks associated with the relevant unit, to the extent that such risks are not reflected in the forecast cashflows.
k Determination of ore reserves |
The Group estimates its ore reserves and mineral resources based on information compiled by Competent Persons (as defined in accordance with the Australasian Code for Reporting of Mineral Resources and Ore Reserves of December 2004 (the JORC code)). Reserves and, for certain mines, resources determined in this way are used in the calculation of depreciation, amortisation and impairment charges, the assessment of life of mine stripping ratios and for forecasting the timing of the payment of close down and restoration costs. |
In assessing the life of a mine for accounting purposes, mineral resources are only taken into account where there is a high degree of confidence of economic extraction.
l Provisions for close down and restoration and for environmental clean up costs |
Close down and restoration costs include the dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas. Close down and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs, whether this occurs during mine development or during the production phase, based on the net present value of estimated future costs. Provisions for close down and restoration costs do not include any additional obligations which are expected to arise from future disturbance. The costs are estimated on the basis of a closure plan. The cost estimates are updated annually during the life of the operation to reflect known developments and are subject to formal review at regular intervals. |
The amortisation or 'unwinding' of the discount applied in establishing the net present value of provisions is charged to the profit and loss account in each accounting period. The amortisation of the discount is shown as a financing cost rather than as an operating cost. Other movements in the provisions for close down and restoration costs, including those resulting from new disturbance, updated cost estimates, changes to the lives of operations and revisions to discount rates, are capitalised within fixed assets. These costs are then depreciated over the lives of the assets to which they relate.
Where rehabilitiation is conducted systematically over the life of the operation, rather than at the time of closure, provision is made for the outstanding continuous rehabilitation work at each balance sheet date. All other costs of continuous rehabilitation are charged to the profit and loss account as incurred. Provision is made for the estimated present value of the costs of environmental clean up obligations outstanding at the balance sheet date. These costs are charged to the profit and loss account. Movements in the environmental clean up provisions are presented as an operating cost, except for the unwind of the discount which is shown as a financing cost.
A-15
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
1 Principal accounting policies (continued)
m Inventories |
Inventories are valued at the lower of cost and net realisable value on a first in, first out ('FIFO') basis. Cost for raw materials and stores is purchase price and for partly processed and saleable products is generally the cost of production, including the appropriate proportion of depreciation and overheads. For this purpose, the costs of production include labour costs, materials and contractor expenses which are directly attributable to the extraction and processing of ore; the depreciation of mining properties and leases and of fixed assets used in the extraction and processing of ore; and production overheads. |
Stockpiles represent ore that has been extracted and is available for further processing. If there is significant uncertainty as to when the stockpiled ore will be processed the related costs are expensed as incurred. Where the future processing of this ore can be predicted with confidence because it exceeds the mine's cut off grade, it is valued at the lower of cost and net realisable value. If the ore will not be processed within the 12 months after the balance sheet date it is disclosed as 'Inventories not expected to be sold nor used within 12 months'.
Work in progress inventory includes ore stockpiles and other partly processed material. Quantities are assessed primarily through surveys and assays.
n Costs and expenses applicable to revenues |
Costs and expenses applicable to revenues include inventory values transferred to the profit and loss account upon sale, together with associated distribution costs. |
o Deferred tax |
Full provision is made for deferred taxation on all timing differences that have arisen but have not reversed at the balance sheet date, except in limited circumstances. The main exceptions are as follows: |
- | Tax payable on the future remittance of the past earnings of subsidiaries, associates and joint ventures is provided only to the extent that dividends have been accrued or there is a binding agreement to distribute such past earnings. |
- | Deferred tax is not recognised on revaluations of non-monetary assets arising on acquisitions unless there is a binding agreement to sell the asset and the gain or loss expected to arise from the disposal has been recognised. |
- | Deferred tax assets are recognised only to the extent that it is more likely than not that they will be recovered. |
Provisions for deferred tax are made in respect of tax benefits related to goodwill that was charged directly to reserves on acquisitions made prior to 1998. Such provisions are released when the related goodwill is charged through the profit and loss account on disposal or closure. Deferred tax balances are not discounted to their present value.
p Post retirement benefits |
In accordance with SSAP 24, the expected costs of post retirement benefits under defined benefit arrangements are charged to the profit and loss account so as to spread the costs over the service lives of employees entitled to those benefits. Variations from the regular cost are spread on a straight line basis over the expected average remaining service lives of relevant current employees. Costs are assessed in accordance with the advice of qualified actuaries. |
q Financial instruments |
The Group's policy with regard to 'Treasury management and financial instruments' is set out in the Financial Review. When the Group enters into derivative contracts, these transactions are designed to reduce exposures related to assets and liabilities, firm commitments or anticipated transactions, and are therefore accounted for as hedges. Amounts receivable and payable in respect of interest rate swaps are recognised as an adjustment to net interest over the life of the contract. Gains or losses on foreign currency forward contracts and currency swaps relating to financial assets and liabilities are matched against the losses or gains on the hedged items, either in the profit and loss account or through reserves, as appropriate. Gains and losses on financial instruments relating to firm commitments or anticipated transactions for revenue items are deferred and recognised when the hedged transaction occurs. Gains and losses on financial instruments relating to firm commitments or anticipated transactions for capital expenditure are capitalised and depreciated in line with the underlying asset. The cash flows from these contracts are classified in a manner consistent with the underlying nature of the related transaction. |
A-16
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
2 | Net operating costs |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||||
Note | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||
Operating costs from continuing operations | ||||||||||||||||||||
Raw materials and consumables | 1,629 | 1,455 | 1,277 | 1,841 | 1,520 | 1,314 | 3,470 | 2,975 | 2,591 | |||||||||||
Depreciation and amortisation (a) | 488 | 385 | 423 | 716 | 621 | 531 | 1,204 | 1,006 | 954 | |||||||||||
3 | Employment costs | 897 | 845 | 687 | 945 | 821 | 650 | 1,842 | 1,666 | 1,337 | ||||||||||
Royalties and other mining taxes | 256 | 220 | 204 | 230 | 219 | 186 | 486 | 439 | 390 | |||||||||||
Decrease in inventories | 82 | 4 | 18 | 11 | 51 | 63 | 93 | 55 | 81 | |||||||||||
Other external costs (a) (c) | 866 | 716 | 622 | 1,377 | 1,075 | 793 | 2,243 | 1,791 | 1,415 | |||||||||||
20 | Provisions (a) | 109 | 60 | 33 | 38 | 94 | 25 | 147 | 154 | 58 | ||||||||||
11 | Exploration and evaluation | 116 | 90 | 94 | 71 | 37 | 36 | 187 | 127 | 130 | ||||||||||
Research and development | 17 | 17 | 17 | 6 | 6 | 8 | 23 | 23 | 25 | |||||||||||
Net exchange losses on monetary items | 32 | 40 | 28 | 1 | 83 | 13 | 33 | 123 | 41 | |||||||||||
Costs included above qualifying for capitalisation | (51 | ) | (68 | ) | (33 | ) | 1 | (100 | ) | (80 | ) | (50 | ) | (168 | ) | (113 | ) | |||
Other operating income | (13 | ) | (40 | ) | (3 | ) | (146 | ) | (79 | ) | (105 | ) | (159 | ) | (119 | ) | (103 | ) | ||
Net operating costs before exceptional | ||||||||||||||||||||
charges | 4,428 | 3,724 | 3,367 | 5,091 | 4,348 | 3,434 | 9,519 | 8,072 | 6,806 | |||||||||||
Exceptional charges (a) | 558 | - | 645 | - | - | 433 | 558 | - | 1,078 | |||||||||||
4,986 | 3,724 | 4,012 | 5,091 | 4,348 | 3,867 | 10,077 | 8,072 | 7,884 | ||||||||||||
(a) | The above detailed analysis of costs is before exceptional charges. Including exceptional charges, the total charge for depreciation and amortisation for the Rio Tinto Group was US$1,612 million in 2004 and US$1,893 million in 2002. The charge for provisions was US$296 million in 2004 and US$174 million in 2002; other external costs were US$1,166 million in 2002. |
The total charge for depreciation and amortisation for Rio Tinto plc was US$896 million in 2004 and US$929 million in 2002; the charge for provisions was US$258 million in 2004 and US$149 million in 2002; and other external costs were US$581 million in 2002. | |
The total charge for depreciation and amortisation for Rio Tinto Limited was US$964 million in 2002 and other external costs were US$585 million in 2002. | |
(b) | Information on auditor's remuneration is included in note 37. |
(c) | Turnover and operating costs have been adjusted to reclassify, as turnover, certain amounts charged to customers for freight and handling costs, which previously were deducted from operating costs. The effect was to increase Net operating costs in 2004 by US$455 million (2003: US$340 million, 2002: US$272 million). |
3 | Employee costs |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||
Employment costs, excluding joint ventures and associates: | ||||||||||||||||||||
- Wages and salaries | 824 | 730 | 647 | 871 | 785 | 615 | 1,695 | 1,515 | 1,262 | |||||||||||
- Social security costs | 62 | 59 | 55 | 12 | 13 | 13 | 74 | 72 | 68 | |||||||||||
- Net post retirement cost (a) | 68 | 101 | 21 | 105 | 83 | 58 | 173 | 184 | 79 | |||||||||||
954 | 890 | 723 | 988 | 881 | 686 | 1,942 | 1,771 | 1,409 | ||||||||||||
Less: charged within provisions | (57 | ) | (45 | ) | (36 | ) | (43 | ) | (60 | ) | (36 | ) | (100 | ) | (105 | ) | (72 | ) | ||
897 | 845 | 687 | 945 | 821 | 650 | 1,842 | 1,666 | 1,337 | ||||||||||||
(a) | The net post retirement cost includes the gradual recognition under SSAP 24 of the deficits and surpluses in the Group's defined benefit pension schemes. | |||||||||||||||||||
(b) | UITF Abstract 17 requires the intrinsic value of share options to be recognised as a cost. However, the Group's SAYE schemes are exempt from this requirement. None of the Group's other share option schemes involve granting new options at a discount to market value. |
A-17
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
4 Exceptional items
2004 | 2003 | 2002 | ||||||||||
Outside | Net | Net | Net | |||||||||
shareholders' | amount | amount | amount | |||||||||
Pre-tax | Taxation | interests | US$m | US$m | US$m | |||||||
Rio Tinto Group | US$m | US$m | US$m | US$m | US$m | US$m | ||||||
Gains/(losses) relating to disposals of: | ||||||||||||
Subsidiaries | 213 | (9 | ) | 4 | 208 | (6 | ) | - | ||||
Joint ventures (c) | 67 | (2 | ) | - | 65 | 107 | - | |||||
Associates (d) | 536 | - | - | 536 | 25 | - | ||||||
Other investments | 104 | - | - | 104 | - | - | ||||||
920 | (11 | ) | 4 | 913 | 126 | - | ||||||
Asset write downs and provision for contract obligation (e) | (558 | ) | 108 | 129 | (321 | ) | - | (879 | ) | |||
Net exceptional items | 362 | 97 | 133 | 592 | 126 | (879 | ) | |||||
2004 | 2003 | 2002 | ||||||||||
Outside | Net | Net | Net | |||||||||
shareholders' | amount | amount | amount | |||||||||
Pre-tax | Taxation | interests | US$m | US$m | US$m | |||||||
Rio Tinto plc | US$m | US$m | US$m | US$m | US$m | US$m | ||||||
Gains/(losses) relating to disposals of: | ||||||||||||
Subsidiaries | 233 | (9 | ) | 4 | 228 | - | - | |||||
Joint ventures (c) | 25 | (1 | ) | - | 24 | 40 | - | |||||
Associates (d) | 536 | - | - | 536 | 7 | - | ||||||
Other investments | 39 | - | - | 39 | - | - | ||||||
833 | (10 | ) | 4 | 827 | 47 | - | ||||||
Asset write downs and provision for contract obligation (e) | (558 | ) | 108 | 129 | (321 | ) | - | (739 | ) | |||
Net exceptional items | 275 | 98 | 133 | 506 | 47 | (739 | ) | |||||
2004 | 2003 | 2002 | ||||||||||
Outside | Net | Net | Net | |||||||||
shareholders' | amount | amount | amount | |||||||||
Pre-tax | Taxation | interests | US$m | US$m | US$m | |||||||
Rio Tinto Limited | US$m | US$m | US$m | US$m | US$m | US$m | ||||||
Gains/(losses) relating to disposals of: | ||||||||||||
Subsidiaries | (32 | ) | - | - | (32 | ) | - | - | ||||
Joint ventures (c) | 67 | (2 | ) | - | 65 | 107 | - | |||||
Associates (d) | - | - | - | - | 19 | - | ||||||
Other investments | 104 | - | - | 104 | - | - | ||||||
139 | (2 | ) | - | 137 | 126 | - | ||||||
Asset write downs | - | - | - | - | - | (225 | ) | |||||
Net exceptional items | 139 | (2 | ) | - | 137 | 126 | (225 | ) | ||||
(a) | The exceptional items analysed above, and within the profit and loss account, are added back in arriving at adjusted earnings and adjusted earnings per share. |
(b) | Additional information on the disposals of interests in subsidiaries, joint ventures, associates and other investments is included in note 35. |
(c) | The gain from disposal of a joint venture in 2004 relates to the sale of a 10 per cent interest in Hail Creek. The Group retained joint control after the disposal. |
(d) | Gains relating to disposals of associates include US$518 million profit on sale of the Group's equity interest in Freeport-McMoRan Copper & Gold Inc. ('FCX'). Rio Tinto invested in the Grasberg ore body through purchase of an equity interest in FCX and participation in the Grasberg joint venture. The investment occurred prior to the introduction of FRS 10 and the goodwill arising was therefore eliminated directly against reserves in accordance with Rio Tinto's UK GAAP accounting policy at the time. On disposal of the equity interest in FCX, the US$228 million of goodwill attributable to this interest was written back through reserves and deducted in arriving at the profit on disposal. |
(e) | The 2004 asset write down and contract obligation comprises US$160 million (both before and after taxation and minority interests) in respect of Colowyo and US$398 before taxation and minority interests (US$161 million after taxation and minority interests) in respect of Palabora. |
(f) | The asset write down for Palabora aligns the balance sheet value of the relevant fixed assets with the net present value of the expected future cash flows relating to those assets. The pre-tax discount rate of nine per cent used in calculating the net present value of expected future cash flows was derived from the Group's weighted average cost of capital, with appropriate adjustments for risk. This discount rate has been applied to the relevant pre-tax cash flows stated in real terms. |
(g) | Future operating and development costs relating to Colowyo are now estimated to be substantially higher than previously expected. This has resulted in the above exceptional charge of US$160 million, which includes assets write downs totalling US$11 million and a provision of US$149 million in respect of the Group's obligations under the management agreement referred to in note 14. These charges are based on the expected further cash flows of the Colowyo operation, having regard to the Group's obligations under the management agreement. In calculating the asset write downs and provision for contract obligations, the cash flows have been estimated in real terms and discounted at a pre-tax discount rate of five per cent. The major area of uncertainty affecting the provision for contract obligations relates to the future operating and development costs of the Colowyo operation, which have been estimated over the next eighteen years. |
(h) | The gains arising on disposals of subsidiaries, joint ventures and associates in 2003 did not give rise to a tax charge. |
(i) | The taxation credit for 2004 comprises a deferred tax credit of US$112 million offset by a current tax charge of US$15 million. |
A-18
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
4 Exceptional items (continued)(j) | The exceptional charges of US$879 million recognised in 2002 comprised provisions of US$763 million for the impairment of asset carrying values and a charge of US$116 million related to environmental remediation works at Kennecott Utah Copper ('KUC'). Of the impairment charge, US$480 million related to KUC and US$235 million related to the Iron Ore Company of Canada ('IOC'). Of the total charge, US$16 million before tax related to joint ventures and the remainder to subsidiaries. Most of the 2002 impairment provisions were calculated so as to ensure that the carrying value of the relevant assets were the same as the present value of the expected future cash flows relating to those assets. The discount rates used in calculating the present value of expected future cash flows were derived from the Group's weighted average cost of capital, with appropriate risk adjustments. When adjusted to include inflation and grossed up at the Group's average tax rate for 2 002, before exceptional items, the discount rate applied to the relevant income generating units was equivalent to 10 per cent, except for gold production for which a rate equivalent to 7 per cent was used. The impairment provision against IOC aligned the carrying value with the value negotiated between shareholders during 2002 as part of a financial restructuring exercise. |
(k) | In preparing financial statements in accordance with the Companies Act and UK GAAP certain information is presented that would be viewed as non-GAAP under regulations issued by the United States Securities and Exchange Commission (SEC). The Group has described such items, provided disclosure on the effects and reasons for presentation along with a condensed income statement using the format prescribed by the SEC. The disclosure of asset write downs and contract obligations in 2004 and 2002, as well as the disclosure of the profit on disposal of interests in operations in 2004 and 2003, as exceptional items is expressly permitted under FRS 3. Otherwise, disclosure of these amounts as exceptional items would be prohibited within the Form 20-F. Management consider these asset write downs, contract obligations and profits on disposal to be exceptional in nature because large items of this type do not occur regularly. Their impact on earnings may be positive in some years and negative in others. The environmental remediation charge in 2002 is similarly presented as an exceptional item under FRS 3. Management consider this charge to be exceptional in nature because large items of this type do not occur regularly. Such items do not reflect the performance of the business unit to which they relate in the particular year in which they are recognised. |
5 Net interest payable and similar charges
Rio Tinto plc - | Rio Tinto Limited - | ||||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | |||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||
Interest payable on | |||||||||||||||||||
Bank borrowings | (26 | ) | (26 | ) | (21 | ) | (27 | ) | (30 | ) | (23 | ) | (53 | ) | (56 | ) | (44 | ) | |
Other loans | (52 | ) | (64 | ) | (95 | ) | (139 | ) | (100 | ) | (112 | ) | (119 | ) | (143 | ) | (189 | ) | |
(78 | ) | (90 | ) | (116 | ) | (166 | ) | (130 | ) | (135 | ) | (172 | ) | (199 | ) | (233 | ) | ||
Amounts capitalised | 1 | 12 | 14 | 34 | 27 | 8 | 35 | 39 | 22 | ||||||||||
(77 | ) | (78 | ) | (102 | ) | (132 | ) | (103 | ) | (127 | ) | (137 | ) | (160 | ) | (211 | ) | ||
Interest receivable and similar income from fixed asset investments | |||||||||||||||||||
Joint ventures | 9 | 8 | 10 | 4 | - | - | 13 | 8 | 10 | ||||||||||
Associates | 72 | 31 | 18 | - | 5 | 1 | - | 5 | 1 | ||||||||||
Other investments | 2 | 4 | 9 | 1 | - | - | 3 | 4 | 9 | ||||||||||
83 | 43 | 37 | 5 | 5 | 1 | 16 | 17 | 20 | |||||||||||
Other interest receivable | 1 | (7 | ) | 13 | 7 | 1 | 17 | 8 | 4 | 30 | |||||||||
84 | 36 | 50 | 12 | 6 | 18 | 24 | 21 | 50 | |||||||||||
Group net interest payable | 7 | (42 | ) | (52 | ) | (120 | ) | (97 | ) | (109 | ) | (113 | ) | (139 | ) | (161 | ) | ||
Share of joint ventures' net interest payable (a) | (19 | ) | (11 | ) | (20 | ) | (1 | ) | (2 | ) | (6 | ) | (20 | ) | (13 | ) | (26 | ) | |
Share of associates' net interest payable (a) | (57 | ) | (85 | ) | (84 | ) | - | (1 | ) | (9 | ) | (16 | ) | (54 | ) | (50 | ) | ||
Net interest payable | (69 | ) | (138 | ) | (156 | ) | (121 | ) | (100 | ) | (124 | ) | (149 | ) | (206 | ) | (237 | ) | |
6 | Amortisation of discount | (76 | ) | (69 | ) | (39 | ) | (46 | ) | (36 | ) | (23 | ) | (105 | ) | (92 | ) | (54 | ) |
Net interest payable and similar charges | (145 | ) | (207 | ) | (195 | ) | (167 | ) | (136 | ) | (147 | ) | (254 | ) | (298 | ) | (291 | ) | |
(a) | The Group's share of net interest payable by joint ventures and associates relates to its share of the net debt of joint ventures and associates, which is disclosed in note 14. |
(b) | Interest of US$72 million payable from Rio Tinto Limited to Rio Tinto plc is included as 'Interest receivable from associates' for Rio Tinto plc and as 'Interest payable on other loans' for Rio Tinto Limited. |
6 Amortisation of discount
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||
Subsidiaries | (56 | ) | (63 | ) | (40 | ) | (44 | ) | (34 | ) | (22 | ) | (100 | ) | (97 | ) | (62 | ) |
Share of joint ventures | (2 | ) | (1 | ) | (1 | ) | (2 | ) | (2 | ) | (1 | ) | (4 | ) | (3 | ) | (2 | ) |
Share of associates | (18 | ) | (13 | ) | (8 | ) | - | - | - | (1 | ) | - | - | |||||
(76 | ) | (77 | ) | (49 | ) | (46 | ) | (36 | ) | (23 | ) | (105 | ) | (100 | ) | (64 | ) | |
Amounts capitalised (b) | - | 8 | 10 | - | - | - | - | 8 | 10 | |||||||||
Amortisation of discount | (76 | ) | (69 | ) | (39 | ) | (46 | ) | (36 | ) | (23 | ) | (105 | ) | (92 | ) | (54 | ) |
(a) | The amortisation of discount relates principally to provisions for close down and restoration and for environmental clean up costs as explained in accounting policy 1(l). It also includes the unwind of the discount on non-interest bearing long term accounts payable. |
(b) | Amounts capitalised relate to costs on specific projects for which construction or development activities are ongoing. |
(c) | Under US GAAP 'Amortisation of discount' would be accounted for as an operating cost. |
A-19
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
7 Taxation charge for the year
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||
UK taxation | ||||||||||||||||||
Corporation tax at 30% | ||||||||||||||||||
Current | 22 | 99 | 58 | - | - | (4 | ) | 22 | 99 | 54 | ||||||||
Deduct: relief for overseas taxes | (15 | ) | (96 | ) | (63 | ) | - | - | - | (15 | ) | (96 | ) | (63 | ) | |||
7 | 3 | (5 | ) | - | - | (4 | ) | 7 | 3 | (9 | ) | |||||||
Deferred | - | (7 | ) | 11 | - | - | 1 | - | (7 | ) | 12 | |||||||
7 | (4 | ) | 6 | - | - | (3 | ) | 7 | (4 | ) | 3 | |||||||
Australian taxation | ||||||||||||||||||
Corporation tax at 30% | ||||||||||||||||||
Current | 5 | 3 | 3 | 385 | 297 | 342 | 390 | 300 | 345 | |||||||||
Deferred | 2 | (2 | ) | - | (27 | ) | 11 | 21 | (25 | ) | 9 | 21 | ||||||
7 | 1 | 3 | 358 | 308 | 363 | 365 | 309 | 366 | ||||||||||
Other countries taxation | ||||||||||||||||||
Current | 162 | 20 | 123 | 42 | 27 | 40 | 204 | 47 | 163 | |||||||||
Deferred | (74 | ) | (10 | ) | 10 | (14 | ) | (17 | ) | (17 | ) | (88 | ) | (27 | ) | (7 | ) | |
88 | 10 | 133 | 28 | 10 | 23 | 116 | 20 | 156 | ||||||||||
Joint ventures - charge for year (b) | 231 | 123 | 78 | 88 | 37 | 87 | 319 | 160 | 165 | |||||||||
Associates
- charge for year (including share
of tax relief on exceptional asset write-downs for Rio Tinto plc
of: (2002: US$9 million) (b) |
201 | 211 | 222 | 3 | 5 | (5 | ) | 34 | 82 | 60 | ||||||||
Subsidiary
companies' deferred tax related to exceptional charges |
- | - | - | - | - | (42 | ) | - | - | (42 | ) | |||||||
534 | 341 | 442 | 477 | 360 | 423 | 841 | 567 | 708 | ||||||||||
(a) | A current tax charge of US$20 million (2003: US$194 million; 2002: US$48 million) and a deferred tax charge of US$13 million (2003: US$162 million; 2002: US$13 million) are dealt with in the Statement of Total Recognised Gains and Losses ('STRGL'). These tax charges relate to exchange gains and losses which are themselves dealt with in the STRGL. |
(b) | Some tax recognised by subsidiary holding companies is presented in these accounts as part of the tax charge on the profits of the joint ventures and associates to which it relates. |
(c) | A benefit of US$15 million was recognised in 2004 (2003: US$34 million; 2002: US$20 million) for operating losses that are expected to be recovered in future years. Of this benefit, US$5 million is included within 'UK taxation', US$nil within 'Australian taxation' and US$10 million within 'Other countries'. |
(d) | Adjustments of prior year accruals and provisions reduced the total tax charge by a net amount of US$8 million (2003: US$28 million; 2002 US$16 million). |
(e) | The 2004 tax charge was reduced by US$26 million (2003: US$11 million) as a result of the entry into the Australian tax consolidation regime with effect from 1 January 2003. |
(f) | The Group's effective tax rate for 2004 is 29.0 per cent (2003: 28.8 per cent; 2002: 31.2 per cent) excluding exceptional items and 23.4 per cent (2003: 27.1 per cent; 2002: 54.0 per cent) including exceptional items. |
(g) | Tax paid during 2003, of US$917 million, included an amount of US$106 million relating to the disputed tax assessment from the Australian Tax Office described in note 29. The amount paid has been recorded as a receivable in these accounts because the Directors believe that the relevant tax assessments are not sustainable. Tax payments also include amounts related to exchange gains and losses on net debt which are recorded directly in the Statement of Total Recognised Gains and Losses. |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||
Prima facie tax reconciliation | ||||||||||||||||||
Profit on ordinary activities before taxation | 2,507 | 1,305 | 715 | 1,704 | 1,255 | 1,033 | 3,596 | 2,094 | 1,311 | |||||||||
Prima facie tax payable at UK and Australian rate of 30% | 752 | 392 | 215 | 511 | 377 | 310 | 1,079 | 628 | 393 | |||||||||
Impact of exceptional items | (54 | ) | - | 227 | (40 | ) | (38 | ) | 130 | (94 | ) | (38 | ) | 328 | ||||
Other permanent differences | ||||||||||||||||||
Other tax rates applicable outside the UK and Australia | 91 | 49 | 55 | 4 | 14 | 1 | 93 | 59 | 56 | |||||||||
Permanently disallowed amortisation/depreciation | 23 | 22 | 22 | 52 | 48 | 44 | 55 | 53 | 51 | |||||||||
Research, development and other investment allowances | (6 | ) | (5 | ) | (5 | ) | (2 | ) | - | (4 | ) | (8 | ) | (5 | ) | (7 | ) | |
Resource depletion allowances | (87 | ) | (54 | ) | (58 | ) | - | - | - | (87 | ) | (54 | ) | (58 | ) | |||
Other (h) | (41 | ) | (31 | ) | 25 | (21 | ) | (8 | ) | 1 | (30 | ) | (24 | ) | 24 | |||
(20 | ) | (19 | ) | 39 | 33 | 54 | 42 | 23 | 29 | 66 | ||||||||
Other deferral of taxation | ||||||||||||||||||
Capital allowances in excess of other depreciation charges | (95 | ) | (30 | ) | (82 | ) | 6 | (27 | ) | (12 | ) | (89 | ) | (48 | ) | (69 | ) | |
Other timing differences | 17 | 4 | 19 | 30 | 5 | (4 | ) | 34 | 14 | - | ||||||||
Total timing differences related to the current year | (78 | ) | (26 | ) | (63 | ) | 36 | (22 | ) | (16 | ) | (55 | ) | (34 | ) | (69 | ) | |
Current taxation charge for the year | 600 | 347 | 418 | 540 | 371 | 466 | 953 | 585 | 718 | |||||||||
Deferred tax recognised on timing differences | 78 | 26 | 63 | (36 | ) | 22 | (26 | ) | 55 | 34 | 27 | |||||||
Deferred tax impact of changes in tax rates | - | - | (15 | ) | - | - | 3 | - | - | (14 | ) | |||||||
Deferred tax impact of exceptional charges | (112 | ) | - | - | - | - | - | (112 | ) | - | - | |||||||
Other deferred tax items (i) | (32 | ) | (32 | ) | (24 | ) | (27 | ) | (33 | ) | (20 | ) | (55 | ) | (52 | ) | (23 | ) |
Total taxation charge for the year | 534 | 341 | 442 | 477 | 360 | 423 | 841 | 567 | 708 | |||||||||
(h) | 'Other' components of the current tax charge include the benefit of reduced Alternative Minimum Tax payable in the United States. |
(i) | 'Other deferred tax items' include benefits from adjustments of prior year provisions (see (d) above) and from Australian tax consolidation (see (e) above). |
A-20
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
8 Dividends | ||||||||
2004 | 2003 | 2002 | ||||||
US$m | US$m | US$m | ||||||
Rio Tinto plc Ordinary Interim dividend | 341 | 320 | 314 | |||||
Rio Tinto plc Ordinary Final dividend | 481 | 363 | 325 | |||||
822 | 683 | 639 | ||||||
Rio Tinto Limited Ordinary Interim dividend | 160 | 150 | 146 | |||||
Rio Tinto Limited Ordinary Final dividend | 225 | 170 | 153 | |||||
Less dividends payable to Rio Tinto plc (e) | (145 | ) | (121 | ) | (112 | ) | ||
Rio Tinto Limited dividends payable to public shareholders (b) | 240 | 199 | 187 | |||||
Total dividends payable to public shareholders | 1,062 | 882 | 826 | |||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||
Rates per share | Number of shares | |||||||||||
(millions) | ||||||||||||
Rio Tinto plc Interim (pence) | 17.54 | p | 18.45 | p | 18.87 | p | 1,067.5 | 1,066.1 | 1,065.4 | |||
Rio Tinto plc Final (pence) | 23.94 | p | 18.68 | p | 18.60 | p | 1,068.0 | 1,066.7 | 1,065.5 | |||
41.48 | p | 37.13 | p | 37.47 | p | |||||||
Rio Tinto Limited Interim - fully franked at 30% (Australian Cents) | 45.53 | c | 45.02 | c | 54.06 | c | 499.1 | 499.0 | 498.8 | |||
Less shares held by Rio Tinto plc | (187.4 | ) | (187.4 | ) | (187.4 | ) | ||||||
Shares held by public shareholders (b) | 311.7 | 311.6 | 311.4 | |||||||||
Rio Tinto Limited Final fully franked at 30% (Australian Cents) | 58.29 | c | 44.68 | c | 51.87 | c | 499.3 | 499.0 | 498.8 | |||
Less shares held by Rio Tinto plc | (187.4 | ) | (187.4 | ) | (187.4 | ) | ||||||
103.82 | c | 89.70 | c | 105.93 | c | |||||||
Shares held by public shareholders (b) | 311.9 | 311.6 | 311.4 | |||||||||
(a) | The 2004 dividends have been based on the following US cents per share amounts: interim 32.0 cents, final 45.0 cents. |
(b) | For the Group accounts, the number of shares on which the Rio Tinto Limited dividends are based excludes those shares held by Rio Tinto plc, in order that the dividends shown represent those paid to public shareholders. |
(c) | The proposed Rio Tinto Limited dividends will be franked out of existing franking credits or out of franking credits arising from the payment of income tax during 2005. |
(d) | Rio Tinto Limited formed a tax consolidated group in Australia with effect from 1 January 2003. The approximate amount of the Rio Tinto Limited tax consolidated group's retained profits and reserves that could be distributed as dividends and franked out of the existing franking credits which arose from net payments of income tax in respect of periods up to 31 December 2004 (after deducting franking credits on the proposed final dividend) is US$3,360 million. |
(e) | In addition, Rio Tinto Limited paid a dividend of US$nil (2003: US$164 million) to Rio Tinto plc on the DLC Dividend Share. |
A-21
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
9 Earnings per ordinary share | ||||||||||||||||||
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
Average number of ordinary shares in issue (million) (b) | 1,067 | 1,066 | 1,065 | 499 | 499 | 499 | 1,379 | 1,378 | 1,377 | |||||||||
US$m | ||||||||||||||||||
Profit for the financial year | 2,073 | 956 | 195 | 1,185 | 884 | 736 | 2,813 | 1,508 | 651 | |||||||||
Exceptional items (note 4) | (506 | ) | (47 | ) | 739 | (137 | ) | (126 | ) | 225 | (592 | ) | (126 | ) | 879 | |||
Adjusted earnings | 1,567 | 909 | 934 | 1,048 | 758 | 961 | 2,221 | 1,382 | 1,530 | |||||||||
US cents | ||||||||||||||||||
Earnings per ordinary share | 194.2 | c | 89.7 | c | 18.3 | c | 237.4 | c | 177.2 | c | 147.6 | c | 204.0 | c | 109.5 | c | 47.3 | c |
Exceptional items per ordinary share | (47.4 | )c | (4.4 | )c | 69.4 | c | (27.4 | )c | (25.3 | )c | 45.1 | c | (43.0 | )c | (9.2 | )c | 63.9 | c |
Adjusted earnings per ordinary share | 146.8 | c | 85.3 | c | 87.7 | c | 210.0 | c | 151.9 | c | 192.7 | c | 161.0 | c | 100.3 | c | 111.2 | c |
US cents | ||||||||||||||||||
Diluted earnings per share | 193.9 | c | 89.5 | c | 18.3 | c | 236.9 | c | 176.9 | c | 147.4 | c | 203.6 | c | 109.3 | c | 47.2 | c |
Exceptional items per share | 47.3 | c | 4.4 | c | (69.2 | )c | 27.4 | c | 25.2 | c | (45.0 | )c | 42.8 | c | 9.1 | c | (62.8 | )c |
Diluted adjusted earnings per ordinary share | 146.6 | c | 85.1 | c | 87.5 | c | 209.5 | c | 151.7 | c | 192.4 | c | 160.8 | c | 100.2 | c | 110.0 | c |
(a) | Adjusted earnings and adjusted earnings per share exclude exceptional items of such magnitude that their exclusion is necessary in order that adjusted earnings fulfil their purpose of reflecting the underlying performance of the Group. |
(b) | For the Rio Tinto Group, the daily average number of ordinary shares in issue of 1,379 million (2003: 1,378 million, 2002: 1,377 million) excludes the Rio Tinto Limited shares held by Rio Tinto plc. |
(c) | The daily average number of ordinary shares used for the diluted earnings per share calculation is 1,381 million (2003: 1,379 million, 2002: 1,379 million) and excludes the Rio Tinto Limited shares held by Rio Tinto plc. The extra two million shares included in the calculation relate to unexercised share options. |
10 Goodwill | ||||||||||||
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Cost | ||||||||||||
At 1 January | 482 | 463 | 1,080 | 819 | 1,562 | 1,282 | ||||||
Adjustment on currency translation | (1 | ) | (1 | ) | 42 | 261 | 41 | 260 | ||||
Additions | – | 20 | – | – | – | 20 | ||||||
At 31 December | 481 | 482 | 1,122 | 1,080 | 1,603 | 1,562 | ||||||
Accumulated amortisation | ||||||||||||
At 1 January | (229 | ) | (191 | ) | (148 | ) | (76 | ) | (377 | ) | (267 | ) |
Adjustment on currency translation | – | – | (10 | ) | (30 | ) | (10 | ) | (30 | ) | ||
Amortisation for the year | (37 | ) | (34 | ) | (40 | ) | (42 | ) | (77 | ) | (76 | ) |
Other movements | – | (4 | ) | – | – | – | (4 | ) | ||||
At 31 December | (266 | ) | (229 | ) | (198 | ) | (148 | ) | (464 | ) | (377 | ) |
Net balance sheet amount | 215 | 253 | 924 | 932 | 1,139 | 1,185 | ||||||
(a) | Goodwill is being amortised over the economic lives of the relevant operations, which involves periods ranging from nine to 40 years with a weighted average of around 26 years (2003: 26 years). The amortisation period exceeds 20 years where the ore reserves (and, for some mines, mineral resources) are sufficient to justify this. |
A-22
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
11 Exploration and evaluation | ||||||||||||
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
At cost less amounts written off | ||||||||||||
At 1 January | 372 | 355 | 462 | 339 | 834 | 694 | ||||||
Adjustment on currency translation | 2 | 1 | 21 | 118 | 23 | 119 | ||||||
Expenditure in year | 123 | 88 | 70 | 42 | 193 | 130 | ||||||
Charged against profit for the year | (45 | ) | (48 | ) | (6 | ) | 1 | (51 | ) | (47 | ) | |
Disposals, transfers and other movements (a) | (12 | ) | (24 | ) | (27 | ) | (38 | ) | (39 | ) | (62 | ) |
At 31 December | 440 | 372 | 520 | 462 | 960 | 834 | ||||||
Provision | ||||||||||||
At 1 January | (370 | ) | (350 | ) | (395 | ) | (287 | ) | (765 | ) | (637 | ) |
Adjustment on currency translation | (2 | ) | - | (18 | ) | (104 | ) | (20 | ) | (104 | ) | |
Charged against profit for the year | (71 | ) | (42 | ) | (65 | ) | (38 | ) | (136 | ) | (80 | ) |
Disposals, transfers and other movements | 30 | 22 | 28 | 34 | 58 | 56 | ||||||
At 31 December | (413 | ) | (370 | ) | (450 | ) | (395 | ) | (863 | ) | (765 | ) |
Net balance sheet amount | 27 | 2 | 70 | 67 | 97 | 69 | ||||||
(a) | 'Disposals, transfers and other movements' includes the capitalisation of US$17 million of close down and restoration provisions in respect of certain exploration projects. |
(b) | The total of US$187 million (2003: US$127 million) charged against profit in respect of exploration and evaluation includes US$51 million (2003: US$47 million) written off cost and an increase in the provision of US$136 million (2003: US$80 million). |
12 Property, plant and equipment | ||||||||||||
Mining | Land | Plant | Capital | |||||||||
properties | and | and | works in | 2004 | 2003 | |||||||
and leases | buildings | equipment | progress | Total | Total | |||||||
US$m | US$m | |||||||||||
Rio Tinto Group | ||||||||||||
Cost | ||||||||||||
At 1 January | 5,392 | 3,523 | 17,942 | 1,739 | 28,596 | 23,327 | ||||||
Adjustment on currency translation | 213 | 101 | 825 | 51 | 1,190 | 4,273 | ||||||
Capitalisation of additional closure costs (note 20) | 260 | - | - | - | 260 | 167 | ||||||
Other additions (g) | 199 | 97 | 570 | 1,559 | 2,425 | 1,462 | ||||||
Disposals | (13 | ) | (29 | ) | (208 | ) | (2 | ) | (252 | ) | (449 | ) |
Subsidiaries acquired/newly consolidated | - | - | - | - | - | 3 | ||||||
Subsidiaries sold | (203 | ) | (12 | ) | (244 | ) | - | (459 | ) | (185 | ) | |
Transfers and other movements (c) | 160 | 123 | 1,356 | (1,621 | ) | 18 | (2 | ) | ||||
At 31 December | 6,008 | 3,803 | 20,241 | 1,726 | 31,778 | 28,596 | ||||||
Accumulated depreciation | ||||||||||||
At 1 January | (1,409 | ) | (1,540 | ) | (10,317 | ) | (134 | ) | (13,400 | ) | (11,144 | ) |
Adjustment on currency translation | (66 | ) | (49 | ) | (472 | ) | - | (587 | ) | (1,886 | ) | |
Exceptional asset write downs | (7 | ) | (3 | ) | (398 | ) | - | (408 | ) | - | ||
Other depreciation for the year | (246 | ) | (119 | ) | (762 | ) | - | (1,127 | ) | (930 | ) | |
Disposals | 13 | 9 | 160 | 1 | 183 | 419 | ||||||
Subsidiaries sold | 71 | - | 110 | - | 181 | 148 | ||||||
Transfers and other movements (c) | 10 | (18 | ) | (4 | ) | (3 | ) | (15 | ) | (7 | ) | |
At 31 December | (1,634 | ) | (1,720 | ) | (11,683 | ) | (136 | ) | (15,173 | ) | (13,400 | ) |
Net balance sheet amount at 31 December 2004 | 4,374 | 2,083 | 8,558 | 1,590 | 16,605 | |||||||
Net balance sheet amount at 31 December 2003 | 3,983 | 1,983 | 7,625 | 1,605 | 15,196 | |||||||
A-23
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
12 | Property, plant and equipment (continued) |
(a) | The net balance sheet amount at 31 December 2004 includes US$374 million (2003: US$394 million) of pledged assets, in addition to assets held under the finance leases disclosed in note 22. |
(b) | The net balance sheet amount for land and buildings includes freehold US$2,005 million; long leasehold US$68 million; and short leasehold US$10 million. |
(c) | 'Transfers and other movements' includes reclassifications between categories. |
(d) | Accumulated depreciation on 'Capital works in progress' at 1 January 2004 relates to an exceptional charge made in 2002. |
(e) | Interest is capitalised at a rate based on the Group's cost of borrowing or at the rate on project specific debt where applicable. |
(f) | During 2002, the Group acquired North Jacob's Ranch for US$380 million. Payments of US$76 million were made in each of 2002, 2003 and 2004. The remainder of the consideration, US$152 million, is payable over the next two years. |
(g) |
During 2004, the Group acquired additional reserves at West Antelope at a cost of US$146 million. |
(h) | At 31 December 2004, net tangible assets per share amounted to US$8.22 (31 December 2003: US$6.38). |
(i) |
A change in the mine plan at Kennecott Utah Copper was approved in February 2005. Pending any extension of the assumed mine life there will be an increase in the annual depreciation charge and amortisation of the discount relating to provisions, together totalling approximately US$45 million, from 2005. |
Mining | Land | Plant | Capital | |||||||||
properties | and | and | works in | 2004 | 2003 | |||||||
and leases | buildings | equipment | progress | Total | Total | |||||||
Rio Tinto plc - part of Rio Tinto Group | US$m | US$m | ||||||||||
Cost | ||||||||||||
At 1 January | 1,791 | 1,855 | 7,481 | 160 | 11,287 | 10,518 | ||||||
Adjustment on currency translation | 46 | 29 | 286 | 3 | 364 | 543 | ||||||
Capitalisation of additional closure costs (note 20) | 105 | - | - | - | 105 | 67 | ||||||
Other additions | 105 | 79 | 168 | 269 | 621 | 485 | ||||||
Disposals | (13 | ) | (21 | ) | (114 | ) | - | (148 | ) | (321 | ) | |
Subsidiaries acquired/newly consolidated | - | - | - | - | - | 3 | ||||||
Subsidiaries sold | (18 | ) | (12 | ) | (142 | ) | - | (172 | ) | - | ||
Transfers and other movements | (92 | ) | 1 | 180 | (65 | ) | 24 | (8 | ) | |||
At 31 December | 1,924 | 1,931 | 7,859 | 367 | 12,081 | 11,287 | ||||||
Accumulated depreciation | ||||||||||||
At 1 January | (345 | ) | (685 | ) | (4,162 | ) | - | (5,192 | ) | (4,955 | ) | |
Adjustment on currency translation | (13 | ) | (5 | ) | (185 | ) | - | (203 | ) | (183 | ) | |
Exceptional charges | (7 | ) | (3 | ) | (398 | ) | - | (408 | ) | - | ||
Other depreciation for the year | (73 | ) | (58 | ) | (320 | ) | - | (451 | ) | (351 | ) | |
Disposals | 13 | 6 | 85 | - | 104 | 305 | ||||||
Subsidiaries sold | - | - | 37 | - | 37 | - | ||||||
Transfers and other movements | 73 | - | (69 | ) | - | 4 | (8 | ) | ||||
At 31 December | (352 | ) | (745 | ) | (5,012 | ) | - | (6,109 | ) | (5,192 | ) | |
Net balance sheet amount at 31 December 2004 | 1,572 | 1,186 | 2,847 | 367 | 5,972 | |||||||
Net balance sheet amount at 31 December 2003 | 1,446 | 1,170 | 3,319 | 160 | 6,095 | |||||||
(a) |
The net balance sheet amount at 31 December 2004 includes US$nil (2003: US$25 million) of pledged assets, in addition to assets held under the finance leases disclosed in note 22. |
Mining | Land | Plant | Capital | |||||||||
properties | and | and | works in | 2004 | 2003 | |||||||
and leases | buildings | equipment | progress | Total | Total | |||||||
Rio Tinto Limited - part of Rio Tinto Group | US$m | US$m | ||||||||||
Cost | ||||||||||||
At 1 January | 3,601 | 1,668 | 10,455 | 1,579 | 17,303 | 12,803 | ||||||
Adjustment on currency translation | 167 | 72 | 539 | 48 | 826 | 3,730 | ||||||
Capitalisation of additional closure costs (note 20) | 155 | - | - | - | 155 | 100 | ||||||
Other additions | 94 | 18 | 402 | 1,290 | 1,804 | 977 | ||||||
Disposals | - | (8 | ) | (94 | ) | (2 | ) | (104 | ) | (128 | ) | |
Subsidiaries acquired/newly consolidated | - | - | - | - | - | - | ||||||
Subsidiaries sold | (185 | ) | - | (102 | ) | - | (287 | ) | (185 | ) | ||
Transfers and other movements | 252 | 122 | 1,182 | (1,556 | ) | - | 6 | |||||
At 31 December | 4,084 | 1,872 | 12,382 | 1,359 | 19,697 | 17,303 | ||||||
Accumulated depreciation | ||||||||||||
At 1 January | (1,064 | ) | (855 | ) | (6,155 | ) | (134 | ) | (8,208 | ) | (6,189 | ) |
Adjustment on currency translation | (53 | ) | (44 | ) | (287 | ) | - | (384 | ) | (1,703 | ) | |
Exceptional charges | - | - | - | - | - | - | ||||||
Other depreciation for the year | (173 | ) | (61 | ) | (442 | ) | - | (676 | ) | (579 | ) | |
Disposals | - | 3 | 75 | 1 | 79 | 114 | ||||||
Subsidiaries sold | 71 | - | 73 | - | 144 | 148 | ||||||
Transfers and other movements | (63 | ) | (18 | ) | 65 | (3 | ) | (19 | ) | 1 | ||
At 31 December | (1,282 | ) | (975 | ) | (6,671 | ) | (136 | ) | (9,064 | ) | (8,208 | ) |
Net balance sheet amount at 31 December 2004 | 2,802 | 897 | 5,711 | 1,223 | 10,633 | |||||||
Net balance sheet amount at 31 December 2003 | 2,537 | 813 | 4,300 | 1,445 | 9,095 | |||||||
(a) | The net balance sheet amount at 31 December 2004 includes US$374 million (2003: US$369 million) of pledged assets in addition to assets held under the finance leases disclosed in note 22. |
A-24
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
12 Property, plant and equipment (continued)
Rio Tinto plc - | Rio Tinto Limited - | Rio Tinto | ||||
part of Rio Tinto Group | part of Rio Tinto Group | Group | ||||
US$m | US$m | US$m | ||||
The 2004 net balance sheet amounts for land and buildings include: | ||||||
Freehold | 1,166 | 839 | 2,005 | |||
Long leasehold | 10 | 58 | 68 | |||
Short leasehold | 10 | - | 10 | |||
1,186 | 897 | 2,083 | ||||
Deferred stripping
Deferred stripping costs which are included
in 'Mining properties and leases' and 'Investments in Joint Ventures and
Associates' (note 13), are analysed below:
Rio Tinto Group | ||||||
2004 | 2003 | 2002 | ||||
US$m | US$m | US$m | ||||
At 1 January | ||||||
Subsidiaries | 441 | 326 | 292 | |||
Share of equity accounted operations | 230 | 198 | 175 | |||
671 | 524 | 467 | ||||
Adjustment on currency translation | ||||||
Subsidiaries | 10 | 17 | - | |||
Share of equity accounted operations | 1 | 3 | - | |||
11 | 20 | - | ||||
Net deferral of stripping costs during the year | ||||||
Subsidiaries | 116 | 77 | 29 | |||
Share of equity accounted operations | 19 | 32 | 27 | |||
135 | 109 | 56 | ||||
Other | ||||||
Subsidiaries | 2 | 21 | 5 | |||
Share of equity accounted operations | (35 | ) | (3 | ) | (4 | ) |
(33 | ) | 18 | 1 | |||
Deferred stripping balance carried forward at 31 December | ||||||
Subsidiaries | 569 | 441 | 326 | |||
Share of equity accounted operations | 215 | 230 | 198 | |||
784 | 671 | 524 | ||||
Rio Tinto plc | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | |||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
At 1 January | ||||||||||||
Subsidiaries | 355 | 260 | 242 | 86 | 66 | 50 | ||||||
Equity accounted operations | 250 | 218 | 191 | 20 | 8 | 4 | ||||||
605 | 478 | 433 | 106 | 74 | 54 | |||||||
Adjustment on currency translation | ||||||||||||
Subsidiaries | 4 | 2 | - | 6 | 15 | - | ||||||
Equity accounted operations | 3 | 7 | - | 1 | 3 | - | ||||||
7 | 9 | - | 7 | 18 | - | |||||||
Net deferral of stripping costs during the year | ||||||||||||
Subsidiaries | 61 | 66 | 13 | 55 | 11 | 16 | ||||||
Equity accounted operations | 40 | 29 | 31 | - | 12 | 4 | ||||||
101 | 95 | 44 | 55 | 23 | 20 | |||||||
Other | ||||||||||||
Subsidiaries | 3 | 27 | 5 | (1 | ) | (6 | ) | - | ||||
Equity accounted operations | (22 | ) | (3 | ) | (4 | ) | (21 | ) | (3 | ) | - | |
(19 | ) | 24 | 1 | (22 | ) | (9 | ) | - | ||||
Deferred stripping balance carried forward at | ||||||||||||
31 December | ||||||||||||
Subsidiaries | 423 | 355 | 260 | 146 | 86 | 66 | ||||||
Equity accounted operations | 271 | 251 | 218 | - | 20 | 8 | ||||||
694 | 606 | 478 | 146 | 106 | 74 | |||||||
A-25
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
13 Fixed asset investments
Investments | Loans to | Investments | Loans | |||||||||
in joint | joint | in associates/ | to | 2004 | 2003 | |||||||
ventures | ventures | other | associates | Total | Total | |||||||
Rio Tinto Group | US$m | US$m | ||||||||||
At 1 January | 2,051 | 172 | 515 | 2 | 2,740 | 2,577 | ||||||
Adjustment on currency translation | 34 | 2 | 13 | - | 49 | 283 | ||||||
Groups share of earnings net of distributions | 166 | - | 47 | - | 213 | 12 | ||||||
Additions (excluding acquisitions) | 30 | - | 14 | - | 44 | 135 | ||||||
Disposals and repayments of advances | (31 | ) | (10 | ) | (229 | ) | (2 | ) | (272 | ) | (254 | ) |
Transfers and other movements | 16 | 2 | 25 | - | 43 | (13 | ) | |||||
At 31 December | 2,266 | 166 | 385 | - | 2,817 | 2,740 | ||||||
Investments | Loans to | Investments | Loans | |||||||||
in joint | joint | in associates/ | to | 2004 | 2003 | |||||||
ventures | ventures | other | associates | Total | Total | |||||||
Rio Tinto plc - part of Rio Tinto Group | US$m | US$m | ||||||||||
At 1 January | 963 | 151 | 2,589 | 91 | 3,794 | 2,535 | ||||||
Adjustment on currency translation | - | - | 147 | - | 147 | 546 | ||||||
Groups share of earnings net of distributions | 158 | - | 344 | - | 502 | 193 | ||||||
Additions (excluding acquisitions) | 8 | - | 14 | 196 | 218 | 852 | ||||||
Disposals and repayments of advances | - | (10 | ) | (211 | ) | (2 | ) | (223 | ) | (318 | ) | |
Transfers and other movements | 9 | (1 | ) | - | - | 8 | (14 | ) | ||||
At 31 December | 1,138 | 140 | 2,883 | 285 | 4,446 | 3,794 | ||||||
Investments | Loans to | Investments | Loans | |||||||||
in joint | joint | in associates/ | to | 2004 | 2003 | |||||||
ventures | ventures | other | associates | Total | Total | |||||||
Rio Tinto Limited - part of Rio Tinto Group | US$m | US$m | ||||||||||
At 1 January | 1,088 | 21 | 62 | - | 1,171 | 1,072 | ||||||
Adjustment on currency translation | 34 | 2 | 5 | - | 41 | 267 | ||||||
Groups share of earnings net of distributions | 8 | - | 4 | - | 12 | (29 | ) | |||||
Additions (excluding acquisitions) | 22 | - | - | - | 22 | 89 | ||||||
Disposals and repayments of advances | (31 | ) | - | (6 | ) | - | (37 | ) | (233 | ) | ||
Transfers and other movements | 7 | 3 | 7 | - | 17 | 5 | ||||||
At 31 December | 1,128 | 26 | 72 | - | 1,226 | 1,171 | ||||||
(a) | The Groups investments in joint ventures and associates include, where appropriate, entry premiums on acquisition plus interest capitalised by the Group during the development period of the relevant mines. At 31 December 2004, this capitalised interest less accumulated amortisation amounted to US$21 million (2003: US$12 million). |
(b) | The cash flow statement analyses
additions to joint ventures and associates between the following: - 'Funding of Group share of joint ventures' and associates capital expenditure', which reports cash supplied by the Group for the formation of new operating assets whose benefits will be attributable to the Group, and - 'Repayments from/(other funding of) joint ventures and associates' which includes any financial investment in joint ventures and associates that does not have the above characteristics, and all loan repayments. - 'Loans (to)/repaid by Rio Tinto Limited'. This includes the change in Rio Tinto plc's loans made to Rio Tinto Limited and its subsidiaries' (which is included in current assets) as well as the increase of US$196 million in loans to associates, which is included in the above table. |
(c) | Investments in and loans to associates by the Rio Tinto plc part of the Group include amounts relating to Rio Tinto Limited which are eliminated in arriving at the Rio Tinto Group figures. |
(d) | Further details of investments in joint ventures and associates are set out on page A-27 and in notes 14, 32 and 33. |
A-26
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
13 Fixed asset investments (continued)
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
Joint Ventures | US$m | US$m | US$m | US$m | US$m | US$m | ||||||
Rio Tinto's share of assets | ||||||||||||
Fixed assets | 1,591 | 1,573 | 1,158 | 1,195 | 2,749 | 2,768 | ||||||
Current assets | 436 | 272 | 290 | 193 | 726 | 465 | ||||||
2,027 | 1,845 | 1,448 | 1,388 | 3,475 | 3,233 | |||||||
Rio Tinto's share of third party liabilities | ||||||||||||
Liabilities due within one year | (316 | ) | (200 | ) | (121 | ) | (112 | ) | (437 | ) | (312 | ) |
Liabilities due after more than one year (including provisions) | (433 | ) | (531 | ) | (173 | ) | (167 | ) | (606 | ) | (698 | ) |
(749 | ) | (731 | ) | (294 | ) | (279 | ) | (1,043 | ) | (1,010 | ) | |
Rio Tinto's share of net assets | 1,278 | 1,114 | 1,154 | 1,109 | 2,432 | 2,223 | ||||||
(a) | The Group's share of joint venture liabilities set out above excludes US$166 million (2003: US$172 million) due to the Group. These excluded liabilities correspond with the loans to joint ventures that are presented earlier in this note as an asset of the Group. Including these loans, the Group's share of the total liabilities of joint ventures was US$1,209 million (2003: US$1,182 million). |
(b) | Of the US$606 million of liabilities due after more than one year, US$482 million relates to long term debt, which matures as follows: US$111 million between 1-2 years; US$111 million between 2-3 years; US$96 million between 3-4 years; US$63 million between 4-5 years and US$101 million after 5 years. |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
Associates | US$m | US$m | US$m | US$m | US$m | US$m | ||||||
Rio Tinto's share of assets | ||||||||||||
Fixed assets | 5,127 | 5,132 | 177 | 182 | 480 | 1,083 | ||||||
Current assets/(liabilities) | 1,003 | 1,197 | 1 | 1 | 79 | 327 | ||||||
6,130 | 6,329 | 178 | 183 | 559 | 1,410 | |||||||
Rio Tinto's share of third party liabilities | ||||||||||||
Liabilities due within one year | (1,589 | ) | (1,423 | ) | (38 | ) | (36 | ) | (56 | ) | (214 | ) |
Liabilities due after more than one year (including provisions) | (1,489 | ) | (2,300 | ) | (96 | ) | (104 | ) | (256 | ) | (733 | ) |
(3,078 | ) | (3,723 | ) | (134 | ) | (140 | ) | (312 | ) | (947 | ) | |
Non equity capital and outside shareholders' interests | (494 | ) | (515 | ) | - | - | - | (42 | ) | |||
Rio Tinto's share of net assets | 2,558 | 2,091 | 44 | 43 | 247 | 421 | ||||||
(a) | Of the US$256 million of liabilities due after more than one year, US$230 million relates to long term debt, which matures as follows: US$58 million between 1-2 years; US$60 million between 2-3 years; US$60 million between 3-4 years; US$15 million between 4-5 years and US$37 million after 5 years. |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Investments in and loans to associates/other | ||||||||||||
Investments in and loans to associates | 2,558 | 2,091 | 44 | 43 | 247 | 421 | ||||||
Other investments (a) | 610 | 589 | 28 | 19 | 138 | 96 | ||||||
3,168 | 2,680 | 72 | 62 | 385 | 517 | |||||||
(a) | Other investments include listed investments of US$46 million with a market value of US$114 million (2003: US$92 million). At 31 December 2004 the Group owned 19 per cent of the Labrador Iron Ore Royalty Income Fund which itself owns 15.1 per cent of Iron Ore Company of Canada Inc. The Group sold its investment in the Labrador Iron ore Royalty Income Fund in March 2005. |
(b) | Further information on the net debt of joint ventures and associates is shown in note 14. |
A-27
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
14 Net debt of joint ventures and associates
Rio Tinto | Rio Tinto | |||||||
Rio Tinto | share of | Rio Tinto | share of | |||||
percentage | net debt | percentage | net debt | |||||
2004 | 2004 | 2003 | 2003 | |||||
% | US$m | % | US$m | |||||
Joint ventures | ||||||||
Minera Escondida Limitada | 30.0 | 324 | 30.0 | 414 | ||||
Leichhardt | 44.7 | 22 | 44.7 | 31 | ||||
Colowyo | 20.0 | 31 | 20.0 | 32 | ||||
Warkworth | 42.1 | 28 | 42.1 | 34 | ||||
Associates | ||||||||
Freeport-McMoRan Copper & Gold Inc. | - | - | 13.1 | 236 | ||||
Tisand (Pty) Limited | 50.0 | 137 | 50.0 | 121 | ||||
Port Waratah Coal Services | 27.6 | 106 | 27.6 | 114 | ||||
Sociedade Mineira de Neves-Corvo SA (Somincor) | - | - | 49.0 | 37 | ||||
Other | (46 | ) | (15 | ) | ||||
Net debt of joint ventures and associates | 602 | 1,004 | ||||||
(a) | In accordance with FRS 9, the Group includes its net investment in joint ventures and associates in its consolidated balance sheet. This investment is shown net of the Group's share of the net debt of joint ventures and associates due to third parties, which is set out above. |
(b) | Some of the debt of joint ventures and associates is subject to financial and general covenants. |
(c) | The group holds 44.7 per cent of the equity of the Leichhardt joint venture, which has a 31.4 per cent interest in the Blair Athol joint venture. Leichhardt has US$91 million (2003: US$85 million) of shareholders' funds and US$50 million (2003: US$70 million) of debt finance. |
(d) | The Group has a partnership interest in the Colowyo Coal Company and has undertaken, via a subsidiary company which entered into a management agreement, to cause the partnership to perform its obligations under certain coal supply contracts. The debt of US$156 million owed by the Colowyo Coal Company is to be serviced and repaid out of the proceeds of these contracts. The exceptional charge in 2004, referred to in note 4, includes a provision of US$149 million in respect of the Group's obligations under the above management agreement. |
(e) | Except for the obligations referred to above, in relation to Colowyo, the debt of joint ventures and associates is without recourse to the Rio Tinto Group. |
15 Inventories | ||||||||||||
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Raw material and purchased components | 217 | 205 | 120 | 142 | 337 | 347 | ||||||
Consumable stores | 157 | 124 | 210 | 166 | 367 | 290 | ||||||
Work in progress | 238 | 219 | 222 | 163 | 460 | 382 | ||||||
Finished goods and goods for resale | 487 | 420 | 375 | 344 | 862 | 764 | ||||||
1,099 | 968 | 927 | 815 | 2,026 | 1,783 | |||||||
Comprising: | ||||||||||||
Inventories expected to be sold or used within 12 months | 1,099 | 968 | 889 | 778 | 1,988 | 1,746 | ||||||
Inventories not expected to be sold nor used within 12 months | - | - | 38 | 37 | 38 | 37 | ||||||
1,099 | 968 | 927 | 815 | 2,026 | 1,783 | |||||||
General and administrative costs | ||||||||||||
- charged to inventory during the year | 129 | 98 | 120 | 112 | 249 | 210 | ||||||
- remaining in inventory at year end | 44 | 34 | 17 | 18 | 61 | 52 | ||||||
(a) | As reported in the Cash flow statement, the increase in inventories during 2004 was US$179 million excluding the effects of subsidiaries sold and changes in exchange rates on translation into US dollars. |
A-28
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
16 | Accounts receivable and prepayments | ||||||||||||
Rio Tinto plc - | Rio Tinto Limited - | ||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | |||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | ||||||||
|
|
|
|
|
|
||||||||
Falling due within one year | US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Trade debtors | 623 | 569 | 716 | 740 | 1,339 | 1,309 | |||||||
Provision for doubtful debts | (26 | ) | (33 | ) | (8 | ) | (10 | ) | (34 | ) | (43 | ) | |
Bills receivable | 6 | 3 | 14 | 10 | 20 | 13 | |||||||
Amounts owed by joint ventures | 5 | - | - | - | 5 | - | |||||||
Amounts owed by associates (a) | 286 | 248 | - | 1 | 2 | 4 | |||||||
Other debtors (b) | 105 | 99 | 270 | 268 | 268 | 225 | |||||||
Current tax recoverable | 33 | 93 | - | 9 | 33 | 102 | |||||||
Pension prepayments (c) | 35 | - | - | 5 | 35 | 5 | |||||||
Other prepayments | 16 | 12 | 39 | 47 | 55 | 59 | |||||||
1,083 | 991 | 1,031 | 1,070 | 1,723 | 1,674 | ||||||||
Falling due after more than one year | |||||||||||||
Pension prepayments (c) | 497 | 530 | 84 | 85 | 581 | 615 | |||||||
Other debtors | 12 | 1 | 27 | 35 | 39 | 36 | |||||||
Current tax recoverable | 10 | - | 128 | 130 | 138 | 130 | |||||||
Deferred tax assets | 21 | 22 | 21 | (5 | ) | 42 | 17 | ||||||
Bills receivable | - | 2 | - | 4 | - | 6 | |||||||
Other prepayments | - | - | 36 | 5 | 36 | 5 | |||||||
540 | 555 | 296 | 254 | 836 | 809 | ||||||||
(a) | Amounts owed to Rio Tinto plc by associates includes US$284 million (2003: US$245 million) due from Rio Tinto Limited. |
(b) | Other debtors for Rio Tinto Limited include US$107 million (2003: US$142 million) due from Rio Tinto plc. |
(c) | Movements on pension prepayments are included in Other items in the Cash flow statement. |
17 | Current asset investments, cash and liquid resources | ||||||||||||
Rio Tinto plc - | Rio Tinto Limited - | ||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | |||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | ||||||||
|
|
|
|
|
|
||||||||
US$m | US$m | US$m | US$m | US$m | US$m | ||||||||
Liquid resources | |||||||||||||
Time deposits | 48 | 147 | 68 | 59 | 116 | 206 | |||||||
Other | 2 | 2 | - | - | 2 | 2 | |||||||
Total liquid resources | 50 | 149 | 68 | 59 | 118 | 208 | |||||||
Deduct: investments qualifying as cash for balance sheet disclosure | (48 | ) | (147 | ) | (68 | ) | (59 | ) | (116 | ) | (206 | ) | |
2 | 2 | - | - | 2 | 2 | ||||||||
Other current asset investments | |||||||||||||
US Treasury bonds (a) | 76 | 228 | - | - | 76 | 228 | |||||||
Investments per balance sheet (unlisted) | 78 | 230 | - | - | 78 | 230 | |||||||
Cash | |||||||||||||
Cash as defined in FRS1 Revised ('FRS1 cash') | 67 | 36 | 139 | 5 | 206 | 41 | |||||||
Investments qualifying as cash | 48 | 147 | 68 | 59 | 116 | 206 | |||||||
Add back Bank borrowings repayable on demand included in FRS 1 cash | 66 | 74 | 2 | 74 | 68 | 148 | |||||||
Cash per balance sheet | 181 | 257 | 209 | 138 | 390 | 395 | |||||||
(a) | Current asset investments of Rio Tinto plc and Rio Tinto Group include US$76 million (2003: US$228 million) relating to US treasury bonds that are not regarded as liquid assets because they are held as security for the deferred consideration for certain assets acquired during 2002. |
(b) | Information on cash and cash equivalents under US GAAP is given in note 42 Reconciliation to US Accounting Principles. |
A-29
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
18 | Short term borrowings | ||||||||||||
Rio Tinto plc - | Rio Tinto Limited - | ||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | |||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | ||||||||
US$m | US$m | US$m | US$m | US$m | US$m | ||||||||
Secured | |||||||||||||
Bank loans repayable within 12 months | 27 | 36 | 19 | 16 | 46 | 52 | |||||||
Other loans repayable within 12 months | 16 | 21 | 10 | 38 | 26 | 59 | |||||||
43 | 57 | 29 | 54 | 72 | 111 | ||||||||
Unsecured | |||||||||||||
Bank borrowings repayable on demand | 66 | 74 | 2 | 74 | 68 | 148 | |||||||
Bank loans repayable within 12 months | - | 91 | 8 | - | 8 | 91 | |||||||
Other loans repayable within 12 months | 123 | 44 | 535 | 113 | 658 | 157 | |||||||
Commercial paper (a) | - | 276 | - | 1,411 | - | 1,687 | |||||||
189 | 485 | 545 | 1,598 | 734 | 2,083 | ||||||||
Total short term borrowings per balance sheet | 232 | 542 | 574 | 1,652 | 806 | 2,194 | |||||||
(a) | US$1.1 billion of the commercial paper outstanding at 31 December 2003 was backed by medium term facilities. Under Australian GAAP this amount would be grouped within non-current borrowings. |
19 | Accounts payable and accruals | ||||||||||||
Rio Tinto plc - | Rio Tinto Limited - | ||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | |||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | ||||||||
US$m | US$m | US$m | US$m | US$m | US$m | ||||||||
Due within one year | |||||||||||||
Trade creditors | 398 | 365 | 552 | 372 | 950 | 737 | |||||||
Amounts owed to joint ventures | 5 | 3 | - | 6 | 5 | 9 | |||||||
Amounts owed to associates (a) | 121 | 185 | 1 | 1 | 15 | 44 | |||||||
Other creditors (a) | 222 | 141 | 570 | 355 | 303 | 226 | |||||||
Tax on profits | 63 | 40 | 126 | 210 | 189 | 250 | |||||||
Employee entitlements | 78 | 83 | 68 | 42 | 146 | 125 | |||||||
Royalties and mining taxes | 92 | 82 | 59 | 51 | 151 | 133 | |||||||
Accruals and deferred income | 63 | 59 | 135 | 64 | 198 | 123 | |||||||
Dividends payable to outside shareholders of | |||||||||||||
subsidiaries | - | - | - | 1 | - | 1 | |||||||
Dividends payable to Rio Tinto plc and Rio Tinto | |||||||||||||
Limited shareholders | 487 | 367 | 225 | 189 | 632 | 492 | |||||||
1,529 | 1,325 | 1,736 | 1,291 | 2,589 | 2,140 | ||||||||
Due in more than one year | |||||||||||||
Other creditors (a) | 154 | 143 | 54 | 51 | 208 | 194 | |||||||
Accruals and deferred income (b) | - | - | 130 | 29 | 130 | 29 | |||||||
Tax on profits | 21 | 13 | 42 | 86 | 63 | 99 | |||||||
175 | 156 | 226 | 166 | 401 | 322 | ||||||||
(a) | 'Other creditors' for the Rio Tinto Group include deferred consideration of US$250 million (2003: US$219 million) relating to certain assets acquired during 2002 and 2004, of which US$96 million (2003: US$76 million) is due within one year. The deferred consideration is included at its net present value. The amortisation of the discount applied in establishing the net present value is treated as a finance cost. All of the deferred consideration relates to Rio Tinto plc. |
Other creditors for Rio Tinto Limited include US$489 million (2003: US$270 million) due to Rio Tinto plc. Dividends payable by Rio Tinto Limited include US$80 million (2003: US$64 million) due to Rio Tinto plc. For Rio Tinto plc US$107 million (2003: US$142 million) of amounts owed to associates relate to balances with Rio Tinto Limited. | |
(b) | 'Accruals and deferred income' include contributions made by governments to the cost of acquiring fixed assets which are to be credited to the profit and loss account over the expected useful economic life of the fixed assets to which they relate. |
A-30
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
20 | Provisions for liabilities and charges |
Post | Other | Close down & | ||||||||||
retirement | employee | restoration/ | 2004 | 2003 | ||||||||
health care | entitlements | environmental | Other | Total | Total | |||||||
US$m | US$m | |||||||||||
Rio Tinto Group | ||||||||||||
At 1 January | 498 | 337 | 2,092 | 211 | 3,138 | 2,562 | ||||||
Adjustment on currency translation | 9 | 11 | 71 | 2 | 93 | 335 | ||||||
Capitalisation of additional closure costs (note 12) | - | - | 260 | - | 260 | 167 | ||||||
Charged/(released) to profit for the year | 43 | 57 | 53 | (6 | ) | 147 | 154 | |||||
Exceptional charge (note 4) | - | - | - | 149 | 149 | |||||||
Amortisation of discount related to provisions | - | - | 95 | 5 | 100 | 89 | ||||||
Utilised in year: | ||||||||||||
provisions set up on acquisition of businesses | - | - | - | (3 | ) | (3 | ) | (4 | ) | |||
other provisions | (26 | ) | (84 | ) | (51 | ) | (22 | ) | (183 | ) | (155 | ) |
Subsidiaries sold | (1 | ) | (10 | ) | (62 | ) | - | (73 | ) | (7 | ) | |
Transfers and other movements | - | (19 | ) | 31 | 11 | 23 | (3 | ) | ||||
523 | 292 | 2,489 | 347 | 3,651 | 3,138 | |||||||
Provision for deferred taxation (note 21) | 1,407 | 1,398 | ||||||||||
Provisions for liabilities and charges per balance sheet | 5,058 | 4,536 | ||||||||||
Post | Other | Close down & | ||||||||||
retirement | employee | restoration/ | 2004 | 2003 | ||||||||
health care | entitlements | environmental | Other | Total | Total | |||||||
US$m | US$m | |||||||||||
Rio Tinto plc - part of Rio Tinto Group | ||||||||||||
At 1 January | 444 | 84 | 1,215 | 60 | 1,803 | 1,621 | ||||||
Adjustment on currency translation | 6 | 1 | 23 | (1 | ) | 29 | 59 | |||||
Capitalisation of additional closure costs (note 12) | - | - | 105 | - | 105 | 67 | ||||||
Charged/(released) to profit for the year | 33 | 24 | 53 | (1 | ) | 109 | 60 | |||||
Exceptional charges | - | - | - | 149 | 149 | |||||||
Amortisation of discount related to provisions | - | - | 51 | 5 | 56 | 55 | ||||||
Utilised in year: | ||||||||||||
provisions set up on acquisition of businesses | - | - | - | - | - | - | ||||||
other provisions | (24 | ) | (44 | ) | (25 | ) | (8 | ) | (101 | ) | (62 | ) |
Subsidiaries sold | - | - | (52 | ) | - | (52 | ) | |||||
Transfers and other movements | - | - | 13 | 17 | 30 | 3 | ||||||
459 | 65 | 1,383 | 221 | 2,128 | 1,803 | |||||||
Provision for deferred taxation (note 21) | 742 | 740 | ||||||||||
Provisions for liabilities and charges per balance sheet | 2,870 | 2,543 | ||||||||||
Post | Other | Close down & | ||||||||||
retirement | employee | restoration/ | 2004 | 2003 | ||||||||
health care | entitlements | environmental | Other | Total | Total | |||||||
US$m | US$m | |||||||||||
Rio Tinto Limited - part of Rio Tinto Group | ||||||||||||
At 1 January | 54 | 253 | 877 | 151 | 1,335 | 941 | ||||||
Adjustment on currency translation | 3 | 10 | 48 | 3 | 64 | 276 | ||||||
Capitalisation of additional closure costs (note 12) | - | - | 155 | - | 155 | 100 | ||||||
Charged/(released) to profit for the year | 10 | 33 | - | (5 | ) | 38 | 94 | |||||
Exceptional charges | - | - | - | - | - | - | ||||||
Amortisation of discount related to provisions | - | - | 44 | - | 44 | 34 | ||||||
Utilised in year: | ||||||||||||
provisions set up on acquisition of businesses | - | - | - | (3 | ) | (3 | ) | (4 | ) | |||
other provisions | (2 | ) | (40 | ) | (26 | ) | (14 | ) | (82 | ) | (93 | ) |
Subsidiaries sold | (1 | ) | (10 | ) | (10 | ) | - | (21 | ) | (7 | ) | |
Transfers and other movements | - | (19 | ) | 18 | (6 | ) | (7 | ) | (6 | ) | ||
64 | 227 | 1,106 | 126 | 1,523 | 1,335 | |||||||
Provision for deferred taxation (note 21) | 665 | 658 | ||||||||||
Provision for liabilities and charges per balance sheet | 2,188 | 1,993 | ||||||||||
A-31
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
20 | Provisions for liabilities and charges (continued) |
(a) | The main assumptions used to determine the provision for post retirement healthcare are disclosed in note 40. The provision is expected to be utilised over the next 15 to 20 years. |
(b) | The provision for other employee entitlements includes pension entitlements of US$53 million and a provision for long service leave, based on the relevant entitlements in certain Group operations. Some US$64 million is expected to be utilised within the next year. |
(c) | The Group's policy on close down and restoration costs is shown in note 1(l). Close down and restoration costs are a normal consequence of mining, and the majority of close down and restoration expenditure is incurred at the end of the life of the mine. Remaining lives of mines and infrastructure range from 2 to over 50 years with an average, weighted by discounted closure provision, of around 16 years. Although the ultimate cost to be incurred is uncertain, subsidiary companies have estimated their respective costs based on feasibility and engineering studies using current restoration standards and techniques. Provisions of US$2,489 million for close down and restoration costs and for environmental clean up obligations include estimates of the effect of future inflation and have been discounted to their present value at an average of approximately six per cent per annum, being an estimate of the risk free pre-tax cost of borrowing. Excluding the effects of future inflation, but before discounting, the provision is equivalent to some US$4.1 billion. |
(d) | Some US$142 million of environmental clean up expenditure is expected to take place within the next five years. The remainder includes amounts for the operation and maintenance of remediation facilities in later years. The provision for environmental expenditure includes the issue described in (e) below. |
(e) | In 1995, Kennecott Utah Copper
('KUC') agreed with the US Environmental Protection Agency (EPA)
and the State of Utah to complete certain source control projects and
perform specific environmental studies regarding contamination of groundwater
in the vicinity of the Bingham Canyon mine. A remedial investigation
and feasibility study on the South Zone groundwater contamination, completed
in March 1998, identified a range of alternative measures to address
this issue pursuant to KUCs obligation to prevent the further spread
of groundwater contamination and to acquire, restore or replace water
for the public in the affected area. Provisions for such environmental obligations had been established in 1989, when KUC was acquired by Rio Tinto and these provisions were updated from time to time taking account of the latest information about future costs. At the start of 2002, a provision of US$273 million had been included in the balance sheet for control and remediation of groundwater contamination, which was based on the expected future cash flows relating to the remediation plan determined at that time, discounted to present value. Action had been taken, by 2000, to prevent further spread of groundwater contamination. Facilities for filtration of the water and treatment of the contaminants were tested. However, in 2002, following discussions with the EPA a modified plan was developed to accommodate the views expressed by the EPA, which required changes in the methodology for treatment of contaminated groundwater. The provision for the net present value of the expected costs of construction and operation of treatment plants was accordingly increased by US$116 million. Reviews in 2003 and 2004 of the engineering estimates did not require any modifications to the 2002 estimated cost of remediation. However, in 2004 KUC adopted a new long-term mine plan which would lead to earlier payment of the environmental costs than under the previous mine plan. For that reason the discounted amount of the environmental remediation provision increased in 2004 by US$46 million. The timing of the cash outflows relating to the revised remediation plan is reliably determinable. The plan involves costs that will arise during the operating life of KUC and beyond, including costs of management of groundwater that will continue in perpetuity after the closure of the mine. |
(f) | At KUC, provisions for close down and restoration costs were increased by US$76 million in 2004 based on the current assumption that the expenditure will occur earlier as a result of the change in the mine plan. |
(g) | Other provisions deal with a variety of issues and include US$35 million relating to the remaining provision for the market valuation of the hedge books held by companies acquired in 2000 and 2001, which will be utilised over the next seven years (see note 28), and US$40 million relating to payments received from employees for accommodation at some sites which are refundable in certain circumstances. |
A-32
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
21 | Deferred taxation |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
At 1 January | 718 | 638 | 663 | 368 | 1,381 | 1,006 | ||||||
Adjustment on currency translation | 45 | 52 | 29 | 145 | 74 | 197 | ||||||
Reported in the STRGL (a) | 3 | - | 10 | 162 | 13 | 162 | ||||||
Subsidiaries acquired/sold | (2 | ) | - | 2 | 6 | - | 6 | |||||
(Released)/charged to profit for the year | (72 | ) | (19 | ) | (41 | ) | (6 | ) | (113 | ) | (25 | ) |
Other movements (b) | 29 | 47 | (19 | ) | (12 | ) | 10 | 35 | ||||
721 | 718 | 644 | 663 | 1,365 | 1,381 | |||||||
Included in provisions for liabilities and charges | 742 | 740 | 665 | 658 | 1,407 | 1,398 | ||||||
Included in accounts receivable | (21 | ) | (22 | ) | (21 | ) | 5 | (42 | ) | (17 | ) | |
721 | 718 | 644 | 663 | 1,365 | 1,381 | |||||||
(a) | The amounts reported in the Statement of Total Recognised Gains and Losses relate to the provisions for tax relief on exchange differences on net debt recorded directly in reserves. |
(b) | 'Other movements' include deferred tax recognised by subsidiary holding companies that is presented in these accounts as part of the tax charge on the profits of the joint ventures and associates to which it relates. |
Other | ||||||||||
Rio Tinto Group | UK | Australian | countries' | 2004 | 2003 | |||||
tax | tax | tax | Total | Total | ||||||
Provided in the accounts | ||||||||||
US$m | US$m | |||||||||
Deferred tax assets | 13 | 315 | 1,208 | 1,536 | 1,369 | |||||
Deferred tax liabilities | (130 | ) | (983 | ) | (1,788 | ) | (2,901 | ) | (2,750 | ) |
Balance as shown above | (117 | ) | (668 | ) | (580 | ) | (1,365 | ) | (1,381 | ) |
Comprising: | ||||||||||
Accelerated capital allowances | (6 | ) | (608 | ) | (1,018 | ) | (1,632 | ) | (1,574 | ) |
Other timing differences | (124 | ) | (79 | ) | 247 | 44 | (89 | ) | ||
Tax losses | 13 | 19 | 191 | 223 | 282 | |||||
Balance as shown above | (117 | ) | (668 | ) | (580 | ) | (1,365 | ) | (1,381 | ) |
Other | ||||||||||
Rio Tinto plc - part of Rio Tinto Group | UK | Australian | countries' | 2004 | 2003 | |||||
tax | tax | tax | Total | Total | ||||||
Provided in the accounts | ||||||||||
US$m | US$m | |||||||||
Deferred tax assets | 13 | 1 | 1,128 | 1,142 | 886 | |||||
Deferred tax liabilities | (130 | ) | - | (1,733 | ) | (1,863 | ) | (1,604 | ) | |
Balance as shown above | (117 | ) | 1 | (605 | ) | (721 | ) | (718 | ) | |
Comprising: | ||||||||||
Accelerated capital allowances | (6 | ) | 1 | (1,031 | ) | (1,036 | ) | (893 | ) | |
Other timing differences | (124 | ) | - | 241 | 117 | (58 | ) | |||
Tax losses | 13 | - | 185 | 198 | 233 | |||||
Balance as shown above | (117 | ) | 1 | (605 | ) | (721 | ) | (718 | ) | |
Other | ||||||||||
Rio Tinto Limited - part of Rio Tinto Group | UK | Australian | countries' | 2004 | 2003 | |||||
tax | tax | tax | Total | Total | ||||||
Provided in the accounts | ||||||||||
US$m | US$m | |||||||||
Deferred tax assets | - | 314 | 80 | 394 | 483 | |||||
Deferred tax liabilities | - | (983 | ) | (55 | ) | (1,038 | ) | (1,146 | ) | |
Balance as shown above | - | (669 | ) | 25 | (644 | ) | (663 | ) | ||
Comprising: | ||||||||||
Accelerated capital allowances | - | (609 | ) | 13 | (596 | ) | (681 | ) | ||
Other timing differences | - | (79 | ) | 6 | (73 | ) | (31 | ) | ||
Tax losses | - | 19 | 6 | 25 | 49 | |||||
Balance as shown above | - | (669 | ) | 25 | (644 | ) | (663 | ) | ||
(c) | US$342 million (2003: US$380 million) of potential deferred tax assets have not been recognised as an asset in these accounts. There is no time limit for the recovery of these potential assets. This total includes US$298 million (2003: US$306 million) of United States Alternative Minimum Tax credits and US tax losses for which recovery is dependent on the level of taxable profits in the US tax group and US$44 million (2003: US$74 million) of tax losses arising in countries other than the US. |
(d) | There is a limited time period for the recovery of US$6 million (2003: US$26 million) of tax losses which have been recognised as deferred tax assets in the accounts. |
A-33
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
22 | Medium and long term borrowings |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
At 1 January | 2,027 | 2,729 | 3,868 | 3,184 | 5,895 | 5,913 | ||||||
Adjustment on currency translation | 18 | 92 | 7 | 92 | 25 | 184 | ||||||
Subsidiaries sold | (12 | ) | - | - | - | (12 | ) | - | ||||
Loans drawn down | 70 | 602 | 135 | 1,215 | 205 | 1,817 | ||||||
Loan repayments | (485 | ) | (1,396 | ) | (1,553 | ) | (623 | ) | (2,038 | ) | (2,019 | ) |
At 31 December | 1,618 | 2,027 | 2,457 | 3,868 | 4,075 | 5,895 | ||||||
Deduct: short term | (166 | ) | (468 | ) | (572 | ) | (1,578 | ) | (738 | ) | (2,046 | ) |
Medium and long term borrowings | 1,452 | 1,559 | 1,885 | 2,290 | 3,337 | 3,849 | ||||||
Borrowings at 31 December | ||||||||||||
Commercial paper | - | 276 | - | 1,411 | - | 1,687 | ||||||
Bank loans | ||||||||||||
Secured | 30 | 41 | 251 | 109 | 281 | 296 | ||||||
Unsecured | 106 | 173 | 117 | 262 | 223 | 289 | ||||||
136 | 214 | 368 | 371 | 504 | 585 | |||||||
Other loans | ||||||||||||
Secured | ||||||||||||
Loans | 3 | 12 | 30 | 35 | 33 | 47 | ||||||
Finance leases | 84 | 99 | 16 | 20 | 100 | 119 | ||||||
Unsecured | ||||||||||||
Rio Tinto Finance (USA) Limited Bonds 5.75% 2006 | - | - | 500 | 500 | 500 | 500 | ||||||
Rio Tinto Finance (USA) Limited Bonds 2.625% 2008 | - | - | 600 | 600 | 600 | 600 | ||||||
Rio Tinto Finance (USA) Limited Bonds 7.125% 2013 | - | - | 100 | 100 | 100 | 100 | ||||||
European Medium Term Notes (b) | 1,237 | 1,237 | 262 | 381 | 1,499 | 1,618 | ||||||
North Finance (Bermuda) Limited 7% 2005 | - | - | 200 | 200 | 200 | 200 | ||||||
Other unsecured loans | 158 | 189 | 381 | 250 | 539 | 439 | ||||||
1,482 | 1,537 | 2,089 | 2,086 | 3,571 | 3,623 | |||||||
Total borrowings | 1,618 | 2,027 | 2,457 | 3,868 | 4,075 | 5,895 | ||||||
(a) | The majority of the fixed rate borrowings shown above are swapped to floating rates. Details of interest rate and currency swaps and of available standby credit facilities are shown in note 28. |
(b) | The Group has a US$3 billion European Medium Term Note programme for the issuance of short to medium term debt of which US$1.5 billion was drawn down at 31 December 2004. |
(c) | Intragroup borrowings between the Rio Tinto plc and Rio Tinto Limited parts of the Group are included in 'Loans made by Rio Tinto plc and its subsidiaries' and 'Accounts payable and accruals'. |
(d) | Rio Tinto Finance (USA) Limited is a 100 per cent owned finance subsidiary of Rio Tinto Limited. Rio Tinto Limited and Rio Tinto plc have fully and unconditionally guaranteed the securities issued by Rio Tinto Finance (USA) Limited. |
A-34
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
23 Net debt | ||||||||||
Analysis of changes in consolidated net debt: |
FRS 1 | Liquid | 2004 | 2003 | ||||||
cash (a) | Borrowings | resources (a) | Net debt | Net debt | ||||||
US$m | US$m | US$m | US$m | US$m | ||||||
At 1 January | 41 | (5,895 | ) | 208 | (5,646 | ) | (5,747 | ) | ||
Adjustment on currency translation | (13 | ) | (25 | ) | 4 | (34 | ) | (123 | ) | |
Subsidiaries sold | - | 12 | (4 | ) | 8 | - | ||||
Per cash flow statement | 178 | 1,833 | (90 | ) | 1,921 | 224 | ||||
At 31 December | 206 | (4,075 | ) | 118 | (3,751 | ) | (5,646 | ) | ||
FRS 1 | Liquid | 2004 | 2003 | |||||||
cash (a) | Borrowings | resources (a) | Net debt | Net debt | ||||||
Rio Tinto plc - part of Rio Tinto Group | ||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||
At 1 January | 36 | (2,027 | ) | 149 | (1,842 | ) | (2,625 | ) | ||
Adjustment on currency translation | (13 | ) | (18 | ) | 1 | (30 | ) | (112 | ) | |
Subsidiaries sold | - | 12 | (4 | ) | 8 | - | ||||
Per cash flow statement | 44 | 415 | (96 | ) | 363 | 895 | ||||
At 31 December | 67 | (1,618 | ) | 50 | (1,501 | ) | (1,842 | ) | ||
FRS 1 | Liquid | 2004 | 2003 | |||||||
cash (a) | Borrowings | resources (a) | Net debt | Net debt | ||||||
Rio Tinto Limited - part of Rio Tinto Group | US$m | US$m | US$m | US$m | US$m | |||||
At 1 January | 5 | (3,868 | ) | 59 | (3,804 | ) | (3,122 | ) | ||
Adjustment on currency translation | - | (7 | ) | 3 | (4 | ) | (11 | ) | ||
Subsidiaries sold | - | - | - | - | - | |||||
Per cash flow statement | 134 | 1,418 | 6 | 1,558 | (671 | ) | ||||
At 31 December | 139 | (2,457 | ) | 68 | (2,250 | ) | (3,804 | ) | ||
(a) | A reconciliation of these figures to their respective balance sheet categories is shown in note 17. |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Reconciliation of cash flow to movement in net debt | ||||||||||||
Increase/(decrease) in cash per cash flow statement | 44 | (9 | ) | 134 | (74 | ) | 178 | (83 | ) | |||
Decrease/(increase) in borrowings | 415 | 794 | 1,418 | (592 | ) | 1,833 | 202 | |||||
(Decrease)/increase in liquid resources | (96 | ) | 110 | 6 | (5 | ) | (90 | ) | 105 | |||
Decrease/(increase) in net debt | 363 | 895 | 1,558 | (671 | ) | 1,921 | 224 | |||||
Net cash flow from movement in liquid resources comprises: | ||||||||||||
(Decrease)/increase in time deposits | (96 | ) | 110 | 6 | 3 | (90 | ) | 113 | ||||
Decrease in other liquid investments | - | - | - | (8 | ) | - | (8 | ) | ||||
Net cash outflow/(inflow) | (96 | ) | 110 | 6 | (5 | ) | (90 | ) | 105 | |||
A-35
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
24 | Share capital - Rio Tinto plc |
2004 | 2003 | 2004 | 2003 | |||||
Number(m) | Number(m) | US$m | US$m | |||||
Share capital account | ||||||||
At 1 January | 1,066.67 | 1,065.48 | 155 | 154 | ||||
Ordinary shares issued | 1.35 | 1.19 | - | 1 | ||||
At 31 December | 1,068.02 | 1,066.67 | 155 | 155 | ||||
Issued and fully paid share capital | ||||||||
Special voting share of 10p (d) | 1 only | 1 only | - | - | ||||
DLC dividend share (d) | 1 only | 1 only | - | - | ||||
Ordinary shares of 10p each (equity) | 1,068.02 | 1,066.67 | 155 | 155 | ||||
Total issued share capital | 155 | 155 | ||||||
Unissued share capital | ||||||||
Ordinary shares of 10p each | 352.01 | 353.36 | 51 | 51 | ||||
Equalisation share of 10p (d) | 1 only | 1 only | - | - | ||||
Total authorised share capital | 1,420.03 | 1,420.03 | 206 | 206 | ||||
Options outstanding | ||||||||
Options outstanding at 1 January | 9.61 | 9.34 | ||||||
- granted |
1.54 | 2.70 | ||||||
- exercised |
(1.15 | ) | (1.43 | ) | ||||
- cancelled |
(0.27 | ) | (1.00 | ) | ||||
Options outstanding at 31 December (b) | 9.73 | 9.61 | ||||||
(a) | 1,346,874 Ordinary shares were issued during the year resulting from the exercise of options under Rio Tinto plc employee share option schemes at prices between 521p and 1,107p (2003: 1,192,702 shares at prices between 521p and 1,061p). |
(b) | At 31 December 2004, options over the following number of Ordinary shares were outstanding: |
-nil under the Rio Tinto plc Executive Share Option Scheme 1985 (31 December 2003: 23,000 shares at price of 861p). | |
-8,053,292 under the Rio Tinto Share Option Plan 1998 at prices between 808.8p and 1,458.6p (31 December 2003: 7,662,925 shares at prices between 808.8p and 1458.6p). The exercise of share options is subject to the satisfaction of a graduated performance condition set by the Remuneration committee at various dates up to April 2014. | |
-1,679,702 under the Rio Tinto plc Share Savings Plan at prices between 711p and 1,277p and exercisable at various dates up to June 2010 (31 December 2003: 1,920,430 shares at prices between 521p and 1,150p). | |
(c) | At the 2004 annual general meeting the shareholders resolved to renew the general authority for the company to buy back up to 10 per cent (within any 12 months) of its Ordinary shares of 10p each for a further period of 18 months. This approval was renewed at the annual general meeting in 2005. During the year to 31 December 2004, no shares were bought back (2003: nil). |
(d) | The 'special voting share' was issued to facilitate the joint voting by shareholders of Rio Tinto plc and Rio Tinto Limited on Joint Decisions, following the DLC merger. Directors have the ability to issue an equalisation share if that is required under the terms of the DLC Merger Sharing Agreement. The 'DLC dividend share' was issued to facilitate the efficient management of funds within the DLC structure. |
(e) | The aggregate consideration received for shares issued during 2004 was US$21 million (2003: US$20 million). |
Further information on share options is given in note 42 'Reconciliation to US Accounting Principles'.
A-36
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
24 | Share capital - Rio Tinto Limited (100 per cent) |
2004 | 2003 | 2004 | 2003 | |||||
Number(m) | Number(m) | US$m | US$m | |||||
Share capital account | ||||||||
At 1 January | 499.06 | 498.82 | 1,280 | 964 | ||||
Adjustment on currency translation | - | - | 51 | 311 | ||||
Share issues | 0.28 | 0.24 | 5 | 5 | ||||
At 31 December | 499.34 | 499.06 | 1,336 | 1,280 | ||||
Options outstanding | ||||||||
Options outstanding at 1 January | 6.00 | 4.69 | ||||||
- granted |
1.34 | 1.63 | ||||||
- exercised |
(0.22 | ) | (0.07 | ) | ||||
- cancelled |
(0.38 | ) | (0.25 | ) | ||||
Options outstanding at 31 December (d) | 6.74 | 6.00 | ||||||
(a) | 280,332 (2003: 240,466) shares were issued during the year, of which 223,617 (2003: 71,563) resulted from the exercise of share options under various Rio Tinto Limited employee share option schemes at prices between A$20.14 and A$27.86 (2003: A$20.37 and A$27.86) and 56,715 (2003: 168,903) from the vesting of shares under the Rio Tinto Mining Companies Comparative Plan. |
(b) | Rio Tinto Limited is authorised by shareholder approvals obtained in 2004 to buyback up to all the Rio Tinto Limited shares held by Tinto Holdings Australia Pty Limited (a wholly owned subsidiary of Rio Tinto plc) plus, on-market, up to ten per cent of the publicly held shares in any 12 month period. This approval was renewed at the Rio Tinto Limited annual general meeting in 2005. During the year to 31 December 2004 no shares were bought back (2003: nil). |
(c) | Total share capital in issue at 31 December 2004 was 499.3 million plus one special voting share and one DLC dividend share (31 December 2003: 499.1 million plus one special voting share and one DLC dividend share). The 'special voting share' was issued to facilitate the joint voting by shareholders of Rio Tinto Limited and Rio Tinto plc on Joint Decisions following the DLC merger. Directors have the ability to issue an equalisation share if that is required under the terms of the DLC Merger Sharing Agreement. The 'DLC dividend share' was issued to facilitate the efficient management of funds within the DLC structure. |
(d) | At 31 December 2004, options over the following number of shares were outstanding: |
-4,073,599 shares under the Rio Tinto Share Option Plans 1998 & 2004 at prices between A$20.37 and A$39.87 ('31 December' 2003: 3,602,137 shares at prices between A$20.14 and A$39.87). These share options are exercisable at various dates up to April 2014, subject to the satisfaction of a graduated performance condition set by the Remuneration committee. | |
-2,651,980 shares under the Rio Tinto Limited Share Savings Plan at prices between A$25.57 and A$29.04 (31 December 2003: 2,385,453 shares at prices between A$25.57 and A$27.86). These share options are exercisable at various dates up to June 2010. | |
(e) | The aggregate consideration received for shares issued during 2004 was US$5 million (2003: US$5 million). |
24(a) | Post Balance Sheet events |
In May 2005 Rio Tinto Limited bought back approximately 27.3 million shares from shareholders other than Rio Tinto plc for approximately A$1 billion, through an off market tender. In addition Rio Tinto Limited bought back approximately 16.4 million shares held by a wholly owned subsidiary of Rio Tinto plc. Rio Tinto plc's proportional shareholding in Rio Tinto Limited did not change as a result of the off-market buy-back. |
A-37
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
25 Share premium and reserves
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Share premium account | ||||||||||||
At 1 January | 1,629 | 1,610 | - | - | 1,629 | 1,610 | ||||||
Premium on issues of ordinary shares | 21 | 19 | - | - | 21 | 19 | ||||||
At 31 December | 1,650 | 1,629 | - | - | 1,650 | 1,629 | ||||||
Parent and subsidiary companies' profit and loss account | ||||||||||||
At 1 January | 3,529 | 2,800 | 2,716 | 1,156 | 6,266 | 3,968 | ||||||
Adjustment on currency translation (b) | 156 | 553 | 325 | 1,009 | 487 | 1,569 | ||||||
Retained profit for the year | 747 | 80 | 790 | 593 | 1,538 | 614 | ||||||
Goodwill written back on disposal of interest in | ||||||||||||
operation (c) | 228 | - | - | - | 228 | - | ||||||
Transfers and other movements (d) | 56 | 96 | (8 | ) | (42 | ) | 48 | 115 | ||||
At 31 December | 4,716 | 3,529 | 3,823 | 2,716 | 8,567 | 6,266 | ||||||
Joint ventures' profit and loss account | ||||||||||||
At 1 January | 335 | 267 | 193 | 237 | 526 | 504 | ||||||
Adjustment on currency translation (b) | - | - | 1 | 55 | 1 | 53 | ||||||
Retained profit/(loss) for the year | 158 | 52 | 8 | (37 | ) | 166 | 15 | |||||
Transfers and other movements (d) | 1 | 16 | 8 | (62 | ) | 9 | (46 | ) | ||||
At 31 December | 494 | 335 | 210 | 193 | 702 | 526 | ||||||
Associates' profit and loss account | ||||||||||||
At 1 January | 1,434 | 819 | 18 | 67 | 42 | 107 | ||||||
Adjustment on currency translation (b) | 137 | 483 | 2 | 3 | 4 | 7 | ||||||
Retained profit/(loss) for the year | 346 | 141 | 2 | 8 | 47 | (3 | ) | |||||
Transfers and other movements (d) | (41 | ) | (9 | ) | (1 | ) | (60 | ) | (42 | ) | (69 | ) |
At 31 December | 1,876 | 1,434 | 21 | 18 | 51 | 42 | ||||||
Total profit and loss account | 7,086 | 5,298 | 4,054 | 2,927 | 9,320 | 6,834 | ||||||
Other reserves | ||||||||||||
At 1 January | 261 | 249 | 117 | 86 | 334 | 303 | ||||||
Adjustment on currency translation | 3 | 12 | 7 | 31 | 7 | 31 | ||||||
Transfers and other movements | (16 | ) | - | 1 | - | (15 | ) | - | ||||
At 31 December | 248 | 261 | 125 | 117 | 326 | 334 | ||||||
Total reserves | ||||||||||||
- Parent and subsidiary companies | 4,919 | 3,731 | 3,948 | 2,835 | 8,893 | 6,585 | ||||||
- Joint ventures | 492 | 335 | 210 | 191 | 702 | 526 | ||||||
- Associated companies | 1,923 | 1,493 | 21 | 18 | 51 | 57 | ||||||
7,334 | 5,559 | 4,179 | 3,044 | 9,646 | 7,168 | |||||||
(a) | A substantial portion of Group reserves are in overseas companies. If these reserves were distributed, there would be a liability to withholding taxes and to corporate tax in the UK and Australia. This would, however, be reduced by double taxation relief. Provision is made in these accounts for such additional tax only to the extent that dividends have been accrued or there is a binding agreement to distribute such past earnings. |
(b) | Adjustments on currency translation include net of tax exchange gains on net debt of US$139 million (2003: gains of US$715 million), Rio Tinto plc gains of US$59million (2003: gains of US$299 million) and Rio Tinto Limited gains of US$128 million (2003: gains of US$667 million). |
(c) | The goodwill written back relates to the disposal of the Group's interest in Freeport-McMoRan Copper & Gold Inc. (see note 4). |
(d) | 'Transfers and other movements' for Rio Tinto plc in 2004 include US$nil (2003: US$102 million) relating to a dividend on the DLC dividend share received from Rio Tinto Limited and US$nil (2003: US$1 million) relating to Rio Tinto Limited share issues (page A-8 note (b)). Other 'Transfers and other movements' relate primarily to the disposal of interests in operations in 2003 and 2004. |
(e) | At 31 December 2004, cumulative goodwill written off directly to reserves for the Rio Tinto Group amounted to US$2,936 million (2003: US$3,142 million), Rio Tinto plc US$2,518 million (2003: US$2,740 million) and Rio Tinto Limited US$418 million (2003: US$402 million). |
A-38
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
26 Product analysis - Rio Tinto Group
2004 | 2003 | 2004 | 2003 | |||||
% | % | US$m | US$m | |||||
Operating assets (a) | ||||||||
Copper, gold and by-products | 16.2 | 18.2 | 2,697 | 2,877 | ||||
Iron ore | 28.6 | 25.0 | 4,757 | 3,951 | ||||
Coal | 11.5 | 14.1 | 1,910 | 2,234 | ||||
Aluminium | 22.2 | 20.6 | 3,690 | 3,261 | ||||
Industrial minerals | 12.9 | 12.9 | 2,150 | 2,044 | ||||
Diamonds | 7.6 | 8.0 | 1,261 | 1,261 | ||||
Other products | 1.0 | 1.2 | 144 | 181 | ||||
Total | 100.0 | 100.0 | 16,609 | 15,809 | ||||
Unallocated items | (274 | ) | (126 | ) | ||||
Less: net debt | (3,751 | ) | (5,646 | ) | ||||
Net assets | 12,584 | 10,037 | ||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||
% | % | % | US$m | US$m | US$m | |||||||
Gross turnover (e) | ||||||||||||
Copper | 15.3 | 12.4 | 12.3 | 2,233 | 1,507 | 1,372 | ||||||
Gold (all sources) | 4.3 | 8.8 | 9.4 | 634 | 1,068 | 1,046 | ||||||
Iron ore | 20.1 | 18.8 | 16.6 | 2,932 | 2,273 | 1,843 | ||||||
Coal | 18.2 | 17.6 | 19.9 | 2,665 | 2,137 | 2,211 | ||||||
Aluminium | 16.7 | 15.7 | 15.5 | 2,441 | 1,906 | 1,723 | ||||||
Industrial minerals | 14.9 | 16.2 | 18.0 | 2,175 | 1,964 | 1,997 | ||||||
Diamonds | 5.1 | 4.6 | 3.3 | 744 | 556 | 372 | ||||||
Other products | 5.4 | 5.9 | 5.0 | 784 | 708 | 555 | ||||||
Total | 100.0 | 100.0 | 100.0 | 14,608 | 12,119 | 11,119 | ||||||
Profit before tax | ||||||||||||
Copper, gold and by-products | 31.5 | 27.3 | 19.0 | 1,186 | 680 | 536 | ||||||
Iron ore | 23.1 | 30.1 | 24.2 | 869 | 748 | 680 | ||||||
Coal | 13.7 | 10.2 | 18.5 | 516 | 255 | 520 | ||||||
Aluminium | 13.3 | 11.5 | 13.0 | 501 | 287 | 365 | ||||||
Industrial minerals | 9.7 | 11.5 | 19.9 | 366 | 286 | 559 | ||||||
Diamonds | 7.6 | 7.5 | 3.4 | 288 | 187 | 96 | ||||||
Other products | 1.1 | 1.9 | 2.0 | 40 | 46 | 58 | ||||||
100.0 | 100.0 | 100.0 | 3,766 | 2,489 | 2,814 | |||||||
Exploration and evaluation | (187 | ) | (127 | ) | (130 | ) | ||||||
Net interest (c) | (113 | ) | (139 | ) | (161 | ) | ||||||
Other items | (232 | ) | (255 | ) | (118 | ) | ||||||
3,234 | 1,968 | 2,405 | ||||||||||
Exceptional items (d) | 362 | 126 | (1,094 | ) | ||||||||
Total | 3,596 | 2,094 | 1,311 | |||||||||
Net earnings | ||||||||||||
Copper, gold and by-products | 33.8 | 27.1 | 20.8 | 861 | 429 | 369 | ||||||
Iron ore | 22.4 | 31.6 | 25.6 | 569 | 500 | 455 | ||||||
Coal | 13.8 | 10.3 | 17.9 | 350 | 163 | 318 | ||||||
Aluminium | 13.1 | 11.9 | 14.5 | 334 | 189 | 257 | ||||||
Industrial minerals | 9.3 | 10.0 | 16.4 | 236 | 159 | 292 | ||||||
Diamonds | 6.6 | 7.0 | 3.5 | 169 | 111 | 63 | ||||||
Other products | 1 | 2.1 | 1.3 | 25 | 33 | 22 | ||||||
100.0 | 100.0 | 100.0 | 2,544 | 1,584 | 1,776 | |||||||
Exploration and evaluation | (152 | ) | (98 | ) | (109 | ) | ||||||
Net interest (c) | (57 | ) | (59 | ) | (95 | ) | ||||||
Other items | (114 | ) | (45 | ) | (42 | ) | ||||||
2,221 | 1,382 | 1,530 | ||||||||||
Exceptional items (d) | 592 | 126 | (879 | ) | ||||||||
Total | 2,813 | 1,508 | 651 | |||||||||
Note references above are explained on page A-40. |
A-39
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
26 Product analysis - Rio Tinto Group (continued)
Notes | |
(a) | Operating assets of subsidiaries comprise net assets before deducting net debt, less outside shareholders' interests which are calculated by reference to the net assets of the relevant companies (i.e. net of such companies' debt). For joint ventures and associates, Rio Tinto's net investment is shown. |
(b) | The above analyses include Rio Tinto's shares of the results of joint ventures and associates including interest. |
(c) | The amortisation of discount is included in the applicable product category. All other financing costs of subsidiaries are shown as Net interest. |
(d) | Exceptional items are shown separately in the above analysis of 'Profit before tax' and 'Net earnings'. Of the 2004 exceptional items, US$920 million before tax (US$913 million after tax and minority interests) relates to profit on disposal of interests in operations, US$(398) million before tax (US$(161) million after tax and minority interests) relates to Palabora which is part of the 'Copper, gold and by-products' segment and US$160 million before and after tax relates to Colowyo which is part of the 'Coal' segment. |
(e) | Turnover has been adjusted to reclassify, as turnover, certain amounts charged to customers for freight and handling costs, which previously were deducted from operating costs. The effect was to increase Gross turnover in 2004 by US$473 million (2003: US$364 million, 2002: US$291 million). |
The Group figures on page A-39 include the following amounts for joint ventures:
2004 | 2003 | |||
US$m | US$m | |||
Net investment | ||||
Copper, gold and by-products | 1,236 | 1,072 | ||
Coal | 1,122 | 1,080 | ||
Other | 74 | 71 | ||
Total | 2,432 | 2,223 | ||
2004 | 2003 | 2002 | ||||
US$m | US$m | US$m | ||||
Gross turnover (b) | ||||||
Copper | 1,088 | 625 | 419 | |||
Gold | 83 | 283 | 236 | |||
Coal | 1,123 | 847 | 961 | |||
Other | 81 | 76 | 51 | |||
Total | 2,375 | 1,831 | 1,667 | |||
Profit before tax | ||||||
Copper, gold and by-products | 692 | 378 | 232 | |||
Coal | 311 | 139 | 285 | |||
Other | 25 | 3 | 3 | |||
Exceptional charges | - | - | (16 | ) | ||
Total | 1,028 | 520 | 504 | |||
Net earnings | ||||||
Copper, gold and by-products | 465 | 256 | 155 | |||
Coal | 223 | 102 | 198 | |||
Other | 21 | 2 | 2 | |||
Exceptional charges | - | - | (16 | ) | ||
709 | 360 | 339 | ||||
The Group figures on page A-39 include the following amounts for associates: | ||||||
2004 |
2003 |
|||||
US$m |
US$m |
|||||
Net investment | ||||||
Copper, gold and by-products | 180 | 362 | ||||
Other | 67 | 59 | ||||
Total | 247 | 421 | ||||
2004 | 2003 | 2002 | ||||
US$m | US$m | US$m | ||||
Gross turnover (b) | ||||||
Copper | 85 | 185 | 259 | |||
Gold | 211 | 411 | 355 | |||
Other | 138 | 124 | 123 | |||
Total | 434 | 720 | 737 | |||
Profit before tax | ||||||
Copper, gold and by-products | 120 | 147 | 130 | |||
Other | 19 | 33 | 59 | |||
Total | 139 | 180 | 189 | |||
Net earnings | ||||||
Copper, gold and by-products | 93 | 77 | 93 | |||
Other | 12 | 21 | 36 | |||
Total | 105 | 98 | 129 | |||
(a) | On 30 March 2004 Rio Tinto sold its 13.1 per cent shareholding in Freeport-McMoRan Copper & Gold Inc. which was included in 'Copper,gold and by-products'. |
(b) | Turnover has been adjusted to reclassify, as turnover, certain amounts charged to customers for freight and handling costs, which previously were deducted from operating costs. The effect was to increase share of joint ventures turnover in 2004 by US$2 million (2003: US$11 million,2002: US$5 million) and to increase share of associates turnover by US$16 million (2003: US$13 million, 2002: US$14 million). |
A-40
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
27 | Geographical analysis - Rio Tinto Group |
By country of location | |
2004 | 2003 | 2004 | 2003 | |||||
% | % | US$m | US$m | |||||
Operating assets | ||||||||
North America | 27.4 | 30.7 | 4,557 | 4,846 | ||||
Australia and New Zealand | 61.3 | 55.7 | 10,176 | 8,799 | ||||
South America | 4.1 | 4.1 | 680 | 652 | ||||
Africa | 3.3 | 3.6 | 548 | 577 | ||||
Indonesia | 2.4 | 3.5 | 398 | 554 | ||||
Europe and other countries | 1.5 | 2.4 | 250 | 381 | ||||
Total | 100.0 | 100.0 | 16,609 | 15,809 | ||||
Unallocated items | (274 | ) | (126 | ) | ||||
Less: net debt | (3,751 | ) | (5,646 | ) | ||||
Net assets | 12,584 | 10,037 | ||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||
% | % | % | US$m | US$m | US$m | |||||||
Gross turnover by country of origin (e) | ||||||||||||
North America | 31.2 | 29.6 | 30.6 | 4,553 | 3,589 | 3,403 | ||||||
Australia and New Zealand | 47.9 | 45.0 | 42.5 | 7,000 | 5,449 | 4,720 | ||||||
South America | 7.7 | 5.7 | 4.7 | 1,131 | 684 | 527 | ||||||
Africa | 5.8 | 5.7 | 7.2 | 850 | 695 | 804 | ||||||
Indonesia | 2.2 | 8.6 | 9.6 | 314 | 1,047 | 1,061 | ||||||
Europe and other countries | 5.2 | 5.4 | 5.4 | 760 | 655 | 604 | ||||||
Total | 100.0 | 100.0 | 100.0 | 14,608 | 12,119 | 11,119 | ||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||
% | % | % | US$m | US$m | US$m | |||||||
Profit before tax | ||||||||||||
North America | 28.3 | 18.9 | 17.1 | 948 | 399 | 439 | ||||||
Australia and New Zealand | 49.8 | 53.7 | 57.1 | 1,666 | 1,131 | 1,464 | ||||||
South America | 18.5 | 11.1 | 3.4 | 619 | 234 | 86 | ||||||
Africa | 1.9 | 3.1 | 11.8 | 65 | 65 | 303 | ||||||
Indonesia | 2.4 | 16.5 | 12.2 | 80 | 348 | 312 | ||||||
Europe and other countries | (0.9 | ) | (3.3 | ) | (1.6 | ) | (31 | ) | (70 | ) | (38 | ) |
100.0 | 100.0 | 100.0 | 3,347 | 2,107 | 2,566 | |||||||
Net interest (c) | (113 | ) | (139 | ) | (161 | ) | ||||||
3,234 | 1,968 | 2,405 | ||||||||||
Exceptional items (d) | 362 | 126 | (1,094 | ) | ||||||||
Total | 3,596 | 2,094 | 1,311 | |||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||
% | % | % | US$m | US$m | US$m | |||||||
Net earnings | ||||||||||||
North America | 32.0 | 25.2 | 20.1 | 730 | 363 | 326 | ||||||
Australia and New Zealand | 48.7 | 52.3 | 57.8 | 1,109 | 754 | 939 | ||||||
South America | 16.8 | 10.8 | 4.0 | 382 | 156 | 65 | ||||||
Africa | 0.7 | 0.8 | 7.1 | 15 | 12 | 115 | ||||||
Indonesia | 2.1 | 12.6 | 11.4 | 48 | 181 | 185 | ||||||
Europe and other countries | (0.3 | ) | (1.7 | ) | (0.4 | ) | (6 | ) | (25 | ) | (5 | ) |
100.0 | 100.0 | 100.0 | 2,278 | 1,441 | 1,625 | |||||||
Net interest (c) | (57 | ) | (59 | ) | (95 | ) | ||||||
2,221 | 1,382 | 1,530 | ||||||||||
Exceptional items (d) | 592 | 126 | (879 | ) | ||||||||
Total | 2,813 | 1,508 | 651 | |||||||||
Note references above are explained on page A-42. |
A-41
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
27 | Geographical analysis - Rio Tinto Group (continued) |
Notes | ||||
(a) | Operating assets of subsidiaries comprise net assets before deducting net debt, less outside shareholders' interests which are calculated by reference to the net assets of the relevant companies (i.e. net of such companies' debt). For joint ventures and associates, Rio Tinto's net investment is shown. | |||
(b) | The above analyses include the Rio Tinto share of the results of joint ventures and associates including interest. | |||
(c) | The amortisation of discount is included in the applicable geographical category. All other financing costs of subsidiaries are shown as Net interest. | |||
(d) | Exceptional items are shown separately in the above analysis of 'Profit before tax' and 'Net earnings'. Of the 2004 exceptional items, US$920 million before tax (US$913 million after tax and minority interests) relates to profit on disposal of interests in operations, US$(398) million before tax (US$(161) million after tax and minority interests) relates to Palabora which is included in the 'Africa' segment and US$160 million before and after tax relates to Colowyo which is included in the 'North America' segment. The exceptional items in 2003 relate to the profit on disposal of interests in a subsidiary, joint venture and associate. Of the 2002 exceptional charges, US$596 million before tax relates to Kennecott Utah Copper and US$443 million before tax relates to the Iron Ore Company of Canada, both of which are included in 'North America'. The impact of the exceptional charges on net earnings was US$536 million for Kennecott Utah Copper and US$235 million for the Iron Ore Company of Canada. | |||
(e) | Turnover has been adjusted to reclassify, as turnover, certain amounts charged to customers for freight and handling costs, which previously were deducted from operating costs. The effect was to increase Gross turnover in 2004 by US$473 million (2003: US$364 million, 2002: US$291 million). |
The Group figures shown on page A-41 include the following amounts for joint ventures:
2004 | 2003 | |||||
US$m | US$m | |||||
Net investment by origin | ||||||
Australia and New Zealand | 1,154 | 1,108 | ||||
South America | 710 | 552 | ||||
Indonesia | 529 | 523 | ||||
North America | 39 | 40 | ||||
Total | 2,432 | 2,223 | ||||
2004 | 2003 | 2002 | ||||
US$m | US$m | US$m | ||||
Gross turnover by origin (a) | ||||||
Australia and New Zealand | 957 | 561 | 592 | |||
South America | 1,003 | 502 | 283 | |||
Indonesia | 153 | 539 | 565 | |||
North America | 262 | 229 | 227 | |||
Total | 2,375 | 1,831 | 1,667 | |||
Profit before tax by origin | ||||||
Australia and New Zealand | 287 | 57 | 214 | |||
South America | 632 | 183 | 49 | |||
Indonesia | 61 | 241 | 231 | |||
North America | 48 | 39 | 26 | |||
Exceptional charges | - | - | (16 | ) | ||
Total | 1,028 | 520 | 504 | |||
Net earnings by origin | ||||||
Australia and New Zealand | 199 | 46 | 151 | |||
South America | 420 | 122 | 32 | |||
Indonesia | 45 | 155 | 149 | |||
North America | 45 | 37 | 23 | |||
Exceptional charges | - | - | (16 | ) | ||
Total | 709 | 360 | 339 | |||
(a) | Turnover has been adjusted to reclassify, as turonver, certain amounts charged to customers for freight and handling costs, which previously were deducted from operating costs. The effect was to increase share of joint ventures turnover in 2004 by US$2 million (2003: US$11 million, 2002: US$5 million). |
A-42
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
27 | Geographical analysis - Rio Tinto Group (continued) |
The Group figures shown on page A-41 include the following amounts for associates:
2004 | 2003 | |||||
US$m | US$m | |||||
Net investment by origin | ||||||
North America | 66 | 53 | ||||
Indonesia | - | 143 | ||||
Other | 181 | 225 | ||||
Total | 247 | 421 | ||||
2004 | 2003 | 2002 | ||||
US$m | US$m | US$m | ||||
Gross turnover by origin (b) | ||||||
North America | 167 | 155 | 131 | |||
Indonesia | 43 | 344 | 306 | |||
Other | 224 | 221 | 300 | |||
Total | 434 | 720 | 737 | |||
Profit before tax by origin | ||||||
North America | 79 | 67 | 42 | |||
Indonesia | (1 | ) | 72 | 54 | ||
Other | 61 | 41 | 93 | |||
Total | 139 | 180 | 189 | |||
Net earnings by origin | ||||||
North America | 58 | 49 | 33 | |||
Indonesia | (4 | ) | 23 | 19 | ||
Other | 51 | 26 | 77 | |||
Total | 105 | 98 | 129 | |||
(a) | On 30 March 2004 Rio Tinto sold its 13.1 per cent shareholding in Freeport-McMoRan Copper & Gold Inc., which was included in 'Indonesia'. | |||
(b) | Turnover has been adjusted to reclassify, as turnover, certain amounts charged to customers for freight and handling costs, which previously were deducted from operating costs. The effect was to increase share of associates turnover by US$16 million (2003: US$13million, 2002: US$14 million). | |||
By destination | ||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||
% | % | % | US$m | US$m | US$m | |||||||
Turnover by destination (b) | ||||||||||||
North America (c) | 24.4 | 25.2 | 28.5 | 3,569 | 3,056 | 3,173 | ||||||
Europe | 21.3 | 23.2 | 21.9 | 3,109 | 2,813 | 2,435 | ||||||
Japan | 17.1 | 17.9 | 17.9 | 2,504 | 2,171 | 1,988 | ||||||
Other Asia | 23.7 | 21.9 | 19.2 | 3,460 | 2,655 | 2,134 | ||||||
Australia and New Zealand | 8.4 | 7.6 | 8.6 | 1,225 | 923 | 956 | ||||||
Other | 5.1 | 4.2 | 3.9 | 741 | 501 | 433 | ||||||
Total | 100.0 | 100.0 | 100.0 | 14,608 | 12,119 | 11,119 | ||||||
The Group figures shown above include the following amounts for joint ventures:
2004 | 2003 | 2002 | ||||
US$m | US$m | US$m | ||||
Turnover by destination (b) | ||||||
North America | 210 | 191 | 214 | |||
Europe | 355 | 300 | 303 | |||
Japan | 766 | 551 | 579 | |||
Other | 1,044 | 789 | 571 | |||
Total | 2,375 | 1,831 | 1,667 | |||
The Group figures shown above include the following amounts for associates: | ||||||
2004 | 2003 | 2002 | ||||
US$m | US$m | US$m | ||||
Turnover by destination (b) | ||||||
North America | 185 | 173 | 159 | |||
Europe | 125 | 224 | 252 | |||
Other | 124 | 323 | 326 | |||
Total | 434 | 720 | 737 | |||
(a) | An analysis of Property, Plant and Equipment by location is included in note 42 'Reconciliation to US Accounting Principles'. |
(b) | Turnover has been adjusted to reclassify, as turnover, certain amounts charged to customers for freight and handling costs, which previously were deducted from operating costs. The effect was to increase Gross turnover in 2004 by US$473 million (2003: US$364 million, 2002: US$291 million); increase share of joint ventures turnover in 2004 by US$2 million (2003: US$11 million, 2002: US$5 million) and to increase share of associates turnover by US$16 million (2003: US$13 million, 2002: US$14 million). |
(c) | North America includes US$3,215 million (2003: US$2,764 million, 2002: US$2,893 million) relating to the United States of America. |
A-43
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
28 Financial Instruments
The Group's policies with regard to currency, interest rate and commodity price exposures, and the use of derivative financial instruments, are discussed in the following sections on pages 37 to 39 of the Financial review: | |
A | Exchange rates, reporting currencies and currency exposure |
B | Interest rates |
C | Commodity prices |
D | Treasury management and financial instruments |
Except where stated, the information given below relates to the financial instruments of the parent companies and their subsidiaries and excludes joint ventures and associates. The information provided is as at the end of the financial year. Short term debtors and creditors are included only in the currency analysis.
Financial instruments held by companies acquired are marked to market as part of the adjustment of assets and liabilities acquired to fair value. Where appropriate, these fair value adjustments, calculated on a basis consistent with that disclosed in Section E, are shown in the disclosures below.
A) Currency
The Group's currency derivatives are itemised below:
a) Forward contracts hedging trading transactions
Buy Australian dollar: sell US dollar | Buy | Sell | Weighted | Fair value | Total fair | |||||
average | value | |||||||||
currency | currency | exchange | ||||||||
amount | amount | rate | ||||||||
A$m | US$m | A$/US$ | US$m | US$m | ||||||
Less than 1 year | 213 | 129 | 0.61 | 34 | ||||||
1 to 5 years | 529 | 321 | 0.61 | 64 | ||||||
More than 5 years | 30 | 18 | 0.61 | 2 | ||||||
Total | 772 | 468 | 0.61 | 100 | ||||||
Of the above, contracts to sell US$439 million were acquired with companies purchased in 2000 and 2001. | ||||||||||
Buy New Zealand dollar: sell US dollar | NZ$m | US$m | NZ$/US$ | US$m | ||||||
Less than 1 year | 95 | 45 | 0.47 | 23 | ||||||
1 to 5 years | 520 | 233 | 0.45 | 100 | ||||||
More than 5 years | 130 | 58 | 0.45 | 19 | ||||||
Total | 745 | 336 | 0.45 | 142 | ||||||
Other currency forward contracts | (6 | ) | ||||||||
Total fair value | 236 | |||||||||
Adjust: Negative fair value recognised in respect of these contracts (of which US$11 million was recognised on acquisition) | 13 | |||||||||
Fair value not recognised | 249 | |||||||||
A-44
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
28 Financial Instruments (continued)
b) Options hedging trading
transactions
The Group acquired a series of bought call options with
companies purchased in 2000. The majority of these bought call options
are matched at 31 December 2003 by sold puts. The combination of these
instruments has a similar effect to forward contracts. During 2004 all
of these sold puts totalling US$248 million were knocked-out, ie automatically
cancelled, because the Australian dollar strengthened above a predetermined
level.
Weighted | ||||||||||
Buy | Sell | average | Total | |||||||
currency | currency | strike | Fair | fair | ||||||
amount | amount | rate | value | value | ||||||
A$m | US$m | A$/US$ | US$m | US$m | ||||||
Bought A$ call options | ||||||||||
Less than 1 year | 94 | 66 | 0.70 | 7 | ||||||
1 to 5 years | 247 | 173 | 0.70 | 17 | ||||||
Total fair value | 341 | 239 | 0.70 | 24 | ||||||
Adjust: Fair value recognised on acquisition in respect of these contracts | 25 | |||||||||
Fair value not recognised | 49 | |||||||||
c) Currency swaps hedging non US dollar debt | ||||||||||
Weighted | ||||||||||
Buy | Sell | average | Total | |||||||
currency | currency | exchange | Fair | fair | ||||||
amount | amount | rate | value (a) | value | ||||||
US$m | US$m | |||||||||
Buy Euro: sell US dollars | ||||||||||
Less than 1 year | Euro 125m | 153 | 0.82 | 17 | ||||||
1 to 5 years | Euro 850m | 781 | 1.09 | 377 | ||||||
934 | 1.04 | 394 | ||||||||
Buy Japanese yen: sell US dollars | ||||||||||
1 to 5 years | Yen 21 billion | 177 | 119 | 28 | ||||||
Buy sterling: sell US dollars | ||||||||||
Less than 1 year | £10m | 15 | 0.67 | 4 | ||||||
1 to 5 years | £165m | 235 | 0.70 | 83 | ||||||
250 | 0.70 | 87 | ||||||||
Buy Swiss francs: sell US dollars | ||||||||||
Less than 1 year | CHF50m | 36 | 1.39 | 9 | ||||||
1 to 5 years | CHF20m | 12 | 1.67 | 6 | ||||||
48 | 1.46 | 15 | ||||||||
Total currency swaps | 1,409 | 524 | ||||||||
Adjust: Fair value recognised within carrying value of debt | (524 | ) | ||||||||
Fair value not recognised | - | |||||||||
(a) | These fair values comprise only the 'currency element' of the swaps. The fair value of the 'interest element' is presented in the summary of interest rate swaps. |
A-45
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
28 Financial Instruments (continued)
d) Currency exposures
arising from the Group's net monetary
assets/(liabilities)
After taking into account the effect of relevant derivative instruments, almost
all the Group's net debt is either denominated in US dollars or in the functional
currency of the entity holding the debt. The table below sets out the currency
exposures arising from net monetary assets/(liabilities), other than net
debt, which are not denominated in the functional currency of the relevant
business unit. Gains and losses resulting from such exposures are recorded
in the profit and loss account. This table reflects the currency exposures
before adjusting for tax and outside interests.
Currency of exposure | Currency of exposure | |||||||||||
US | Other | 2004 | US | Other | 2003 | |||||||
dollar | currencies | Total | dollar | currencies | Total | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Functional currency of business unit: | ||||||||||||
United States dollar | - | 36 | 36 | - | 30 | 30 | ||||||
Australian dollar | 345 | 9 | 354 | 385 | (16 | ) | 369 | |||||
Canadian dollar | 57 | - | 57 | 51 | (1 | ) | 50 | |||||
South African rand | 22 | 12 | 34 | 47 | 6 | 53 | ||||||
Other currencies | 12 | (19 | ) | (7 | ) | 20 | 15 | 35 | ||||
Total | 436 | 38 | 474 | 503 | 34 | 537 | ||||||
The table below shows the Rio Tinto share of the above currency exposures after tax and outside interests:
Currency of exposure | Currency of exposure | |||||||||||
US | Other | 2004 | US | Other | 2003 | |||||||
dollar | currencies | Total | dollar | currencies | Total | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Functional currency of business unit: | ||||||||||||
United States dollar | - | 24 | 24 | - | 20 | 20 | ||||||
Australian dollar | 222 | 7 | 229 | 251 | (11 | ) | 240 | |||||
Canadian dollar | 21 | - | 21 | 19 | (1 | ) | 18 | |||||
South African rand | 8 | 3 | 11 | 16 | 2 | 18 | ||||||
Other currencies | 5 | (16 | ) | (11 | ) | 14 | 9 | 23 | ||||
Total | 256 | 18 | 274 | 300 | 19 | 319 | ||||||
B) Interest rates
(i) Financial
liabilities and assets including the effect of interest rate and currency
swaps
This table analyses
the currency and interest rate composition of the Group's financial assets
and liabilities:
2004 | 2003 | |||||||||||||
United | South | Total | Total | |||||||||||
States | Australian | African | Other | carrying | carrying | |||||||||
dollar | dollar | Sterling | rand | currencies | value | value | ||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||
Financial liabilities | ||||||||||||||
Fixed rate | (758 | ) | - | - | - | - | (758 | ) | (721 | ) | ||||
Floating rate | (2,660 | ) | (422 | ) | (12 | ) | (265 | ) | (26 | ) | (3,385 | ) | (5,322 | ) |
Non interest bearing | (250 | ) | - | - | - | - | (250 | ) | (219 | ) | ||||
(3,668 | ) | (422 | ) | (12 | ) | (265 | ) | (26 | ) | (4,393 | ) | (6,262 | ) | |
Financial assets | ||||||||||||||
Fixed rate | 87 | - | - | - | - | 87 | 239 | |||||||
Floating rate (including loans to joint ventures and associates) | 304 | 132 | 25 | 6 | 91 | 558 | 571 | |||||||
(3,277 | ) | (290 | ) | 13 | (259 | ) | 65 | (3,748 | ) | (5,452 | ) | |||
Adjusted to exclude: | ||||||||||||||
US Treasury bonds (fixed rate) | (87 | ) | (239 | ) | ||||||||||
Deferred consideration payable (non interest bearing) | 250 | 219 | ||||||||||||
Loans to joint ventures and associates (floating rate) | (166 | ) | (174 | ) | ||||||||||
Net debt (note 23) | (3,751 | ) | (5,646 | ) | ||||||||||
A-46
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
28 Financial Instruments (continued)
(ii) Fixed rate liabilities and assets, presented gross, and interest rate and currency swaps
The US$758 million (2003:
US$721 million) of fixed rate liabilities shown in (i) above comprise gross liabilities
of US$2,670 million (2003: US$2,716 million) less the interest rate and currency
swaps of US$1,912 million (2003: US$1,995 million) shown below:
2004 | 2003 | |||||||||||
Gross liabilities | Excess of | Excess of | ||||||||||
Average | fair value | Average | fair value | |||||||||
fixed | over | fixed | over | |||||||||
Principal | rate | principal | Principal | rate | principal | |||||||
US$m | % p.a. | US$m | US$m | % p.a. | US$m | |||||||
Maturity | ||||||||||||
Less than 1 year | 200 | 7.0 | (6 | ) | - | - | - | |||||
1 to 5 years | 1,150 | 4.1 | 8 | 1,350 | 4.6 | (33 | ) | |||||
More than 5 years | 100 | 7.1 | (18 | ) | 100 | 7.2 | (17 | ) | ||||
US$ fixed rate liabilities | 1,450 | 4.7 | (16 | ) | 1,450 | 4.8 | (50 | ) | ||||
Less than 1 year | 15 | 5.4 | - | 46 | 2.3 | - | ||||||
1 to 5 years | 1,205 | 4.5 | (67 | ) | 1,220 | 4.5 | (62 | ) | ||||
Non US dollar fixed rate liabilities (a) | 1,220 | 4.5 | (67 | ) | 1,266 | 4.4 | (62 | ) | ||||
Fixed rate liabilities before interest rate swaps | 2,670 | (83 | ) | 2,716 | (112 | ) | ||||||
Interest rate swaps | ||||||||||||
Average | Average | |||||||||||
Maturity | fixed | 2004 | fixed | 2003 | ||||||||
Principal | rate | Fair value(i) | Principal | rate | Fair value | |||||||
US$m | % p.a. | US$m | US$m | % p.a. | US$m | |||||||
Less than 1 year | 200 | 7.0 | 5 | - | - | - | ||||||
1 to 5 years | 850 | 4.7 | 5 | 1,050 | 5.1 | 41 | ||||||
Interest rate swaps to US$ floating rates | 1,050 | 5.1 | 10 | 1,050 | 5.1 | 41 | ||||||
Less than 1 year | 15 | 5.4 | - | 46 | 2.3 | - | ||||||
1 to 5 years | 1,205 | 4.5 | 59 | 1,220 | 4.5 | 55 | ||||||
Interest rate swaps from non US$ fixed rates to US$ floating rates (a) | 1,220 | 4.5 | 59 | 1,266 | 4.4 | 55 | ||||||
Less than 1 year | 225 | 7.0 | (5 | ) | 20 | 7.5 | (1 | ) | ||||
1 to 5 years | 133 | 5.8 | (11 | ) | 225 | 7.0 | (19 | ) | ||||
More than 5 years | - | - | - | 76 | 5.6 | (8 | ) | |||||
Interest rate swaps to US$ fixed rates (b) | 358 | 6.6 | (16 | ) | 321 | 6.7 | (28 | ) | ||||
Interest rate swaps (net impact) | 1,912 | 53 | 1,995 | 68 | ||||||||
Total fixed rate financial liabilities after interest rate swaps (b), (d) | 758 | (30 | ) | 721 | (44 | ) | ||||||
(i) | These fair values include the interest element of the currency swaps described earlier. |
2004 | 2003 | |||||||||||
Gross assets | Excess of | Excess of | ||||||||||
Average | fair value | Average | fair value | |||||||||
Maturity | fixed | over | fixed | over | ||||||||
Principal | rate | principal | Principal | rate | principal | |||||||
US$m | % p.a. | US$m | US$m | % p.a. | US$m | |||||||
Less than 1 year | 87 | 2.1 | - | 239 | 1.0 | (1 | ) | |||||
Total fixed rate financial assets | 87 | 2.1 | - | 239 | 1.0 | (1 | ) | |||||
(a) | All of the above non US$ liabilities are swapped to US$. The principal amounts shown above reflect the currency element of the related currency swaps. | |
(b) | As a consequence of acquisitions during 2000, the Group holds a number of interest rate swaps to receive US$ floating rates and pay US$ fixed rates which have been included in the total of fixed rate debt shown above. | |
(c) | The Group has US$100 million of finance leases (2003: US$119 million), the largest of which has a principal of US$74 million, a maturity of 2018 and a floating interest rate. | |
(d) | After taking into account all interest rate swaps, the Group's fixed rate debt totals US$ 758 million and has a weighted average interest rate of 5.1 per cent and a weighted average time to maturity of four years (2003: US$721 million with a weighted average interest rate of 5.1 per cent and a weighted average time to maturity of four years). | |
(e) | Interest rates on the great majority of the Group's floating rate financial liabilities and assets will have been reset within six months. The interest rates applicable to the Group's US dollar denominated floating rate financial liabilities and assets did not differ materially at the year end from the three month US dollar LIBOR rate of 2.5 per cent (2003: 1.2 per cent). | |
(f) | The above table does not include the remaining US$35 million (2003: US$39 million) net provision for the mark to market valuation of the hedge books held by companies acquired in 2000 and 2001 and other financial assets of US$216 million (2003: US$145 million), all of which are non interest bearing. Further details of the instruments included within the acquisition provision for mark to market valuation of the hedge books held by companies acquired are shown in section A above and section C below. | |
(g) | These non interest bearing financial liabilities have been presented in the financial statements on a discounted basis, using a discount rate of 3.8 per cent. |
A-47
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
28 Financial Instruments (continued)
C) Commodities
The Group's material
commodity derivatives are summarised below:
2004 | 2003 | |||
Fair value | Fair value | |||
US$m | US$m | |||
Commodity derivatives, including options (in 2003) | (10 | ) | (20 | ) |
Adjust: Fair value recognised on acquisition in respect of these contracts | (1 | ) | (2 | ) |
Fair value not recognised | (11 | ) | (22 | ) |
D) Liquidity
The
maturity profile of the Group's net debt is discussed in the Balance Sheet
section of the Financial review.
Financial assets and liabilities are repayable as follows:
2004 | 2003 | |||
US$m | US$m | |||
Financial liabilities | ||||
Within 1 year, or on demand | (903 | ) | (2,270 | ) |
Between 1 and 2 years | (1,168 | ) | (672 | ) |
Between 2 and 3 years | (1,000 | ) | (1,109 | ) |
Between 3 and 4 years | (798 | ) | (1,019 | ) |
Between 4 and 5 years | (43 | ) | (745 | ) |
After 5 years | (481 | ) | (447 | ) |
(4,393 | ) | (6,262 | ) | |
Financial assets | ||||
Within 1 year, or on demand | 515 | 670 | ||
Between 1 and 2 years | 14 | 10 | ||
Between 2 and 3 years | 15 | 14 | ||
Between 3 and 4 years | 14 | 15 | ||
Between 4 and 5 years | 15 | 14 | ||
After 5 years | 72 | 87 | ||
Total per currency/interest rate analysis | (3,748 | ) | (5,452 | ) |
In addition, of the remaining US$35 million net provision for the mark to market of the hedge books held by companies on acquisition in 2000 and 2001, US$10 million matures in 2005, US$24 million in 2006 to 2009 and US$1 million thereafter. There are other financial assets totalling US$216 million, of which US$138 million have no fixed maturity and US$78 million has a maturity greater than one year. | ||||
As at 31 December 2004, a total of US$1,499 million is outstanding under the US$3 billion European Medium Term Notes facility, of which US$204 million is repayable within one year. | ||||
In accordance with FRS 4, all commercial paper is classified as short term borrowings. There were no outstandings as at 31 December 2004, (2003: commercial paper of US$1.1 billion all backed by medium term facilities). | ||||
At 31 December 2004, the Group had unutilised standby credit facilities totalling US$1.45 billion. These facilities, which are summarised below, are for back-up support for the Groups commercial paper programmes and for general corporate purposes: |
2004 | 2003 | |||
US$m | US$m | |||
Unutilised standby credit facilities | ||||
Within 1 year | 600 | 1,650 | ||
Between 1 and 2 years | 850 | - | ||
After 2 years | - | 1,100 | ||
1,450 | 2,750 | |||
A-48
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
28 | Financial Instruments (continued) |
E) Fair values of financial instruments
The carrying values and the fair values of Rio Tinto's financial instruments at 31 December are shown in the following table. Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction between informed and willing parties. Where available, market values have been used to determine fair values. In other cases, fair values have been calculated using quotations from independent financial institutions, or by discounting expected cash flows at prevailing market rates. The fair value of cash, short term borrowings and loans to joint ventures and associates approximates to the carrying value, as a result of their short maturity, or because they carry floating rates of interest.
If Rio Tinto's financial instruments were realised at the fair values shown, tax of US$84 million would become payable (2003: US$86 million payable). The maturity of the financial instruments is shown in the notes above.
2004 | 2003 | ||||||||
US$m | Carrying | Fair | Carrying | Fair | |||||
value | value | value | value | ||||||
US$m | US$m | US$m | US$m | ||||||
Primary financial instruments held or issued to | |||||||||
finance the Group's operations: | |||||||||
Cash (note 17) | 390 | 390 | 395 | 395 | |||||
Investments (b) | 89 | 89 | 230 | 229 | |||||
Short term borrowings (note 18) (a) | (836 | ) | (836 | ) | (2,199 | ) | (2,199 | ) | |
Medium and long term borrowings (note 22) (a) | (3,831 | ) | (3,914 | ) | (4,231 | ) | (4,343 | ) | |
Loans to joint ventures and associates (note 13) | 166 | 166 | 174 | 174 | |||||
Other assets | 216 | 302 | 156 | 156 | |||||
Other liabilities | (250 | ) | (250 | ) | (219 | ) | (219 | ) | |
(4,056 | ) | (4,053 | ) | (5,694 | ) | (5,807 | ) | ||
Derivative financial instruments held to manage | |||||||||
the interest rate and currency profile: | |||||||||
Currency forward contracts hedging trading transactions (A) | (13 | ) | 236 | (22 | ) | 207 | |||
Currency option contracts hedging trading transactions (A) | (25 | ) | 24 | (27 | ) | 10 | |||
Currency forward contracts hedging future capital expenditure (A) | - | - | - | 93 | |||||
Currency swaps hedging non US dollar debt (A) (a) | 524 | 524 | 387 | 387 | |||||
Interest rate swap agreements and options (B) | - | 53 | - | 68 | |||||
Commodity forward/future contracts hedging trading transactions (C) | 1 | (10 | ) | 2 | (20 | ) | |||
(3,569 | ) | (3,226 | ) | (5,354 | ) | (5,062 | ) | ||
Less: mark to market provision at acquisition/other provisions | 37 | 47 | |||||||
'Other' financial assets | (216 | ) | (145 | ) | |||||
Total per liquidity analysis | (3,748 | ) | (5,452 | ) | |||||
(a) | Of the currency swaps, of US$524 million, US$30 million are netted against short term borrowings in the balance sheet and US$494 million are netted against medium and long term borrowings. |
(b) | US$11 million of these investments are in fixed assets. |
Gains and losses on hedges
Changes in the fair value of derivatives used as hedges of trading transactions, capital expenditure and interest rate exposures, including changes relating to derivatives held by companies acquired during 2000 and 2001, are not recognised in the financial statements until the hedged position matures.
2004 | 2003 | |||||||
Total net | Total net | |||||||
US$m | gains/ | gains/ | ||||||
Gains | Losses | (losses) | (losses) | |||||
Unrecognised gains and losses on hedges at 1 January | 471 | (66 | ) | 405 | 25 | |||
Gains and losses arising in previous years recognised in the year | (161 | ) | 18 | (143 | ) | (35 | ) | |
Gains and losses arising before 1 January that were not recognised in the year | 310 | (48 | ) | 262 | (10 | ) | ||
Gains and losses arising in the year that were not recognised in the year | 87 | (9 | ) | 78 | 415 | |||
Unrecognised gains and losses on hedges at 31 December | 397 | (57 | ) | 340 | 405 | |||
Of which: | ||||||||
Gains and losses expected to be recognised within one year | 105 | (27 | ) | 78 | 143 | |||
Gains and losses expected to be recognised in more than one year | 292 | (30 | ) | 262 | 262 | |||
397 | (57 | ) | 340 | 405 | ||||
A-49
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
29 | Contingent liabilities and commitments |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Commitments | ||||||||||||
Contracted capital expenditure at 31 December (a) | 110 | 56 | 590 | 556 | 700 | 612 | ||||||
Operating lease commitments (b) | 47 | 35 | 67 | 96 | 114 | 131 | ||||||
Other commitments | 30 | - | 110 | 67 | 140 | 67 |
(a) | 'Contracted capital expenditure' includes amounts falling due within one year of US$564 million (2003: US$598 million). | |||
(b) | 'Operating lease commitments' includes amounts falling due within one year of US$36 million (2003: US$38 million). |
Unconditional purchase obligations
The aggregate amount of future payment commitments under unconditional purchase obligations outstanding at 31 December was:
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Within 1 year | 38 | 38 | 348 | 230 | 386 | 268 | ||||||
Between 1 and 2 years | 38 | 38 | 344 | 240 | 382 | 278 | ||||||
Between 2 and 3 years | 38 | 38 | 327 | 237 | 365 | 275 | ||||||
Between 3 and 4 years | 8 | 8 | 316 | 235 | 324 | 243 | ||||||
Between 4 and 5 years | 8 | 8 | 279 | 226 | 287 | 234 | ||||||
After 5 years | 48 | 56 | 1,440 | 1,656 | 1,488 | 1,712 | ||||||
178 | 186 | 3,054 | 2,824 | 3,232 | 3,010 | |||||||
Unconditional purchase obligations relate to commitments to make payments in the future for fixed or minimum quantities of goods or services at fixed or minimum prices. The balance outstanding at 31 December 2004 relates mainly to commitments under 'take or pay' contracts.
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Contingent liabilities | ||||||||||||
Indemnities and other performance guarantees on | ||||||||||||
which no material loss is expected | 29 | - | 406 | 266 | 435 | 266 | ||||||
(a) | Pursuant to the DLC merger both Rio Tinto plc and Rio Tinto Limited issued deed poll guarantees by which each guaranteed contractual obligations incurred by the other or, to the extent guaranteed by the other, any person. The amounts shown above for Rio Tinto plc and Rio Tinto Limited do not reflect these deed poll guarantees. |
(b) | In 2002, the Australian Tax Office issued assessments of approximately A$500 million (which amount includes penalties and interest) in relation to certain transactions undertaken in 1997 to acquire franking credits. The transactions were conducted based on the Groups considered view of the law prevailing at the time. Subsequently, the law was changed. The Group lodged objections to the assessments and on 26 May 2003 the Australian Tax Office (ATO) substantially disallowed those objections. The Group subsequently lodged proceedings in the Federal Court to dispute the assessments. |
As required by Australian tax law and practice, part payment of the disputed tax assessments was required pending resolution of the dispute. A payment of A$164 million (US$128 million at the year end exchange rate) was made, which will be subject to recovery with interest if, as it is believed based on Counsels opinion, the Group is successful in challenging the assessments. Consequently, the amount paid has been recorded as a receivable on the balance sheet. | |
As at the year end, the amount of the disputed tax assessments, penalties and interest stood at approximately A$479 million (US$373 million at the year end exchange rate) after tax relief on the general interest charge component. | |
(c) | There are a number of legal claims arising from the normal course of business which are currently outstanding against the Group. No material loss to the Group is expected to result from these claims. |
A-50
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
30 | Average number of employees |
Subsidiaries and joint arrangements (a) | ||||||
2004 | 2003 | 2002 | ||||
The principal locations of employment were : | ||||||
Australia and New Zealand | 10,002 | 9,274 | 8,721 | |||
North America | 8,275 | 8,478 | 8,906 | |||
Africa | 4,724 | 5,661 | 6,012 | |||
Europe | 2,630 | 3,059 | 2,765 | |||
South America | 1,361 | 1,794 | 1,708 | |||
Indonesia | 511 | 569 | 908 | |||
Other countries | 195 | 205 | 150 | |||
27,698 | 29,040 | 29,170 | ||||
Joint ventures and associates (a) | ||||||
(Rio Tinto share) | ||||||
2004 | 2003 | 2002 | ||||
The principal locations of employment were : | ||||||
Australia and New Zealand | 925 | 983 | 995 | |||
North America | 1,055 | 1,034 | 873 | |||
Africa | 441 | 422 | 450 | |||
Europe | 161 | 386 | 433 | |||
South America | 851 | 773 | 940 | |||
Indonesia | 1,754 | 3,234 | 4,154 | |||
Other countries | 155 | 144 | 158 | |||
5,342 | 6,976 | 8,003 | ||||
Group total | ||||||
2004 | 2003 | 2002 | ||||
The principal locations of employment were : | ||||||
Australia and New Zealand | 10,927 | 10,257 | 9,716 | |||
North America | 9,330 | 9,512 | 9,779 | |||
Africa | 5,165 | 6,083 | 6,462 | |||
Europe | 2,791 | 3,445 | 3,198 | |||
South America | 2,212 | 2,567 | 2,648 | |||
Indonesia | 2,265 | 3,803 | 5,062 | |||
Other countries | 350 | 349 | 308 | |||
33,040 | 36,016 | 37,173 | ||||
(a) | Employee numbers, which represent the average for the year, include 100 per cent of employees of subsidiary companies. Employee numbers for joint arrangements, joint ventures and associates are proportional to the Group's equity interest. |
(b) | Part-time employees are included on a full time equivalent basis. Temporary employees are included in employee numbers. |
(c) | People employed by contractors are not included. |
A-51
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
31 Principal subsidiaries at 31 December 2004
Class of | Proportion | Group | Ultimate | ||||||
Company and country | shares | of class | interest | parent | |||||
of incorporation/operation | Principal activities | held | held % | % | company | ||||
Australia | |||||||||
Argyle Diamond Mines | Mining and processing of diamonds | (a) | 100 | Rio Tinto Limited | |||||
Coal & Allied Industries Limited | Coal mining | Ordinary | 75.71 | 75.71 | Rio Tinto Limited | ||||
Comalco Limited | Bauxite mining; alumina production; | Ordinary | 100 | 100 | Rio Tinto Limited | ||||
primary aluminium smelting | |||||||||
Dampier Salt Limited | Salt production | Ordinary | 64.94 | 64.94 | Rio Tinto Limited | ||||
Energy Resources of Australia Ltd | Uranium mining | Class A | 68.39 | 68.39 | Rio Tinto Limited | ||||
Hamersley Iron Pty Limited | Iron ore mining | Ordinary | 100 | 100 | Rio Tinto Limited | ||||
Rio Tinto Coal Australia Pty Limited | Coal mining | Ordinary | 100 | 100 | Rio Tinto Limited | ||||
Canada | |||||||||
Iron Ore Company of Canada Inc (b) | Iron ore mining; iron ore pellets | Series A & E | 58.72 | 58.72 | Rio Tinto Limited | ||||
QIT-Fer et Titane Inc | Titanium dioxide feedstock; high | Common shares | 100 | 100 | Rio Tinto plc | ||||
purity iron and steel | Preferred shares | 100 | 100 | ||||||
France | |||||||||
Talc de Luzenac S.A. | Mining, refining and marketing of talc | E15.25 | 99.94 | 99.94 | Rio Tinto plc | ||||
Indonesia | |||||||||
P.T. Kelian Equatorial Mining | Gold mining | Ordinary US$1 | 90 | 90 | Rio Tinto Limited | ||||
Namibia | |||||||||
Rossing Uranium Limited (c) | Uranium mining | 'B'N$1 | 71.16 | } | 68.58 | Rio Tinto plc | |||
'C'N10c | 70.59 | ||||||||
Papua New Guinea | |||||||||
Bougainville Copper Limited (d) | Copper and gold mining | Ordinary 1 Kina | 53.58 | 53.58 | Rio Tinto Limited | ||||
South Africa | |||||||||
Palabora Mining Company Limited | Copper mining, smelting and refining | R1 | 75.2 | 49.2 | Rio Tinto plc | ||||
Richards Bay Iron and Titanium | Titanium dioxide feedstock; | R1 | 50.5 | 50 | Rio Tinto plc | ||||
(Pty) Limited | high purity iron | ||||||||
United Kingdom | |||||||||
Anglesey Aluminium Metal Limited | Aluminium smelting | Ordinary £1 | 51 | 51 | Rio Tinto plc | ||||
United States of America | |||||||||
Kennecott Holdings Corporation | Copper and gold mining, smelting | Common US$0.01 | 100 | 100 | Rio Tinto plc | ||||
(including Kennecott Utah Copper, | and refining, land development | ||||||||
Kennecott Minerals and Kennecott | |||||||||
Land Company) | |||||||||
Kennecott Energy & Coal Company | Coal mining | Common US$1 | 100 | 100 | Rio Tinto plc | ||||
U.S. Borax Inc. | Mining, refining and marketing of borates | Common US$1 | 100 | 100 | Rio Tinto plc | ||||
(a) | The entity marked (a) is unincorporated. |
(b) | In addition, at 31 December 2004 the Group held 19.0 per cent of the Labrador Iron Ore Royalty Income Fund which has a 15.1 per cent interest in the Iron Ore Company of Canada. The Group sold its investment in the Labrador Iron Ore Royalty Income Fund in March 2005. |
(c) | The Group's shareholding in Rossing Uranium Limited carries 35.54 per cent of the total voting rights. Rossing is consolidated by virtue of Board control. |
(d) | The results of Bougainville Copper Limited are not consolidated (see note 39). |
(e) | The Group comprises a large number of companies and it is not practical to include all of them in this list. The list therefore only includes those companies that have a more significant impact on the profit or assets of the Group. |
(f) | The Group's principal subsidiaries are held by intermediate holding companies and not directly by Rio Tinto plc or Rio Tinto Limited. |
(g) | All entities operate mainly in the countries in which they are incorporated. |
A-52
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
32 Principal joint venture interests at 31 December 2004
Class of | Group | Ultimate | |||||||
Name and country | shares | interest | parent | ||||||
of incorporation/operation | Principal activities | held | % | company | |||||
Australia | |||||||||
Blair Athol Coal | Coal mining | (b) | 71.2 | Rio Tinto Limited | |||||
Kestrel | Coal mining | (b) | 80.0 | Rio Tinto Limited | |||||
Hail Creek | Coal mining | (b) | 82.0 | Rio Tinto Limited | |||||
Mount Thorley | Coal mining | (b) | 60.6 | Rio Tinto Limited | |||||
Bengalla | Coal mining | (b) | 30.3 | Rio Tinto Limited | |||||
Warkworth | Coal mining | (b) | 42.1 | Rio Tinto Limited | |||||
Chile | |||||||||
Minera Escondida Limitada (f) | Copper mining and refining | (b) | 30 | Rio Tinto plc | |||||
Indonesia | |||||||||
Grasberg expansion | Copper and gold mining | (b) | 40 | Rio Tinto plc | |||||
United States of America | |||||||||
Decker | Coal mining | (b) | 50.0 | Rio Tinto plc | |||||
Greens Creek | Silver, gold, zinc and lead mining | (b) | 70.3 | Rio Tinto plc | |||||
Rawhide | Gold mining | (b) | 51.0 | Rio Tinto plc | |||||
(a) | The Group has joint control of the above ventures and therefore includes them in its accounts using the gross equity accounting technique. |
(b) | These entities are unincorporated. |
(c) | The Group comprises a large number of entities and it is not practical to include all of them in this list. The list therefore only includes those entities that have a more significant impact on the profit or assets of the Group. |
(d) | The Group's principal joint ventures are held by intermediate holding companies and not directly by Rio Tinto plc or Rio Tinto Limited. |
(e) | All entities operate mainly in the countries in which they are incorporated. |
(f) | The year end of Minera Escondida Limitada is 30 June. |
33 Principal associates at 31 December 2004
Class of | Proportion | Group | Ultimate | ||||||||
Name and country | Number of shares | shares | of class | interest | parent | ||||||
of incorporation/operation | Principal activities | held by the Group | held | held % | % | company | |||||
Papua New Guinea | |||||||||||
Lihir Gold Limited (a) | Gold mining | 185,758,126 | Ordinary Kina 0.1 | 14.46 | 14.46 | Rio Tinto plc | |||||
South Africa | |||||||||||
Tisand (Pty) Limited | Rutile and zircon mining | 7,353,675 | R1 | 49.5 | 50 | Rio Tinto plc | |||||
United States of America | |||||||||||
Cortez | Gold mining | (b) | 40.0 | Rio Tinto plc | |||||||
(a) | The Group continues to have significant influence over the activities of Lihir Gold Limited, including Board representation; consequently the Group equity accounts for its interest in this company. |
(b) | This entity is unincorporated. |
(c) | The Group comprises a large number of entities and it is not practical to include all of them in this list. The list therefore only includes those entities that have a more significant impact on the profit or assets of the Group. |
(d) | The Group's principal associates are held by intermediate holding companies and not directly by Rio Tinto plc or Rio Tinto Limited. |
(e) | All entities operate mainly in the countries in which they are incorporated. |
34 Principal joint arrangements at 31 December 2004
Class of | Proportion | Group | Ultimate | ||||||||
Name and country | Number of shares | shares | of class | interest | parent | ||||||
of incorporation/operation | Principal activities | held by the Group | held | held % | % | company | |||||
Australia | |||||||||||
Boyne Smelters Limited | Aluminium smelting | 153,679,560 | Ordinary | 59.4 | 59.4 | Rio Tinto Limited | |||||
Gladstone Power Station | Power generation | (b) | 42.1 | Rio Tinto Limited | |||||||
Northparkes Mine | Copper/gold mining and processing | (b) | 80 | Rio Tinto Limited | |||||||
Queensland Alumina Limited | Alumina production | 854,078 | Ordinary | 38.6 | 38.6 | Rio Tinto Limited | |||||
Robe River Iron Associates | Iron ore mining | (b) | 53 | Rio Tinto Limited | |||||||
Hlsmelt® Kwinana Joint Venture | Iron technology | (b) | 60 | Rio Tinto Limited | |||||||
Bao-HI Ranges Joint Venture | Iron ore mining | (b) | 54 | Rio Tinto Limited | |||||||
Canada | |||||||||||
Diavik | Mining and processing of diamonds | (b) | 60 | Rio Tinto plc | |||||||
New Zealand | |||||||||||
New Zealand Aluminium Smelters Limited | Aluminium smelting | 24,998,400 | Ordinary | 79.36 | 79.36 | Rio Tinto Limited | |||||
(a) | The Group comprises a large number of entities and it is not practical to include all of them in this list. The list therefore only includes those entities that have a more significant impact on the profit or assets of the Group. |
(b) | These entities are unincorporated. |
(c) | All entities operate mainly in the countries in which they are incorporated. |
(d) | The Group's principal joint arrangements are held by intermediate holding companies and not directly by Rio Tinto plc or Rio Tinto Limited. |
A-53
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
35 Sales and purchases of subsidiaries, joint ventures, associates and other interests in operations
2004 Disposals | ||||||||
Name of operation | Location | Principal activities | Ownership | Date of | ||||
disposed | disposal | |||||||
% | ||||||||
Rio Tinto plc - part of Rio Tinto Group | ||||||||
Subsidiaries | ||||||||
Mineracao Serra de Fortaleza Limitada | Brazil | Nickel mining | 99.9 | 1 January 2004 | ||||
Rio Paracatu Mineracao S.A. | Brazil | Gold mining | 51.0 | 31 December 2004 | ||||
Associates | ||||||||
Freeport-McMoRan Copper & Gold Inc. (b) | USA | Copper and gold mining in Indonesia | 13.1 | 30 March 2004 | ||||
Sociedade Mineira de Neves-Corvo S.A. | Portugal | Copper mining | 49.0 | 18 June 2004 | ||||
(Somincor) | ||||||||
Rio Tinto Limited - part of Rio Tinto Group | ||||||||
Subsidiaries | ||||||||
Zinkgruvan AB | Sweden | Zinc, lead and silver mining | 100.0 | 2 June 2004 | ||||
Joint ventures | ||||||||
Hail Creek | Australia | Coal mining | 10.0 | 15 November 2004 | ||||
Other investments | ||||||||
Lake Cowal | Australia | Gold mining | (c | ) | 9 July 2001 | |||
Sepon | Laos | Gold mining | 20.0 | 1 January 2004 | ||||
Boke | Guinea | Bauxite mining | 4.0 | 25 June 2004 | ||||
(a) | The aggregate profit on disposal of interests in operations in 2004 was US$920 million, which is analysed in note 4. These gains have been classified as exceptional items and consequently excluded from adjusted earnings at the foot of the profit and loss account. |
(b) | The sale of investment in Freeport-McMoRan Copper & Gold Inc. does not affect the terms of the Grasberg joint venture referred to in note 32 above. |
(c) | The Group disposed of the Lake Cowal gold project in July 2001. In accordance with the sale agreement, a US$15 million payment on commencement of mining activity was made to the Group on 5 March 2004. |
(d) | In accordance with FRS 2 and FRS 9, the Group consolidates the results of subsidiary operations, and recognises its share of the results of joint ventures and associates, up to the date of disposal. In addition to the amount recorded as 'Profit on disposal of interests in operations' on the face of the profit and loss account, the subsidiaries which were disposed of during the year contributed US$16 million to Group profit. |
(e) | The Cash flow statement includes proceeds from disposals of interests in operations as follows: |
–US$1,511 million included in 'Disposals less acquisitions' which, in accordance with FRS1, is stated net of US $16 million cash and overdrafts transferred on sale of subsidiaries. This comprises US$431 million in respect of subsidiaries and US$1,080 in respect of joint ventures and associates. | |
–US$110 million included in 'Sales less purchases of other investments'. |
2003 Disposals | ||||||||
Name of operation | Location | Principal activities | Ownership | Date of | ||||
disposed | disposal | |||||||
% | ||||||||
Rio Tinto Limited - part of Rio Tinto Group | ||||||||
Subsidiaries | ||||||||
Peak Gold Mines Pty Limited | Australia | Gold mining | 100 | 17 March 2003 | ||||
Joint ventures | ||||||||
P.T. Kaltim Prima Coal | Indonesia | Coal mining | 50 | 10 October 2003 | ||||
Associates | ||||||||
Minera Alumbrera Limited | Argentina | Copper and gold mining | 25 | 17 March 2003 | ||||
(f) | The profit on disposal of interests in operations in 2003 was US$126 million. This was classified as an exceptional items and consequently excluded from adjusted earnings at the foot of the profit and loss account. |
(g) | The sale proceeds of US$403 million relating to these disposals were included in the Cash flow statement within 'Disposals less acquisitions'. |
2003 Acquisitions
During 2003 Kennecott Energy, an indirect subsidiary of Rio Tinto plc, increased its holding in Pegasus Technologies Inc. from 20 per cent to 86 per cent. The transaction gave rise to goodwill of US$20 million. The transaction did not involve any cash consideration.
A-54
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
36 | Directors' remuneration |
Aggregate remuneration of the directors of the parent Companies was as follows:
Rio Tinto Group | |||||||
2004 | 2003 | 2002 | |||||
US$'000 | US$'000 | US$'000 | |||||
Emoluments | 9,992 | 9,571 | 9,541 | ||||
Long term incentive plans | 57 | 3,278 | 8,443 | ||||
10,049 | 12,849 | 17,984 | |||||
Pension contributions | 669 | 424 | 65 | ||||
Gains made on exercise of share options | 2,414 | 2,029 | 2,992 |
For 2004, a total of US$4,190,900 (2003: US$4,048,800) was attributable to the highest paid director in respect of the aggregate amounts disclosed in the above table, including gains made on exercise of share options. The accrued pension entitlement for the highest paid director was US$712,400 (2003: US$1,158,700).
The aggregate remuneration incurred by Rio Tinto plc in respect of its directors was US$7,756,000 (2003: US$9,794,000).
There were no pension contributions.
The aggregate remuneration, including pension contributions and other retirement benefits, incurred by Rio Tinto Limited in respect of its directors was US$5,376,000 (2003: US$5,508,000). The aggregate pension contribution was US$668,982 (2003: US$423,938).
During 2004, four directors (2003: six) accrued retirement benefits under defined benefit arrangements.
Shares awarded last year in respect of the MCCP 2000 performance periods vested after the publication of the 2003 Annual Report and financial statements and the value of awards provided therein were estimated based on share prices of 1,386p and A$35.24. The actual share prices on 27 February 2004 when the awards vested were 1,440.5p and A$35.83 and the above 2004 figures for long term incentive plans have included this adjustment. Further details are given in the Remuneration report.
Emoluments included in the table above have been translated from local currency at the average rate for the year with the exception of bonus payments which, together with amounts payable under long term incentive plans, have been translated at the year end rate.
More detailed information concerning directors remuneration, shareholdings and options is shown in the Remuneration report, including Tables 1 to 5, on pages 76 to 81.
A-55
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
37 | Auditors' remuneration |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||
Auditors' remuneration - Group Auditors | ||||||||||||||||||
Audit services | ||||||||||||||||||
- Statutory audit | 3.4 | 3.1 | 2.6 | 2.6 | 2.1 | 1.5 | 6.0 | 5.2 | 4.1 | |||||||||
- Audit-related regulatory reporting | 1.7 | 0.9 | 0.7 | 1.7 | 0.4 | 0.4 | 3.4 | 1.3 | 1.1 | |||||||||
Further assurance services | 0.1 | 0.1 | 0.2 | 0.1 | 0.2 | 0.2 | 0.2 | 0.3 | 0.4 | |||||||||
Tax services | ||||||||||||||||||
- Compliance | 0.5 | 0.4 | 0.4 | 0.5 | 1.3 | 1.1 | 1.0 | 1.7 | 1.5 | |||||||||
- Advisory | 0.4 | 0.4 | 0.2 | 0.4 | 0.7 | 0.7 | 0.8 | 1.1 | 0.9 | |||||||||
Other services | ||||||||||||||||||
- Financial information technology | - | 0.1 | - | - | - | - | - | 0.1 | - | |||||||||
- Internal audit | - | 0.1 | 0.3 | - | - | - | - | 0.1 | 0.3 | |||||||||
- Other services not covered above | - | 0.1 | 0.2 | 0.1 | 0.2 | 0.2 | 0.1 | 0.3 | 0.4 | |||||||||
6.1 | 5.2 | 4.6 | 5.4 | 4.9 | 4.1 | 11.5 | 10.1 | 8.7 | ||||||||||
Remuneration payable to other accounting firms | ||||||||||||||||||
Statutory audit | 0.4 | 0.3 | 0.2 | - | 0.1 | 0.1 | 0.4 | 0.4 | 0.3 | |||||||||
Tax services | 0.7 | 0.3 | 0.2 | 2.3 | 2.2 | 0.6 | 3.0 | 2.5 | 0.8 | |||||||||
Internal audit | 1.0 | 1.2 | 0.3 | 0.8 | 1.1 | 0.7 | 1.8 | 2.3 | 1.0 | |||||||||
Other services | 2.0 | 2.0 | 1.1 | 3.9 | 4.9 | 2.6 | 5.9 | 6.9 | 3.7 | |||||||||
4.1 | 3.8 | 1.8 | 7.0 | 8.3 | 4.0 | 11.1 | 12.1 | 5.8 | ||||||||||
10.2 | 9.0 | 6.4 | 12.4 | 13.2 | 8.1 | 22.6 | 22.2 | 14.5 | ||||||||||
(a) | The audit fees payable to PricewaterhouseCoopers, the Group Auditors, are reviewed by the Audit committee. The committee sets the policy for the award of non-audit work to the auditors and reviews the nature and extent of such work, and the amount of the related fees, to ensure that independence is maintained. The fees disclosed above consolidate all payments made to PricewaterhouseCoopers by the companies and their subsidiaries. |
(b) | 'Audit-related regulatory reporting' includes the audit of employee benefit plans, consultation regarding the application of accounting principles (including IFRS) and work performed in connection with Section 404 of the Sarbanes-Oxley Act. |
(c) | 'Further assurance services' includes financial due diligence for potential business acquisitions and disposals. |
(d) | 'Tax services' includes tax compliance, involving the preparation or review of returns for corporation, income, sales and excise taxes; acquisitions advice on transfer pricing and dealing with tax returns for expatriates. |
(e) | 'Other services' includes reviews of risk management policies and procedures, forensic investigations and provision of training services. |
(f) | Internal audit fees payable to Group Auditors in 2003 relate to projects which were carried forward from 2002. There were no internal audit services provided by the Group auditors in 2004. |
(g) | 'Remuneration payable to other accounting firms' does not include fees for similar services payable to suppliers of consultancy services other than accountancy firms. |
(h) | Amounts payable to PricewaterhouseCoopers for non-audit work for the Group's UK companies were US$1.7 million (2003: US$1.3 million 2002: US$0.9 million) and for the Group's Australian companies were US$2.1 million (2003: US$2.3 million 2002: US$1.7 million). |
A-56
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
38 Related party transactions
Information about material related party transactions of the Rio Tinto Group is set out below:
Subsidiary companies: Details of investments in principal subsidiary companies are disclosed in note 31.
Joint ventures and associates: Information relating to joint ventures and associates can be found in the following notes:
Note 4 - | Exceptional items |
Note 5 - | Net interest payable and similar charges |
Note 6 - | Amortisation of discount |
Note 7 - | Taxation charge |
Note 12 - | Property, plant and equipment |
Note 13 - | Fixed asset investments |
Note 14 - | Net debt of joint ventures and associates |
Note 16 - | Accounts receivable and prepayments |
Note 19 - | Accounts payable and accruals |
Note 25 - | Share premium and reserves |
Note 26 - | Product analysis |
Note 27 - | Geographical analysis |
Note 30 - | Average number of employees |
Note 32 - | Principal joint venture interests |
Note 33 - | Principal associates |
Note 35 - | Purchases and sales of subsidiaries, joint arrangements, joint ventures and associates |
Information relating to joint arrangements can be found in note 34 - Principal joint arrangements.
Pension funds: Information relating to pension fund arrangements is disclosed in note 40.
Directors: Details of directors' remuneration are set out in note 36 and in the Remuneration report.
Transactions between the Rio Tinto plc part of the Group and the Rio Tinto Limited part of the Group
These are eliminated on the consolidation of the Rio Tinto Group. Transactions during 2004 and 2003 included the following:
- | During 2004, Rio Tinto plc made loans of US$1.4 billion to Rio Tinto Limited. |
- | During 2003, a subsidiary of the Rio Tinto plc part of the Group acquired US$500 million of redeemable preference shares in a subsidiary of the Rio Tinto Limited part of the Group. |
- | During 2003, a payment of US$1,208 million was made by the Rio Tinto Limited part of the Group to the Rio Tinto plc part of the Group in respect of a number of shares which were bought back during 2000. |
- | During 2003 a dividend of US$164 million was paid by Rio Tinto Limited on the DLC Dividend Share, which was issued to facilitate the efficient management of funds within the DLC structure. Of this, US$62 million was paid out of Rio Tinto plc's 37.6% share of the reserves of Rio Tinto Limited and, therefore, had no impact on the shareholders' funds of Rio Tinto plc. The remaining US$102 million of this dividend gave rise to an increase in the shareholders' funds of the Rio Tinto plc part of the Group.This dividend, however, had no impact on the shareholders' funds of the Rio Tinto Group as the economic interests of shareholders both of Rio Tinto plc and Rio Tinto Limited are in the combined net assets of the two dual listed companies. There was no such dividend in 2004. |
Leighton Holdings Limited (Leighton)
In 2001, John Morschel became a director and, subsequently, the chairman of Leighton, Australia's largest project development and contracting group. A number of Rio Tinto companies in Australia and Indonesia have, in the ordinary course of their businesses, awarded commercial contracts to subsidiaries of Leighton. The Board does not consider the value of these contracts to be material to the business of either Leighton or the Rio Tinto Group. John Morschel resigned from the board of Leighton on 25 March 2004.
Barclays Bank plc and ANZ Banking Group Limited
On 1 October 2004, Leigh Clifford became a director of Barclays Bank plc and John Morschel became a director of ANZ Banking Group Limited. Rio Tinto is a client of both these banks.
Dupont
Richard Goodmanson's employer, The DuPont Company, has commercial buy and sell arrangements with Rio Tinto. These are not material to either company and, in the normal course of his duties, he does not play a role in nor exert influence over these transactions.
39 Bougainville Copper Limited ('BCL')
The Panguna mine remains shut down. Access to the mine site has not been possible and an accurate assessment of the condition of the assets cannot be determined. Considerable funding would be required to recommence operations to the level which applied at the time of the mine's closure in 1989 and these funding requirements cannot be forecast accurately. The directors do not have access to reliable, verifiable or objective information on BCL and the directors have therefore decided to exclude BCL information from the financial statements. BCL reported a net profit of US$2 million for the financial year (2003: profit of US$4 million, 2002: profit of US$2 million). This is based upon actual transactions for the financial year. The aggregate amount of capital and reserves reported by BCL as at 31 December 2004 was US$106 million (2003: US$97 million). The Group owns 214,887,966 shares in BCL, representing 53.6 per cent of the issued share capital. The investment of US$195 million was fully provided against in 1991. At 31 December 2004, the market value of the shareholding in BCL was US$40 million.
A-57
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
40 Post retirement benefits
(a) SSAP 24 accounting
and disclosure
Pensions
The Group operates a number of pension plans around the world. Whilst some of these plans are defined contribution, the majority are of the funded defined benefit type, with assets held in separate trustee administered funds. Valuations of these plans are updated annually to 31 December by independent qualified actuaries. Further details regarding the plans are provided in the FRS 17 disclosures in section (b) of this note.
Summary of independent actuarial reviews | UK | Australia | US | Canada | Other (e) | |||||
At 31 December 2004 | ||||||||||
Assumptions | ||||||||||
Rate of return on investments (a) | 6.8 | % | 6.4 | % | 6.8 | % | 6.8 | % | 8.2 | % |
Rate of earnings growth, where appropriate (b) | 4.9 | % | 4.7 | % | 4.2 | % | 4.4 | % | 6.0 | % |
Rate of increase in pensions | 2.9 | % | 2.7 | % | - | - | 4.0 | % | ||
Results | ||||||||||
Smoothed market value of assets ($m) (c) | 1,738 | 1,273 | 682 | 815 | 208 | |||||
Percentage of coverage of liabilities by assets (d) | 121 | % | 101 | % | 91 | % | 82 | % | 112 | % |
Amount of deficit for individual plans with net deficits ($m) | 15 | - | 97 | 186 | 12 | |||||
At 31 December 2003 | ||||||||||
Assumptions | ||||||||||
Rate of return on investments (a) | 6.9 | % | 6.4 | % | 6.7 | % | 6.5 | % | 9.2 | % |
Rate of earnings growth, where appropriate (b) | 4.8 | % | 4.0 | % | 4.0 | % | 4.0 | % | 6.5 | % |
Rate of increase in pensions | 2.8 | % | 2.5 | % | - | - | 4.5 | % | ||
Results | ||||||||||
Smoothed market value of assets ($m) (c) | 1,506 | 962 | 573 | 673 | 194 | |||||
Percentage of coverage of liabilities by assets (d) | 124 | % | 100 | % | 81 | % | 80 | % | 91 | % |
Amount of deficit for individual plans with net deficits ($m) | 13 | 7 | 145 | 174 | 19 |
(a) | The rate of return on investments assumed for Australia is after taking into account the tax applicable to Australian pension schemes. |
(b) | The rate of earnings growth assumed includes a promotional salary scale where appropriate. |
(c) | Assets were measured at market value smoothed over a one year period. |
(d) | Asset coverage of the liability is quoted after allowing for expected increases in earnings. |
(e) | The assumptions vary by location for the 'Other ' plans. Assumptions shown are for Africa. |
Other information
A triennial actuarial valuation of the Group's UK plan was made at 31 March 2003 using the projected unit method. In Australia, whilst Group companies sponsor or subscribe to a number of pension plans, the Rio Tinto Staff Superannuation Fund is the only significant plan. This plan principally contains defined contribution liabilities but also has defined benefit liabilities. Valuations are made at least every three years using the projected unit method, with the latest valuation being as at 30 June 2004. A number of defined benefit pension plans are sponsored by the US entities, typically with separate provision for salaried and hourly paid staff. Valuations are made annually at 1 January using the projected unit method. A number of defined benefit pension plans are sponsored by entities in Canada. Valuations are updated annually using the projected unit method. Other defined benefit plans sponsored by the Group around the world were assessed at various dates during 2002, 2003 and 2004. Th
e above summary is based on the most recent valuation in each case, updated to the appropriate balance sheet date. The expected average remaining service life in the plans relating to the Group's major entities ranges from eight to 17 years, with an overall average of 12 years. The main pension plans, providing purely defined contribution benefits, held assets equal to their liabilities, of US$180 million as at 31 December 2004 (US$186 million at 31 December 2003). The Group's contributions to these plans of US$6 million (2003:US$9 million) are charged against profits and are included in the 'Regular cost' shown below. The Group also operates a number of unfunded plans, which are included within the deficit and percentage coverage statistics above, measured on a basis consistent with both SSAP 24 and FRS 17.
Profit and loss account - effect of pension costs, before tax and outside shareholders' interests
2004 | 2003 | |||
US$m | US$m | |||
Regular cost | (118 | ) | (102 | ) |
Variation cost | (92 | ) | (90 | ) |
Interest on prepayment under SSAP 24 | 39 | 42 | ||
Settlement | 41 | - | ||
Net post retirement cost | (130 | ) | (150 | ) |
The variation cost reflects the amortisation of the excess of the pension asset carried in the balance sheet at the beginning of the year over the surplus/(deficit) in the relevant plans calculated on a SSAP 24 valuation basis. The settlement represents a pension surplus allocated to the Group in South Africa, which is reflected as a credit.
A-58
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
40 Post retirement benefits (continued)
Balance sheet - effect of pension assets and liabilities, before tax and outside shareholders' interests
2004 | 2003 | |||
US$m | US$m | |||
Prepayment under SSAP 24 | 616 | 620 | ||
Provisions | (53 | ) |
(77 | ) |
Net post retirement asset | 563 | 543 | ||
Post retirement healthcare
Certain subsidiaries of the Group, mainly in the US, provide health and life insurance benefits to retired employees and in some cases their beneficiaries and covered dependants. Eligibility for cover is dependent upon certain age and service criteria. These arrangements are unfunded.
On 30 September 2004, the unfunded accumulated post retirement benefit obligation and annual cost of accrual of benefits were determined by independent actuaries using the projected unit method. The main financial assumptions were: discount rate 5.7 per cent (at 30 September 2003: 6.1 per cent), Medical Trend Rate 10.5 per cent reducing to 5.0 per cent by the year 2011 (at 30 September 2003 initially 11.2 per cent reducing to 4.7 per cent by the year 2011), claims cost based on individual company experience. The assumptions were consistent with those adopted for determining pension costs. At 30 September 2004, which is the measurement date, the unfunded accumulated post retirement benefits obligation (excluding associates and joint ventures) was US$523 million (at 30 September 2003: US$563 million).
Profit and loss account - effect of post retirement healthcare costs, before tax and outside shareholders' interests
2004 | 2003 | |||
US$m | US$m | |||
Regular cost | (10 | ) | (9 | ) |
Amortisation | (4 | ) | 4 | |
Interest | (32 | ) | (29 | ) |
Curtailment | 3 | - | ||
Net post retirement cost | (43 | ) | (34 | ) |
Balance sheet - effect of post retirement healthcare liabilities, before tax and outside shareholders' interests | ||||
2004 | 2003 | |||
US$m | US$m | |||
Provisions | (523 | ) | (498 | ) |
b) FRS 17 Transitional
disclosures
FRS 17 - 'Retirement Benefits', which deals with accounting for post retirement benefits, has not been adopted, but the additional disclosures which are required are shown below. The standard requires pension deficits, and surpluses to the extent that they are considered recoverable, to be recognised in full. Annual service cost and net financial income on the assets and liabilities of the plans are recognised through earnings. Other fluctuations in the value of the surpluses/(deficits) are recognised in the Statement of Total Recognised Gains and Losses ('STRGL'). Details of post retirement benefit plan assets and liabilities at 31 December 2004, 2003 and 2002, valued on a projected unit basis in accordance with FRS 17, are set out below:
Main assumptions for FRS 17 purposes | UK | Australia | US | Canada | Other
(mainly
Africa) |
|||||
At 31 December 2004 | ||||||||||
Rate of increase in salaries | 4.9 | % | 4.7 | % | 4.2 | % | 4.4 | % | 6.0 | % |
Rate of increase in pensions | 2.9 | % | 2.7 | % | - | - | 4.0 | % | ||
Discount rate | 5.3 | % | 5.1 | % | 5.6 | % | 5.6 | % | 8.5 | % |
Inflation | 2.9 | % | 2.7 | % | 2.7 | % | 2.7 | % | 4.0 | % |
At 31 December 2003 | ||||||||||
Rate of increase in salaries | 4.8 | % | 4.0 | % | 4.0 | % | 4.0 | % | 6.5 | % |
Rate of increase in pensions | 2.8 | % | 2.5 | % | - | - | 4.5 | % | ||
Discount rate | 5.4 | % | 6.0 | % | 5.9 | % | 6.1 | % | 9.0 | % |
Inflation | 2.8 | % | 2.5 | % | 2.5 | % | 2.3 | % | 4.5 | % |
At 31 December 2002 | ||||||||||
Rate of increase in salaries | 4.8 | % | 4.0 | % | 3.2 | % | 3.7 | % | 10.5 | % |
Rate of increase in pensions | 2.3 | % | 2.5 | % | - | - | 7.0 | % | ||
Discount rate | 5.6 | % | 6.2 | % | 6.2 | % | 6.5 | % | 11.5 | % |
Inflation | 2.3 | % | 2.5 | % | 2.2 | % | 2.2 | % | 7.0 | % |
The main financial assumptions used for the health care schemes, which are predominantly in the US, were: discount rate: 5.6% (2003: 5.9%, 2002: 6.2%), Medical Trend Rate: 10.7% reducing to 5.2% by the year 2011 (2003: Medical Trend Rate: 11.5% reducing to 5.0% by the year 2011, 2002: Medical Trend Rate 8.0% reducing to 5.0% by the year 2009), claims cost based on individual company experience. For the pension and healthcare arrangements the post retirement mortality assumptions allow for expected increases in longevity. The mortality table used for the main arrangements implies that a 60 year old male has an expected future lifetime of 24 years.
A-59
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
40 Post retirement benefits (continued)
UK | Australia | US | Canada | Other
(mainly
Africa) |
||||||
Long term rate of return expected at 31 December 2004 | ||||||||||
Equities | 7.9 | % | 7.2 | % | 7.7 | % | 7.7 | % | 9.0 | % |
Fixed interest bonds | 4.8 | % | 4.7 | % | 5.1 | % | 5.1 | % | 8.5 | % |
Index linked bonds | 4.8 | % | 4.7 | % | 5.1 | % | 5.1 | % | 8.5 | % |
Other | 4.5 | % | 4.9 | % | 5.2 | % | 4.0 | % | 5.0 | % |
Long term rate of return expected at 31 December 2003 | ||||||||||
Equities | 7.8 | % | 7.0 | % | 7.5 | % | 7.3 | % | 9.5 | % |
Fixed interest bonds | 5.0 | % | 5.1 | % | 5.4 | % | 5.2 | % | 8.5 | % |
Index linked bonds | 5.0 | % | 5.1 | % | 5.4 | % | 5.2 | % | 8.5 | % |
Other | 4.6 | % | 5.1 | % | 5.1 | % | 3.3 | % | 5.6 | % |
Long term rate of return expected at 31 December 2002 | ||||||||||
Equities | 7.3 | % | 7.0 | % | 7.2 | % | 7.2 | % | 12.5 | % |
Fixed interest bonds | 5.0 | % | 5.5 | % | 5.6 | % | 6.0 | % | 11.0 | % |
Index linked bonds | 5.0 | % | 5.5 | % | 5.6 | % | 6.0 | % | 11.0 | % |
Other | 4.6 | % | 5.9 | % | 6.4 | % | 5.0 | % | 10.2 | % |
Scheme assets
The assets in the pension plans and the contributions
made were:
UK | Australia | US | Canada | Other
(mainly
Africa) |
Total | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Value at 31 December 2004 | ||||||||||||
Equities | 1,211 | 852 | 460 | 534 | 114 | 3,171 | ||||||
Fixed interest bonds | 318 | 299 | 154 | 228 | 14 | 1,013 | ||||||
Index linked bonds | 162 | - | - | 54 | - | 216 | ||||||
Other | 84 | 132 | 79 | 11 | 80 | 386 | ||||||
1,775 | 1,283 | 693 | 827 | 208 | 4,786 | |||||||
Value at 31 December 2003 | ||||||||||||
Equities | 1,094 | 646 | 401 | 451 | 82 | 2,674 | ||||||
Fixed interest bonds | 300 | 229 | 126 | 193 | 15 | 863 | ||||||
Index linked bonds | 127 | 7 | 12 | 44 | - | 190 | ||||||
Other | 54 | 88 | 74 | 21 | 97 | 334 | ||||||
1,575 | 970 | 613 | 709 | 194 | 4,061 | |||||||
Value at 31 December 2002 | ||||||||||||
Equities | 823 | 377 | 342 | 271 | 93 | 1,906 | ||||||
Fixed interest bonds | 294 | 160 | 139 | 148 | 18 | 759 | ||||||
Index linked bonds | 95 | 5 | 11 | 32 | - | 143 | ||||||
Other | 60 | 65 | 39 | 64 | 190 | 418 | ||||||
1,272 | 607 | 531 | 515 | 301 | 3,226 | |||||||
Employer contributions made during 2004 * | - | 56 | 41 | 37 | 9 | 143 | ||||||
Employer contributions made during 2003 * | 6 | 45 | 4 | 43 | 5 | 103 | ||||||
Employer contributions made during 2002 * | - | 10 | 4 | 15 | 4 | 33 | ||||||
*The contributions shown include US$6 million (2003:US$9 million; 2002: US$13 million) for defined contribution plans. |
In addition, there were contributions of US$26 million (2003: US$18 million; 2002: US$16 million) in respect of unfunded health care schemes in the year. Since these schemes are unfunded, contributions for future years will be equal to benefit payments and therefore cannot be pre-determined. In relation to pensions, it is currently expected that there will be no significant regular employer or employee contributions to the UK plan in 2005. Contributions are made to the main Australian plan according to the recommendation of the plan actuary and are primarily to a mixed defined benefit/defined contribution type arrangement (included in the above figures). In North America, contributions are agreed annually in nominal terms. Whilst contributions for 2005 are yet to be determined, the currently expected level of contributions by the Group to the plans in Australia, Canada and the US is expected to be higher similar in aggregate to that made in 2004.
The most recent full valuation of the UK plans was at 31 March 2003. The most recent full valuation of the Australian plans was at 30 June 2004. For both the US and Canadian major plans, the most recent full valuation was at 1 January 2004.
A-60
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
40 Post retirement benefits (continued)
Surpluses/(deficits) in the plans
The following amounts were measured in accordance with FRS 17:
At 31 December 2004 | Total | |||||||||||||||
UK | Australia | US | Canada | Other | Pensions | Healthcare | Total | |||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Total market value of plan assets | 1,775 | 1,283 | 693 | 827 | 208 | 4,786 | - | 4,786 | ||||||||
Present value of plan liabilities | (1,760 | ) | (1,275 | ) | (868 | ) | (1,129 | ) | (185 | ) | (5,217 | ) | (544 | ) | (5,761 | ) |
Surplus/(deficit) in the plans | 15 | 8 | (175 | ) | (302 | ) | 23 | (431 | ) | (544 | ) | (975 | ) | |||
Related deferred tax | 168 | |||||||||||||||
Related outside shareholders' interest | 108 | |||||||||||||||
Net post retirement liability | (699 | ) | ||||||||||||||
Surplus/(deficit) in the plans comprises: | ||||||||||||||||
Surplus | 36 | 8 | 6 | 6 | 35 | 91 | - | 91 | ||||||||
Deficit | (21 | ) | - | (181 | ) | (308 | ) | (12 | ) | (522 | ) | (544 | ) | (1,066 | ) | |
15 | 8 | (175 | ) | (302 | ) | 23 | (431 | ) | (544 | ) | (975 | ) | ||||
Total | ||||||||||||||||
At 31 December 2003 | UK | Australia | US | Canada | Other | Pensions | Healthcare | Total | ||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Total market value of plan assets | 1,575 | 970 | 613 | 709 | 194 | 4,061 | - | 4,061 | ||||||||
Present value of plan liabilities | (1,477 | ) | (963 | ) | (768 | ) | (877 | ) | (213 | ) | (4,298 | ) | (561 | ) | (4,859 | ) |
Surplus/(deficit) in the plans | 98 | 7 | (155 | ) | (168 | ) | (19 | ) | (237 | ) | (561 | ) | (798 | ) | ||
Related deferred tax | 123 | |||||||||||||||
Related outside shareholders' interest | 92 | |||||||||||||||
Net post retirement liability | (583 | ) | ||||||||||||||
Surplus/(deficit) in the plans comprises: | ||||||||||||||||
Surplus | 121 | 7 | 12 | 2 | - | 142 | - | 142 | ||||||||
Deficit | (23 | ) | - | (167 | ) | (170 | ) | (19 | ) | (379 | ) | (561 | ) | (940 | ) | |
98 | 7 | (155 | ) | (168 | ) | (19 | ) | (237 | ) | (561 | ) | (798 | ) | |||
If the above amounts had been recognised in the financial statements, the Group's shareholders' funds at 31 December would have been as follows:
2004 | 2003 | |||
US$m | US$m | |||
Shareholders' funds including SSAP 24 post retirement net asset | 12,584 | 10,037 | ||
Deduct: SSAP 24 post retirement net asset | 362 | 357 | ||
Deduct: SSAP 24 post retirement healthcare liability | (305 | ) | (290 | ) |
Shareholders' funds excluding SSAP 24 post retirement pension net asset | 12,527 | 9,970 | ||
Include: FRS 17 post retirement net liability | (382 | ) | (242 | ) |
Include: FRS 17 post retirement healthcare liability | (317 | ) | (341 | ) |
Shareholders' funds including FRS 17 post retirement net liability | 11,828 | 9,387 | ||
The post retirement assets and liablities shown above are net of tax and outside shareholders' interests. | ||||
Movements in deficit during the year |
The net post retirement deficit under FRS 17 before deferred tax and outside shareholders interests would have moved as follows during 2004:
Pension | Other | 2004 | 2003 | |||||
benefits | benefits | Total | Total | |||||
US$m | US$m | |||||||
Net post retirement deficit at 1 January | (237 | ) | (561 | ) | (798 | ) | (666 | ) |
Movement in year: | ||||||||
Currency translation adjustment | (12 | ) | (14 | ) | (26 | ) | (45 | ) |
Total current service cost (employer and employee) | (164 | ) | (10 | ) | (174 | ) | (149 | ) |
Past service cost | (15 | ) | (4 | ) | (19 | ) | (7 | ) |
Curtailment and settlement gains | 31 | 4 | 35 | 3 | ||||
Subsidiaries sold | 7 | - | 7 | - | ||||
Plan amendments | - | - | - | (10 | ) | |||
Other net finance (expense)/income | 19 | (33 | ) | (14 | ) | (30 | ) | |
Contributions (including employee contributions) | 185 | 26 | 211 | 156 | ||||
Actuarial (loss)/gain recognised in STRGL | (245 | ) | 48 | (197 | ) | (50 | ) | |
Net post retirement deficit at 31 December | (431 | ) | (544 | ) | (975 | ) | (798 | ) |
The curtailment and settlement gain primarily reflects the allocation of a surplus to the employer in a South African plan.
A-61
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
40 Post retirement benefits (continued)
Amounts which would have been recognised in the profit and loss account and in the STRGL under FRS 17
The following amounts would have been included within operating profit under FRS 17:
Pension | Other | 2004 | 2003 | |||||
benefits | benefits | Total | Total | |||||
US$m | US$m | |||||||
Employer current service cost | (125 | ) | (10 | ) | (135 | ) | (122 | ) |
Past service cost | (15 | ) | (4 | ) | (19 | ) | (7 | ) |
Curtailment and settlement gains | 31 | 4 | 35 | 3 | ||||
Total operating charge | (109 | ) | (10 | ) | (119 | ) | (126 | ) |
Employer contributions of US$6 million (2003: US$9 million) for defined contribution arrangements have been included in the above operating charge.
The following amounts would have been included as other net finance (expense)/income under FRS 17:
Pension | Other | 2004 | 2003 | |||||
benefits | benefits | Total | Total | |||||
US$m | US$m | |||||||
Expected return on pension scheme assets | 272 | - | 272 | 213 | ||||
Interest on post retirement liabilities | (253 | ) | (33 | ) | (286 | ) | (243 | ) |
Net return | 19 | (33 | ) | (14 | ) | (30 | ) | |
If the above amounts had been recognised in the financial statements instead of the SSAP24 charges, the Group's reported net earnings for 2004 would have increased by US$27 million (2003: increased by US$17 million).
The following amounts would have been recognised within the STRGL under FRS 17:
2004 | 2003 | 2002 | ||||
US$m | US$m | US$m | ||||
Excess actual returns on plan assets compared with the expected return | ||||||
Amount (US$m) | 226 | 354 | (599 | ) | ||
As a percentage of plan assets | 5% | 9% | -19% | |||
Experience (losses)/gains on plan liabilities: | ||||||
(i.e. variances between the actual estimate of liabilities and the subsequent outcome) | ||||||
Amount (US$m) | (7 | ) | (118 | ) | 28 | |
As a percentage of the present value of the plan liabilities | - | -2% | 1% | |||
Change in assumptions: | ||||||
Amount (US$m) | (416 | ) | (286 | ) | (148 | ) |
Total amount recognised in STRGL | ||||||
Amount (US$m) | (197 | ) | (50 | ) | (719 | ) |
As a percentage of the present value of the plan liabilities | -3% | -1% | -18% | |||
A-62
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
41 Rio Tinto financial information by business unit
Rio Tinto | Gross turnover (a) | EBITDA (b) | Net earnings (c) | |||||||||||||||||
interest | ||||||||||||||||||||
% | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||
Iron Ore | ||||||||||||||||||||
Hamersley (inc. HIsmelt®) | 100.0 | 1,858 | 1,409 | 1,173 | 800 | 711 | 676 | 447 | 424 | 401 | ||||||||||
Robe River | 53.0 | 614 | 400 | 253 | 325 | 213 | 160 | 119 | 68 | 54 | ||||||||||
Iron Ore Company of Canada | 58.7 | 428 | 442 | 400 | 55 | 47 | 25 | 3 | 7 | (3 | ) | |||||||||
2,900 | 2,251 | 1,826 | 1,180 | 971 | 861 | 569 | 499 | 452 | ||||||||||||
Energy | ||||||||||||||||||||
Kennecott Energy | 100.0 | 1,107 | 955 | 949 | 277 | 236 | 267 | 119 | 88 | 90 | ||||||||||
Rio Tinto Coal Australia | 100.0 | 780 | 443 | 421 | 336 | 157 | 233 | 180 | 70 | 134 | ||||||||||
Kaltim Prima Coal | (d | ) | - | 142 | 216 | - | 74 | 79 | - | 31 | 26 | |||||||||
Coal & Allied | 75.7 | 779 | 599 | 627 | 204 | 52 | 207 | 51 | (24 | ) | 68 | |||||||||
Rössing | 68.6 | 124 | 86 | 112 | 8 | (33 | ) | 50 | (4 | ) | (19 | ) | 23 | |||||||
Energy Resources of Australia | 68.4 | 174 | 131 | 113 | 70 | 58 | 50 | 19 | 11 | 12 | ||||||||||
2,964 | 2,356 | 2,438 | 895 | 544 | 886 | 365 | 157 | 353 | ||||||||||||
Industrial Minerals | 2,126 | 1,916 | 1,946 | 538 | 465 | 717 | 223 | 154 | 286 | |||||||||||
Aluminium | (e | ) | 2,478 | 1,995 | 1,722 | 720 | 488 | 510 | 334 | 200 | 256 | |||||||||
Copper | ||||||||||||||||||||
Kennecott Utah Copper | 100.0 | 1,113 | 722 | 755 | 496 | 230 | 236 | 293 | 88 | 86 | ||||||||||
Escondida | 30.0 | 1,003 | 502 | 283 | 699 | 284 | 121 | 416 | 122 | 32 | ||||||||||
Freeport | (f | ) | 43 | 344 | 306 | 7 | 169 | 139 | (4 | ) | 23 | 19 | ||||||||
Grasberg joint venture | (g | ) | 159 | 407 | 371 | 102 | 225 | 215 | 38 | 104 | 113 | |||||||||
Palabora | 49.2 | 305 | 206 | 201 | (20 | ) | 20 | 53 | (21 | ) | 1 | 12 | ||||||||
Kennecott Minerals | 100.0 | 263 | 239 | 205 | 129 | 122 | 93 | 79 | 60 | 38 | ||||||||||
Rio Tinto Brasil | (h | ) | 109 | 141 | 117 | 31 | 48 | 40 | 1 | 48 | 16 | |||||||||
Other Copper | (d | ) | 169 | 178 | 256 | 91 | 51 | 100 | 54 | (6 | ) | 25 | ||||||||
3,164 | 2,739 | 2,494 | 1,535 | 1,149 | 997 | 856 | 440 | 341 | ||||||||||||
Diamonds | ||||||||||||||||||||
Argyle | 100.0 | 322 | 434 | 372 | 102 | 198 | 175 | 23 | 72 | 63 | ||||||||||
Diavik | 60.0 | 420 | 122 | - | 316 | 106 | - | 145 | 41 | - | ||||||||||
Murowa | 78.0 | 2 | - | - | 1 | - | - | 1 | - | - | ||||||||||
744 | 556 | 372 | 419 | 304 | 175 | 169 | 113 | 63 | ||||||||||||
Other Operations | 145 | 184 | 208 | 83 | 77 | 81 | 28 | 21 | 25 | |||||||||||
Product Group Total | 14,521 | 11,997 | 11,006 | 5,370 | 3,998 | 4,227 | 2,544 | 1,584 | 1,776 | |||||||||||
Other items | 87 | 122 | 113 | (221 | ) | (233 | ) | (137 | ) | (114 | ) | (45 | ) | (42 | ) | |||||
Exploration and evaluation | (187 | ) | (127 | ) | (130 | ) | (152 | ) | (98 | ) | (109 | ) | ||||||||
Net interest | (57 | ) | (59 | ) | (95 | ) | ||||||||||||||
Adjusted earnings | 2,221 | 1,382 | 1,530 | |||||||||||||||||
Exceptional items | 771 | 126 | (116 | ) | 592 | 126 | (879 | ) | ||||||||||||
Total | 14,608 | 12,119 | 11,119 | 5,733 | 3,764 | 3,844 | 2,813 | 1,508 | 651 | |||||||||||
Depreciation & amortisation in subsidiaries | (1,204 | ) | (1,006 | ) | (954 | ) | ||||||||||||||
Asset write-downs relating to subsidiaries & joint ventures | (408 | ) | - | (955 | ) | |||||||||||||||
Depreciation & amortisation in joint ventures and associates | (271 | ) | (366 | ) | (333 | ) | ||||||||||||||
Profit on ordinary activities before interest and tax | 3,850 | 2,392 | 1,602 | |||||||||||||||||
(a) | Gross turnover includes 100 per cent of subsidiaries' turnover and the Group's share of the turnover of joint ventures and associates. |
Turnover has been adjusted to reclassify, as turnover, certain amounts charged to customers for freight and handling, which previously were deducted from operating costs. | |
(b) | EBITDA of subsidiaries, joint ventures and associates represents profit before: exceptional items, tax, net interest payable, depreciation and amortisation, that is attributable to the Rio Tinto Group. |
(c) | Net earnings represent after tax earnings attributable to the Rio Tinto Group. Earnings of subsidiaries are stated before interest charges but after the amortisation of the discount related to provisions. Earnings attributable to joint ventures and associates include interest charges. |
(d) | During June 2004, Rio Tinto sold its interests in Somincor and Zinkgruvan. During 2003 Rio Tinto sold its interests in Kaltim Prima Coal, Alumbrera and Peak. |
(e) | Includes Rio Tinto's interest in Anglesey Aluminium (51 per cent) and Comalco (100 per cent). |
(f) | On 30 March 2004 Rio Tinto sold its 13.1 per cent shareholding in Freeport-McMoRan Copper & Gold Inc. The sale of the shares does not affect the terms of the joint venture referred to below. |
(g) | Under the terms of a joint venture agreement, Rio Tinto is entitled to 40 per cent of additional material mined as a consequence of expansions and developments of the Grasberg facilities since 1998. |
(h) | Rio Tinto sold its 99.9 per cent interest in Fortaleza on 1 January 2004, and its 51 per cent interest in Morro do Ouro on 31 December 2004. |
(i) | Business units have been classified above according to the Groups management structure at 31 December 2004. Generally, this structure has regard to the primary product of each business unit but there are exceptions. For example, the Copper group includes certain gold operations. This summary differs, therefore, from the Product Analysis, in which the contributions of individual business units are attributed to several products as appropriate. |
A-63
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
41 Rio Tinto financial information by business unit (continued)
Capital expenditure (j) | Depreciation & amortisation (k) | Operating assets (l) | Employees (m) | |||||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||
Iron Ore | ||||||||||||||||||||||||
Hamersley (inc. HIsmelt®) | 745 | 298 | 79 | 161 | 110 | 94 | 2,211 | 1,543 | 923 | 2,581 | 2,169 | 2,006 | ||||||||||||
Robe River | 109 | 75 | 81 | 93 | 74 | 50 | 1,910 | 1,852 | 1,409 | 527 | 478 | 496 | ||||||||||||
Iron Ore Company of Canada | 51 | 37 | 39 | 41 | 29 | 35 | 530 | 489 | 416 | 1,528 | 1,884 | 1,936 | ||||||||||||
905 | 410 | 199 | 295 | 213 | 179 | 4,651 | 3,884 | 2,748 | 4,636 | 4,531 | 4,438 | |||||||||||||
Energy | ||||||||||||||||||||||||
Kennecott Energy | 169 | 168 | 152 | 118 | 105 | 128 | 447 | 561 | 486 | 1,771 | 1,776 | 1,710 | ||||||||||||
Rio Tinto Coal Australia | 50 | 92 | 126 | 73 | 52 | 37 | 661 | 649 | 406 | 904 | 755 | 679 | ||||||||||||
Kaltim Prima Coal | - | 2 | 5 | - | 16 | 21 | - | - | 46 | - | 2,108 | 2,760 | ||||||||||||
Coal & Allied | 15 | 34 | 58 | 94 | 91 | 69 | 717 | 787 | 626 | 1,095 | 1,338 | 1,375 | ||||||||||||
Rössing | 2 | 4 | 5 | 15 | 7 | 5 | 40 | 46 | 48 | 814 | 810 | 786 | ||||||||||||
Energy Resources of Australia | 7 | 5 | 4 | 35 | 30 | 23 | 179 | 178 | 140 | 273 | 238 | 262 | ||||||||||||
243 | 305 | 350 | 335 | 301 | 283 | 2,044 | 2,221 | 1,752 | 4,857 | 7,025 | 7,572 | |||||||||||||
Industrial Minerals | 248 | 139 | 133 | 176 | 172 | 158 | 2,170 | 2,038 | 2,063 | 6,575 | 6,581 | 6,723 | ||||||||||||
Aluminium | 449 | 436 | 269 | 202 | 169 | 137 | 3,683 | 3,258 | 2,365 | 4,349 | 4,223 | 3,929 | ||||||||||||
Copper | ||||||||||||||||||||||||
Kennecott Utah Copper | 105 | 83 | 97 | 90 | 92 | 129 | 1,243 | 1,277 | 1,378 | 1,449 | 1,406 | 1,596 | ||||||||||||
Escondida | 113 | 45 | 117 | 54 | 79 | 52 | 624 | 492 | 449 | 851 | 722 | 704 | ||||||||||||
Freeport | - | 33 | 23 | 3 | 54 | 50 | - | 144 | 128 | |||||||||||||||
Grasberg joint venture | 35 | 60 | 55 | 43 | 43 | 40 | 428 | 417 | 412 | 1,783 | 1,165 | 1,445 | ||||||||||||
Palabora | 30 | 66 | 64 | 41 | 17 | 13 | 358 | 426 | 287 | 1,734 | 2,043 | 2,176 | ||||||||||||
Kennecott Minerals | 36 | 9 | 21 | 27 | 42 | 43 | 166 | 136 | 155 | 714 | 672 | 763 | ||||||||||||
Rio Tinto Brasil | 18 | 19 | 14 | 6 | (18 | ) | 11 | 50 | 138 | 91 | 975 | 1,393 | 1,320 | |||||||||||
Other Copper | 42 | 63 | 60 | 23 | 52 | 73 | 190 | 335 | 443 | 467 | 931 | 1,266 | ||||||||||||
379 | 378 | 451 | 287 | 361 | 411 | 3,059 | 3,365 | 3,343 | 7,973 | 8,332 | 9,270 | |||||||||||||
Diamonds | ||||||||||||||||||||||||
Argyle | 89 | 22 | 31 | 58 | 76 | 76 | 666 | 600 | 488 | 809 | 750 | 751 | ||||||||||||
Diavik | 49 | 78 | 206 | 67 | 34 | - | 599 | 674 | 484 | 377 | 298 | 250 | ||||||||||||
Murowa | 14 | - | - | - | - | - | 16 | - | - | 76 | - | - | ||||||||||||
152 | 100 | 237 | 125 | 110 | 76 | 1,281 | 1,274 | 972 | 1,262 | 1,048 | 1,001 | |||||||||||||
Other Operations | 10 | 4 | 6 | 45 | 37 | 36 | 89 | 98 | 114 | 1,432 | 2,228 | 2,789 | ||||||||||||
Product Group Total | 2,386 | 1,772 | 1,645 | 1,465 | 1,363 | 1,280 | 16,977 | 16,138 | 13,357 | 31,084 | 33,968 | 35,722 | ||||||||||||
Other items | 5 | 17 | 13 | 418 | 9 | 7 | (642 | ) | (455 | ) | (148 | ) | 1,956 | 2,048 | 1,451 | |||||||||
Less: Joint ventures and associates (j) (k) | (234 | ) | (181 | ) | (241 | ) | (271 | ) | (366 | ) | (333 | ) | ||||||||||||
Total | 2,157 | 1,608 | 1,417 | 1,612 | 1,006 | 954 | 16,335 | 15,683 | 13,209 | 33,040 | 36,016 | 37,173 | ||||||||||||
Less: net debt | (3,751 | ) | (5,646 | ) | (5,747 | ) | ||||||||||||||||||
Net Assets | 12,584 | 10,037 | 7,462 | |||||||||||||||||||||
(j) | Capital expenditure comprises the net cash outflow on purchases less disposals of property, plant and equipment. The details provided include 100 per cent of subsidiaries' capital expenditure and Rio Tinto's share of the capital expenditure of joint ventures and associates. Amounts relating to joint ventures and associates not specifically funded by Rio Tinto are deducted before arriving at total capital expenditure for the Group. |
(k) | Depreciation figures include 100 per cent of subsidiaries' depreciation and amortisation of goodwill and include Rio Tinto's share of the depreciation and goodwill amortisation of joint ventures and associates. Amounts relating to joint ventures and associates are deducted before arriving at the total depreciation charge. |
(l) | Operating assets of subsidiaries comprise net assets before deducting net debt, less outside shareholders' interests which are calculated by reference to the net assets of the relevant companies (ie net of such companies' debt). For joint ventures and associates, Rio Tinto's net investment is shown. For joint ventures and associates shown above, Rio Tinto's shares of operating assets, defined as for subsidiaries, are as follows: Escondida US$948 million (2003: US$905 million; 2002: US$913 million), Grasberg joint venture US$428 million (2003: US$417 million; 2002: US$412 million). |
(m) | Employee numbers, which represent the average for the year, include 100 per cent of employees of subsidiary companies. Employee numbers for joint arrangements, joint ventures and associates are proportional to the Group's equity interest. Part time employees are included on a full time equivalent basis and people employed by contractors are not included. Temporary employees are included in employee numbers. |
A-64
RIO TINTO PLC - RIO TINTO
LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles
Reconciliation with US GAAP
Rio Tinto
plc - part of Rio Tinto Group |
Rio Tinto
Limited - part of Rio Tinto Group |
Rio Tinto Group | ||||||
2004 | 2004 | 2004 | ||||||
US$m | US$m | US$m | ||||||
Net earnings under UK GAAP | 2,073 | 1,185 | 2,813 | |||||
Increase/(decrease) before tax in respect of: | ||||||||
Amortisation
of goodwill - subsidiaries and joint arrangements
|
37 | 40 | 77 | |||||
Amortisation
of intangibles - subsidiaries and joint arrangements
|
(44 | ) | - | (44 | ) | |||
Amortisation
of intangibles - equity accounted companies (excluding Rio Tinto Limited)
|
(6 | ) | - | (6 | ) | |||
Exchange differences included in earnings under US GAAP | 18 | 209 | 227 | |||||
Mark to market of derivative contracts | 4 | 23 | 27 | |||||
Profit on sale of operations | 114 | - | 114 | |||||
Adjustments
to asset carrying values - subsidiaries and joint arrangements
|
(5 | ) | - | (5 | ) | |||
Adjustments
to asset carrying values - equity accounted companies (excluding Rio
Tinto Limited)
|
- | - | - | |||||
Pensions/post retirement benefits | 12 | 3 | 15 | |||||
Exploration and evaluation | (6 | ) | (65 | ) | (71 | ) | ||
Depreciation of mining assets | (1 | ) | (67 | ) | (68 | ) | ||
Share options | (14 | ) | (9 | ) | (23 | ) | ||
Effect
of historical average commodity prices and other items in ore reserve
determination
|
(94 | ) | (2 | ) | (96 | ) | ||
Other | (12 | ) | (53 | ) | (65 | ) | ||
Taxation: | ||||||||
Tax effect of the above adjustments | 24 | 38 | 62 | |||||
Other tax adjustments | (137 | ) | - | (137 | ) | |||
Outside shareholders' interests in the above adjustments | 4 | (1 | ) | 3 | ||||
Share of US GAAP adjustments of Rio Tinto Limited | 43 | - | - | |||||
Net
income/(loss) under US GAAP before cumulative effect of change in
accounting principle
|
2,010 | 1,301 | 2,823 | |||||
Cumulative
effect of change in accounting principle for close down and restoration
costs
|
- | - | - | |||||
Share of US GAAP adjustment of Rio Tinto Limited | - | - | - | |||||
Net income/(loss) under US GAAP | 2,010 | 1,301 | 2,823 | |||||
Basic earnings per ordinary share under US GAAP | ||||||||
Before cumulative effect of change in accounting principle | 188.3 | c | 260.6 | c | 204.7 | c | ||
Cumulative effect of change in accounting principle | - | - | - | |||||
After cumulative effect of change in accounting principle | 188.3 | c | 260.6 | c | 204.7 | c | ||
Diluted earnings per ordinary share under US GAAP | ||||||||
Before cumulative effect of change in accounting principle | 188.0 | c | 260.1 | c | 204.4 | c | ||
Cumulative effect of change in accounting principle | - | - | - | |||||
After cumulative effect of change in accounting principle | 188.0 | c | 260.1 | c | 204.4 | c | ||
A-65.2004
RIO TINTO PLC - RIO TINTO
LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles
Reconciliation with US GAAP
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio Tinto Group | ||||||
2003 | 2003 | 2003 | ||||||
US$m | US$m | US$m | ||||||
Net earnings under UK GAAP | 956 | 884 | 1,508 | |||||
Increase/(decrease) before tax in respect of: | ||||||||
Amortisation
of goodwill - subsidiaries and joint arrangements
|
34 | 42 | 76 | |||||
Amortisation
of intangibles - subsidiaries and joint arrangements
|
(40 | ) | - | (40 | ) | |||
Amortisation
of intangibles - equity accounted companies (excluding Rio Tinto Limited)
|
(7 | ) | - | (7 | ) | |||
Exchange differences included in earnings under US GAAP | 52 | 967 | 1,019 | |||||
Mark to market of derivative contracts | (24 | ) | 311 | 287 | ||||
Profit on sale of operations | - | - | - | |||||
Adjustments
to asset carrying values - subsidiaries and joint arrangements
|
(32 | ) | - | (32 | ) | |||
Adjustments
to asset carrying values - equity accounted companies (excluding Rio
Tinto Limited)
|
- | - | - | |||||
Pensions/post retirement benefits | 55 | 4 | 59 | |||||
Exploration and evaluation | (8 | ) | (16 | ) | (24 | ) | ||
Depreciation of mining assets | 16 | (75 | ) | (59 | ) | |||
Share options | (12 | ) | (9 | ) | (21 | ) | ||
Effect
of historical average commodity prices and other items in ore reserve
determination
|
(82 | ) | - | (82 | ) | |||
Other | (60 | ) | (37 | ) | (97 | ) | ||
Taxation: | ||||||||
Tax effect of the above adjustments | 16 | (412 | ) | (396 | ) | |||
Other tax adjustments | (12 | ) | 7 | (5 | ) | |||
Outside shareholders' interests in the above adjustments | 8 | (39 | ) | (31 | ) | |||
Share of US GAAP adjustments of Rio Tinto Limited | 279 | - | - | |||||
Net
income/(loss) under US GAAP before cumulative effect of change in
accounting principle
|
1,139 | 1,627 | 2,155 | |||||
Cumulative
effect of change in accounting principle for close down and restoration
costs
|
(198 | ) | 20 | (178 | ) | |||
Share of US GAAP adjustment of Rio Tinto Limited | 8 | - | - | |||||
Net income/(loss) under US GAAP | 949 | 1,647 | 1,977 | |||||
Basic earnings per ordinary share under US GAAP | ||||||||
Before cumulative effect of change in accounting principle | 106.8 | c | 326.1 | c | 156.4 | c | ||
Cumulative effect of change in accounting principle | (17.8 | )c | 4.0 | c | (12.9 | )c | ||
After cumulative effect of change in accounting principle | 89.0 | c | 330.1 | c | 143.5 | c | ||
Diluted earnings per ordinary share under US GAAP | ||||||||
Before cumulative effect of change in accounting principle | 106.7 | c | 326.0 | c | 156.2 | c | ||
Cumulative effect of change in accounting principle | (17.8 | )c | 4.0 | c | (12.9 | )c | ||
After cumulative effect of change in accounting principle | 88.9 | c | 330.0 | c | 143.3 | c | ||
A-65.2003
RIO TINTO PLC - RIO TINTO
LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles
Reconciliation with US GAAP
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio Tinto Group | ||||||
2002 | 2002 | 2002 | ||||||
US$m | US$m | US$m | ||||||
Net earnings under UK GAAP | 195 | 736 | 651 | |||||
Increase/(decrease) before tax in respect of: | ||||||||
Amortisation
of goodwill - subsidiaries and joint arrangements
|
52 | 38 | 90 | |||||
Amortisation
of intangibles - subsidiaries and joint arrangements
|
(59 | ) | - | (59 | ) | |||
Amortisation
of intangibles - equity accounted companies (excluding Rio Tinto Limited)
|
(9 | ) | - | (9 | ) | |||
Exchange differences included in earnings under US GAAP | (53 | ) | 293 | 240 | ||||
Mark to market of derivative contracts | 6 | 151 | 157 | |||||
Profit on sale of operations | - | - | - | |||||
Adjustments
to asset carrying values - subsidiaries and joint arrangements
|
(422 | ) | 420 | (2 | ) | |||
Adjustments
to asset carrying values - equity accounted companies (excluding Rio
Tinto Limited)
|
(87 | ) | - | (87 | ) | |||
Pensions/post retirement benefits | 8 | (7 | ) | 1 | ||||
Exploration and evaluation | - | (17 | ) | (17 | ) | |||
Depreciation of mining assets | 10 | (20 | ) | (10 | ) | |||
Share options | (12 | ) | (5 | ) | (17 | ) | ||
Effect
of historical average commodity prices and other items in ore reserve
determination
|
- | - | - | |||||
Other | (39 | ) | (32 | ) | (71 | ) | ||
Taxation: | ||||||||
Tax effect of the above adjustments | 11 | (125 | ) | (114 | ) | |||
Other tax adjustments | (13 | ) | - | (13 | ) | |||
Outside shareholders' interests in the above adjustments | 6 | (165 | ) | (159 | ) | |||
Share of US GAAP adjustments of Rio Tinto Limited | 200 | - | - | |||||
Net
income/(loss) under US GAAP before cumulative effect of change in
accounting principle
|
(206 | ) | 1,267 | 581 | ||||
Cumulative
effect of change in accounting principle for close down and restoration
costs
|
- | - | - | |||||
Share of US GAAP adjustment of Rio Tinto Limited | - | - | - | |||||
Net income/(loss) under US GAAP | (206 | ) | 1,267 | 581 | ||||
Basic earnings per ordinary share under US GAAP | ||||||||
Before cumulative effect of change in accounting principle | (19.3 | )c | 254.0 | c | 42.2 | c | ||
Cumulative effect of change in accounting principle | - | - | - | |||||
After cumulative effect of change in accounting principle | (19.3 | )c | 254.0 | c | 42.2 | c | ||
Diluted earnings per ordinary share under US GAAP | ||||||||
Before cumulative effect of change in accounting principle | (19.3 | )c | 253.7 | c | 42.1 | c | ||
Cumulative effect of change in accounting principle | - | - | - | |||||
After cumulative effect of change in accounting principle | (19.3 | )c | 253.7 | c | 42.1 | c | ||
A-65.2002
RIO TINTO PLC - RIO TINTO
LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Reconciliation with US GAAP
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio Tinto Group | ||||||
2004 | 2004 | 2004 | ||||||
US$m | US$m | US$m | ||||||
Shareholders' funds under UK GAAP | 9,139 | 5,515 | 12,584 | |||||
Increase/(decrease) before tax in respect of: | ||||||||
Goodwill - subsidiaries and joint arrangements | 938 | 351 | 1,289 | |||||
Goodwill
- equity accounted companies (excluding Rio Tinto Limited)
|
206 | - | 206 | |||||
Intangibles - subsidiaries and joint arrangements | 196 | - | 196 | |||||
Intangibles
- equity accounted companies (excluding Rio Tinto Limited)
|
36 | - | 36 | |||||
Mark to market of derivative contracts | (66 | ) | 454 | 388 | ||||
Adjustments
to asset carrying values - subsidiaries and joint arrangements
|
117 | 399 | 516 | |||||
Pensions/post retirement benefits | (389 | ) | (26 | ) | (415 | ) | ||
Exploration and evaluation | (14 | ) | (241 | ) | (255 | ) | ||
Depreciation of mining assets | 34 | (219 | ) | (185 | ) | |||
Effect
of historical average commodity prices and other items in ore reserve
determination
|
(176 | ) | (2 | ) | (178 | ) | ||
Provision for close down and restoration costs | (63 | ) | 70 | 7 | ||||
Start up costs | (128 | ) | (30 | ) | (158 | ) | ||
Proposed dividends | 401 | 225 | 626 | |||||
Other | 55 | (70 | ) | (15 | ) | |||
Tax effect of the above adjustments | 48 | (98 | ) | (50 | ) | |||
Deferred tax on acquisitions: | ||||||||
Impact on mining property | - | 789 | 789 | |||||
Impact on tax provisions | - | (789 | ) | (789 | ) | |||
Other tax adjustments | (69 | ) | 1 | (68 | ) | |||
Outside
shareholders' interests in the above adjustments
|
20 | (82 | ) | (62 | ) | |||
Share of US GAAP adjustments of Rio Tinto Limited | 275 | - | - | |||||
Shareholders' funds under US GAAP | 10,560 | 6,247 | 14,462 | |||||
A-66.2004
RIO TINTO PLC - RIO TINTO
LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Reconciliation with US GAAP
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio Tinto Group | ||||||
2003 | 2003 | 2003 | ||||||
US$m | US$m | US$m | ||||||
Shareholders' funds under UK GAAP | 7,343 | 4,324 | 10,037 | |||||
Increase/(decrease) before tax in respect of: | ||||||||
Goodwill - subsidiaries and joint arrangements | 896 | 302 | 1,198 | |||||
Goodwill
- equity accounted companies (excluding Rio Tinto Limited)
|
352 | - | 352 | |||||
Intangibles - subsidiaries and joint arrangements | 240 | - | 240 | |||||
Intangibles
- equity accounted companies (excluding Rio Tinto Limited)
|
42 | - | 42 | |||||
Mark to market of derivative contracts | (65 | ) | 446 | 381 | ||||
Adjustments
to asset carrying values - subsidiaries and joint arrangements
|
96 | 409 | 505 | |||||
Pensions/post retirement benefits | (410 | ) | (59 | ) | (469 | ) | ||
Exploration and evaluation | (8 | ) | (172 | ) | (180 | ) | ||
Depreciation of mining assets | 35 | (142 | ) | (107 | ) | |||
Effect
of historical average commodity prices and other items in ore reserve
determination
|
(82 | ) | - | (82 | ) | |||
Provision for close down and restoration costs | (29 | ) | 82 | 53 | ||||
Start up costs | (122 | ) | (34 | ) | (156 | ) | ||
Proposed dividends | 299 | 170 | 469 | |||||
Other | (44 | ) | (84 | ) | (128 | ) | ||
Tax effect of the above adjustments | 55 | (157 | ) | (102 | ) | |||
Deferred tax on acquisitions: | ||||||||
Impact on mining property | - | 831 | 831 | |||||
Impact on tax provisions | - | (831 | ) | (831 | ) | |||
Other tax adjustments | 68 | 1 | 69 | |||||
Outside
shareholders' interests in the above adjustments
|
12 | (90 | ) | (78 | ) | |||
Share of US GAAP adjustments of Rio Tinto Limited | 253 | - | - | |||||
Shareholders' funds under US GAAP | 8,931 | 4,996 | 12,044 | |||||
A-66.2003
RIO TINTO PLC - RIO TINTO
LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Reconciliation with US GAAP
Rio
Tinto plc - part of Rio Tinto Group |
Rio
Tinto Limited - part of Rio Tinto Group |
Rio Tinto Group | ||||||
2002 | 2002 | 2002 | ||||||
US$m | US$m | US$m | ||||||
Shareholders' funds under UK GAAP | 5,899 | 2,510 | 7,462 | |||||
Increase/(decrease) before tax in respect of: | ||||||||
Goodwill - subsidiaries and joint arrangements | 862 | 203 | 1,065 | |||||
Goodwill
- equity accounted companies (excluding Rio Tinto Limited)
|
352 | - | 352 | |||||
Intangibles - subsidiaries and joint arrangements | 271 | - | 271 | |||||
Intangibles
- equity accounted companies (excluding Rio Tinto Limited)
|
49 | - | 49 | |||||
Mark to market of derivative contracts | (10 | ) | (44 | ) | (54 | ) | ||
Adjustments
to asset carrying values - subsidiaries and joint arrangements
|
133 | 420 | 553 | |||||
Pensions/post retirement benefits | (454 | ) | (18 | ) | (472 | ) | ||
Exploration and evaluation | - | (124 | ) | (124 | ) | |||
Depreciation of mining assets | 19 | (37 | ) | (18 | ) | |||
Effect
of historical average commodity prices and other items in ore reserve
determination
|
- | - | - | |||||
Provision for close down and restoration costs | 216 | 71 | 287 | |||||
Start up costs | (81 | ) | (29 | ) | (110 | ) | ||
Proposed dividends | 272 | 158 | 430 | |||||
Other | (33 | ) | (54 | ) | (87 | ) | ||
Tax effect of the above adjustments | (32 | ) | (28 | ) | (60 | ) | ||
Deferred tax on acquisitions: | ||||||||
Impact on mining property | - | 825 | 825 | |||||
Impact on tax provisions | - | (825 | ) | (825 | ) | |||
Other tax adjustments | 80 | (6 | ) | 74 | ||||
Outside
shareholders' interests in the above adjustments
|
(1 | ) | (100 | ) | (101 | ) | ||
Share of US GAAP adjustments of Rio Tinto Limited | 155 | - | - | |||||
Shareholders' funds under US GAAP | 7,697 | 2,922 | 9,517 | |||||
A-66.2002
RIO TINTO PLC - RIO TINTO
LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
The Groups financial statements have been prepared in accordance with generally accepted accounting principles in the United Kingdom ('UK GAAP'), which differ in certain respects from those in the United States ('US GAAP'). These differences relate principally to the following items, and the effect of each of the adjustments to net earnings and shareholders' funds that would be required under US GAAP is set out on the preceding pages.
Goodwill
For 1997 and prior years,
UK GAAP permitted the write off of purchased goodwill on acquisition, directly
against reserves. For acquisitions in 1998 and subsequent years, goodwill is
capitalised and amortised over its expected useful life under UK GAAP. Under
US GAAP, goodwill is capitalised and, until 2001, was amortised by charges
against income over the period during which it was expected to be of benefit,
subject to a maximum of 40 years. Goodwill previously written off directly
to reserves in the UK GAAP financial statements was therefore reinstated and
amortised under US GAAP. From 1 January 2002, goodwill and indefinite lived
intangible assets are no longer amortised under US GAAP but are reviewed annually
for impairment under SFAS 142 'Goodwill and Other Intangible Assets'. Goodwill
amortisation of US$77 million charged against UK GAAP earnings for 2004 (2003:
US$76 million, 2002: US$90 million) is added back in the US GAAP reconciliation.
No impairment write-downs were required on the initial transition to SFAS 142.
Intangible assets under US GAAP
The implementation
of SFAS 141 'Business Combinations' resulted in the reclassification of US$340
million from goodwill to finite lived intangible assets at 1 January 2002.
The accumulated cost relating to these intangible assets at 31 December 2004
was US$714 million and accumulated amortisation was US$482 million. The total
amortisation expense for 2004 was US$50 million of which US$18 million is related
to the amortisation of goodwill previously written off to reserves under UK
GAAP now reclassified as finite lived intangible assets under US GAAP. The
remaining US$32 million relates to the amortisation of an asset classified
as goodwill on the UK GAAP balance sheet but now reclassified as finite lived
intangible assets under US GAAP. The estimated amortisation charge relating
to intangible assets for each of the next five years is US$50 million.
Exchange differences included in earnings
under US GAAP
The Group finances its
operations primarily in US dollars, and a significant proportion of the Group's
US dollar debt is located in its Australian operations. Under UK GAAP, this
debt is dealt with in the context of the currency status of the Group as a
whole and exchange differences reported by the Australian operations are adjusted
through reserves. US GAAP permits such exchange gains and losses to be taken
to reserves only to the extent that the US dollar debt hedges US dollar assets
in the Australian Group. Exchange gains of the Group of US$227 million pre-tax
(2003: gains of US$1,019 million, 2002: gains of US$240 million), US$183 million
net of tax and minorities (2003: US$623 million net of tax and minorities,
2002: US$177 million loss net of tax and minorities), on US dollar debt that
does not qualify for hedge accounting under US GAAP have therefore been recorded
in US GAAP earnings.
Mark to market of derivative contracts
The Group is
party to derivative contracts in respect of some of its future transactions
in order to hedge its exposure to fluctuations in exchange rates against the
US dollar. Under UK GAAP, these contracts are accounted for as hedges: gains
and losses are deferred and subsequently recognised when the hedged transaction
occurs. Under SFAS 133 ' Accounting for Derivative Instruments and Hedging
Activities', all derivative instruments are included in the balance sheet as
assets or liabilities measured at fair value. Certain of the Group's derivative
contracts do not qualify for hedge accounting under SFAS 133, principally because
the hedge is not located in the entity with the relevant exposure. Unrealised
pre-tax losses for the Group of US$87 million (2003: unrealised pre-tax gains
of US$182 million, 2002: unrealised pre-tax gains of US$148 million), US$57
million after tax and minorities (2003: US$115 million after tax and minorities,
2002: US$104 million after tax and minorities), on such derivatives have therefore
been recorded in US GAAP earnings. Realised gains of US$114 million pre tax
(2003: US$105 million pre tax, 2002: US$9 million pre tax), US$79 million after
tax and minorities, (2003: US$75 million after tax and minorities, 2002: US$6
million after tax and minorities), which have been capitalised under UK GAAP
have also been recorded in earnings under US GAAP.
Accounting treatment for the derivatives disclosed in the Financial instruments note 28
Forward exchange contracts and currency
options hedging trading transactions
Under UK GAAP, gains and
losses on these contracts are taken to the profit and loss account in the same
accounting period as the hedged item to which they relate. Under US GAAP, certain
of these contracts qualify as cash flow hedges under SFAS 133. Unrealised gains
and losses on these qualifying contracts are reflected in other comprehensive
income until the maturity of the hedged item when they are reclassified to
earnings. The remainder of these contracts do not qualify for hedge accounting
under SFAS 133. Gains and losses on these contracts are recorded in earnings
as they arise.
Forward exchange contracts hedging capital
expenditure
Under UK GAAP, gains and
losses on the contracts are credited or debited to the cost of the asset in
the same accounting period as the hedged expenditure and are depreciated over
the economic life of the asset. Under US GAAP, these contracts do not qualify
for hedge accounting under SFAS 133. Gains and losses on contracts not qualifying
for hedge accounting are recorded in earnings as they arise.
Currency swaps hedging non US dollar debt
Under UK GAAP, unrealised
exchange gains and losses on the currency swaps hedging non US dollar debt
are taken to reserves offsetting unrealised exchange gains and losses on the
underlying hedged debt. Under US GAAP, both unrealised gains and losses on
the currency swaps and unrealised gains and losses on the underlying debt are
recorded in earnings.
A-67
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Interest rate swaps
Under UK GAAP, the interest differential arising from interest rate swaps is taken to the profit and loss account on an accruals basis, and matched against the interest charge on the hedged loan. Under US GAAP, for those interest rate swaps that qualify for fair value hedge accounting under SFAS 133, the fair value gain or loss on the interest rate swap and the offsetting gain or loss on the hedged loan are recorded to earnings. For those interest rate swaps that do not qualify for hedge accounting under SFAS 133 the fair value gain or loss is recorded in earnings.
Commodity derivatives
Under UK GAAP, gains and losses on these contracts are taken to the profit and loss account in the same accounting period as the hedged item to which they relate. Under US GAAP, unrealised gains and losses on the derivatives and the offsetting gains and losses on the underlying hedged item are recorded in earnings for those commodity derivatives that qualify as fair value hedges under SFAS 133. For those commodity derivatives that qualify as cash flow hedges under SFAS 133, unrealised gains and losses are reflected in other comprehensive income until the maturity of the hedged item when they are reclassified to earnings. For those commodity derivatives that do not qualify for either fair value or cash flow hedge accounting under SFAS 133, the unrealised gains and losses are immediately recorded in earnings.
Profit on sale of operations
Under UK GAAP, goodwill previously written off to reserves is reinstated for the purpose of calculating profit on the sale of an operation. Under US GAAP, the equivalent goodwill is capitalised and was subject to amortisation in the period from acquisition until 2001. The profit on sale of operations balance under US GAAP reflects the lower book values of operations sold under US GAAP compared to UK GAAP, principally as a result of such amortisation.
Adjustments to asset carrying values
Impairment of fixed assets under UK GAAP is recognised and measured by reference to the discounted cash flows expected to be generated by an Income Generating Unit or disposal value if higher. Under US GAAP, impairment, other than that relating to equity accounted investments, is recognised only when the anticipated undiscounted cash flows are insufficient to recover the carrying value of the asset group.
However, where an asset group is found to be impaired under US GAAP, its carrying value is written down to fair value. Fair value is normally assessed by reference to the discounted cash flows expected to be generated from the asset group, generally using the same assumptions and bases to those applicable under UK GAAP. For example, the evaluation is on a pre-tax and pre-debt basis. The amount of such impairment is, therefore, generally similar under US GAAP to that computed under UK GAAP, except where the US GAAP carrying value includes goodwill on acquisitions prior to 31 December 1997, which was written off to reserves on acquisition under UK GAAP. Furthermore under US GAAP, SFAS 143 'Accounting for Asset Retirement Obligations' requires that estimated cash flows related to a liability for an asset retirement obligation that has been recognised in the financial statements are excluded from the undiscounted cash flows used to test the asset for recoverability, the discounted cash flows used to measure the asset's fair value and the book value of the asset.
Under UK GAAP, impairment provisions may be written back in a future year if the expected recoverable amount of the Income Generating Unit increases. Any credits to UK GAAP earnings resulting from such write backs are reversed in the reconciliation to US GAAP because reversal of impairment provisions is not permitted under US GAAP.
Under US GAAP, APB 18 'The Equity Method of Accounting for Investments in Common Stock' provides that impairment of an equity accounted investment is recognised and measured by comparing the fair value of the investment with its carrying value. Any differences in impairment charges from UK GAAP would generally relate to differences in the carrying value. These differences may arise where the US GAAP carrying value includes goodwill that was written off to reserves on acquisition under UK GAAP.
In 2004 the impact of applying the guidance in SFAS 143 resulted in an additional impairment recognised under US GAAP of US$5 million pre-tax (US$nil million net of tax and minorities).
The adjustment to asset carrying values for the Group in 2003 under US GAAP, of US$32 million, relates to the reversal of a credit made to UK GAAP earnings on the write back of an impairment provision.
The asset write downs for the Group in 2002, under US GAAP, include amounts recognised in 2001 under UK GAAP of US$445 million and exclude asset write downs recognised in 2002 under UK GAAP of US$235 million. The 2002 Group US GAAP asset write downs also include an adjustment for goodwill. The 2002 US GAAP impairment write-down for the Group was US$1,067 million pre-tax (US$1,060 million net of tax and minorities). This is US$89 million pre-tax (US$297 million net of tax and minorities) above the charge of US$978 million pre-tax (US$763 million net of tax and minorities) included under UK GAAP. The asset write downs for Rio Tinto plc in 2002, under US GAAP, include amounts recognised in 2001 under UK GAAP, of US$445 million. The 2002 Rio Tinto plc asset write downs also include an adjustment for goodwill. The 2002 US GAAP impairment write-down for Rio Tinto plc was US$1,059 million pre-tax (US$1,052 million net of tax and minorities). This is US$420 million pre-tax (US$429 million net of tax and minorities) above the charge of US$639 million pre-tax (US$623 million net of tax and minorities) included under UK GAAP. The asset write downs for Rio Tinto Limited in 2002, under US GAAP, exclude asset write downs recognised in 2002 under UK GAAP of US$212 million. The 2002 US GAAP impairment write-down for Rio Tinto Limited was US$13 million pre-tax (US$13 million net of tax and minorities). This is US$420 million pre-tax (US$212 million net of tax and minorities) below the charge of US$433 million pre-tax (US$225 million net of tax and minorities) included under UK GAAP.
A-68
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Pensions/post retirement benefits
Under UK GAAP, post retirement benefits are accounted for in accordance
with Statement of Standard Accounting Practice 24. The expected costs under
defined benefit arrangements are spread over the service lives of employees
entitled to those benefits. Variations from the regular cost are spread on
a straight line basis over the expected average remaining service lives of
relevant current employees. Under US GAAP, the annual pension cost comprises
the estimated cost of benefits accruing in the period adjusted for the amortisation
of the surplus arising when SFAS 87, 'Employers' Accounting for Pensions' was
adopted. The charge is further adjusted to reflect the cost of benefit improvements
and any surpluses/deficits that emerge as a result of variances from actuarial
assumptions. For US purposes, only those surpluses/deficits outside a ten per
cent fluctuation 'corridor' are spread. The reductions in shareholders' funds
at 31 December 2004, 2003 and 2002 also include the effect of the US GAAP requirement
to make immediate provision for pension fund deficits through other comprehensive
income. The provision reflects the reduction in equity values over recent years.
The additional disclosures required under FRS 17, 'Retirement Benefits', are
included in note 40 to the consolidated financial statements.
Exploration and evaluation
Under UK GAAP, expenditure on a project can be carried forward after it has reached a stage where there is a high degree of confidence in its viability. US GAAP does not allow expenditure to be carried forward unless the viability of the project is supported by a final feasibility study. In addition, under UK GAAP, provisions made against exploration and evaluation in prior years can be reversed when the project proceeds to development, to the extent that the relevant costs are recoverable. US GAAP does not allow such provisions to be reversed.
Depreciation of mining assets
Under UK GAAP, mining assets are fully depreciated over their economic lives or the remaining life of the mine if shorter. In some cases, mineral resources that do not yet have the status of reserves are taken into account in determining depreciation charges, where there is a high degree of confidence that they will be mined economically. For US GAAP, only 'proven and probable reserves' are taken into account in the calculation of depreciation, depletion and amortisation charges. As a result, adjustments have been made to depreciation reducing Group US GAAP earnings.
Share option plans
Under UK GAAP, no cost is accrued where the option scheme applies to all relevant employees and the intention is to satisfy the share options by the issuance of new shares. Under the fair value recognition provisions of SFAS 123, ' Accounting for Stock-Based Compensation', the fair value of the plans is determined using an option pricing model.
Effect of historical average commodity prices and other items in ore reserve determination
For UK and Australian reporting,
the Groups ore reserve estimates are determined in accordance with the JORC code and are based on forecasts of future commodity prices. During 2003, the SEC formally indicated that, for US reporting, historical price data should be used. The application of historical prices has led to reduced ore reserve quantities for US reporting purposes for certain of the Groups
operations, which results in lower earnings for US reporting, largely as a
result of higher depreciation charges. The reduced ore reserves also had the
effect
of increasing the present value of provisions for closure obligations for certain
of the Group's operations. Details of the ore reserves used for US reporting
are set out on pages A-85 to A-95.
Provisions for close down and restoration costs
SFAS 143 'Accounting for Asset Retirement Obligations' was implemented with effect from 1 January 2003. Under this US standard, provision is made in the accounting period when the related environmental disturbance occurs, based on the net present value of estimated future costs. The costs so recognised are capitalised and depreciated over the estimated useful life of the related asset. In each subsequent year, the discount applied to the provision 'unwinds', resulting in a charge to the profit and loss account for the year and an increase in the present value of the provision. This accounting treatment is broadly similar to Rio Tinto's established policy under UK GAAP.
Start up costs
Under US GAAP, Statement of Position 98-5, 'Reporting on the Costs of Start-up Activities', requires that the costs of start up activities are expensed as incurred. Under UK GAAP, some of these start up costs qualify for capitalisation and are amortised over the economic lives of the relevant assets.
Proposed dividends
Under UK GAAP, ordinary dividends are recognised in the financial year in respect of which they are paid. Under US GAAP, such dividends are recognised when they are formally declared by the board of directors or approved by the shareholders.
A-69
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Other
Other adjustments include amounts relating to differences between UK and US accounting principles in respect of revenue recognition, unrealised holding gains and losses and higher cost of sales resulting from acquisition accounting.
Revenue recognition - Staff
Accounting Bulletin No. 104 ('SAB 104') 'Revenue Recognition in Financial
Statements' has the result that, in some cases, sales recorded as revenue
under UK GAAP are deferred and are not recognised as revenue under
US GAAP until a future accounting period. Occasionally, sales of goods
recorded as revenue for UK GAAP purposes may be kept in store by Rio
Tinto at the request of the buyer. Under US GAAP, such transactions cannot be recognised as revenue unless the goods are physically segregated from the supplier's other inventory and certain additional criteria are met. In 2004, such timing differences resulted in an increase in Rio Tinto Group US GAAP pre tax earnings of US$24 million (2003: US$17 million reduction, 2002: US$4 million increase). The timing differences increased Rio Tinto plc pre tax earnings by US$23 million (2003: US$20 million reduction, 2002: nil); and increased Rio Tinto Limited's pre tax earnings by US$1 million (2003: US$3 million increase, 2002: US$4 million increase). All of the turnover attributable to Rio Tinto's share of joint ventures and associates presented under UK GAAP would also be attributed to equity accounted units under US GAAP. |
|
Unrealised holding gains and losses - UK GAAP permits current asset investments to be valued at the lower of cost and net realisable value. Under US GAAP, SFAS 115 'Accounting for Certain Investments in Debt and Equity Securities' requires that unrealised holding gains and losses on investments classified as 'available for sale' are reported within a separate component of shareholders' funds and excluded from earnings until realised. | |
Higher cost of sales resulting from acquisition accounting - Under UK GAAP, the inventories of acquired companies are valued at the lower of replacement cost and net realisable value. Under US GAAP, such inventories are recognised at the time of acquisition on the basis of expected net sales proceeds. |
Taxation
Under UK GAAP, provision for taxes arising on remittances of earnings can only be made if the dividends have been accrued or if there is a binding agreement for the distribution of the earnings. Under US GAAP, provision must be made for tax arising on expected future remittances of past earnings.
Under UK GAAP, deferred tax is not provided in respect of upward fair value adjustments to tangible fixed assets and inventories made on acquisitions. Under US GAAP, deferred tax must be provided on all fair value adjustments to non-monetary assets recorded on acquisition with a consequential increase in the amount allocated to mining properties or goodwill as appropriate.
A valuation allowance of US$114 million has been recorded against a deferred tax asset that existed in the opening balance sheet, resulting in a non-recurring charge against earnings. Under UK GAAP, this deferred tax asset is offset against
deferred tax liabilities relating to goodwill.
Profit contribution from equity accounted operations
Under US GAAP, investments in affiliates are accounted for using the equity method, and the reporting entity's share of the after tax profits and losses of its affiliates is included in the profit and loss account as a single line item. Under UK GAAP, the reporting entity's share of the trading results of its associates and joint ventures is split in the profit and loss account between its share of their operating profits/losses, interest receivable/payable and taxation.
The Group's share of the after tax profits and losses of associates and joint ventures is shown in its 'Statement of Total Recognised Gains and Losses'.
Consolidated statement of cash flows
The consolidated statement
of cash flows prepared in accordance with FRS 1 (revised) presents substantially
the same information as that required under US GAAP. Under US GAAP, however,
there are certain differences from UK GAAP with regard to the classification
of items within the cash flow statement and with regard to the definition of
cash and cash equivalents. Under US GAAP, tax paid and interest would form part
of operating cash flow. Similarly, deferred stripping costs which are shown as
capital expenditure under UK GAAP would be included in operating cash flow for
the purposes of the US GAAP cash flow disclosure. Under UK GAAP, cash for the
purposes of the cash flow statement is defined as cash in hand and deposits repayable
on demand with any qualifying financial institution, less bank borrowings from
any qualifying financial institution repayable on demand. Deposits are repayable
on demand if they can be withdrawn at any time without notice and without penalty
or if a maturity or period of notice of not more than 24 hours or one working
day has been agreed. Under US GAAP, cash equivalents comprise cash balances and
current asset investments with an original maturity of less than three months
and exclude bank borrowings repayable on demand. Under US GAAP, funding of the
Groups share of joint ventures and associates' capital and other
expenditure would be included on one line within the investing section of the
statement of cash flows.
Balance sheet classification
Under UK GAAP, Accounts receivable and prepayments falling due after more than one year and Inventories expected to be neither sold nor used within 12 months are included within Current assets. Under US GAAP, they would be classified as non-current assets.
A-70
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Income statement classification
Certain sales are made on the basis that the selling price will be determind at the end of a period ranging from 30 to 180 days after delivery to the customer. Such sales are recorded provisionally on the basis of the prices quoted in the market when the revenue is first recognised. Under UK GAAP, subsequent adjustments to such provisional prices are recorded in turnover. Under US GAAP such subsequent adjustments would be classified as derivative gains and losses. As a consequence, under US GAAP, revenues for 2004 would have been US$9 million lower than that reported under UK GAAP (2003: US$6 million lower, 2002: no difference).
Adjusted earnings
As permitted under UK GAAP, adjusted earnings and adjusted earnings per share have been presented excluding the impact of exceptional items to provide a measure that reflects the underlying performance of the Group. This is in addition to the presentation of net earnings and basic earnings per share, which include the exceptional items. Under US GAAP, earnings and earnings per share have been presented based on US GAAP earnings, without adjustment for the impact of exceptional items. Such additional measures of underlying performance are not permitted under US GAAP.
Guarantor's accounting
Under US GAAP there is a requirement for entities to recognise, upon issue of a guarantee, an initial liability for the fair value, or market value, of the associated obligation with disclosure of that information in its interim and annual financial statements. FIN 45 is effective, on a prospective basis, to guarantees issued or modified after 31 December 2002. The disclosure requirements of FIN 45 apply to these accounts and the following information is given in response to these.
Note 29 to the financial statements discloses indemnities and other performance guarantees totalling US$435 million on which no material loss is expected. This includes US$21 million relating to the Group's commitment to pay deferred consideration in relation to acquisitions of mining properties in 2002 and previous years. This does not include guarantees of payment of US$97 million entered into by the Group relating to deferred consideration arising from such acquisitions because the deferred consideration has been recognised as a liability within the Group's balance sheet. The disclosure in note 29 to the consolidated financial statements also includes guarantees for up to US$197 million relating to the costs of infrastructure financed by certain government authorities, which would be subject to reimbursement by the Group if the facilities are not completed or certain tests relating to the related project are not met. There are a further US$84 million of liabilities relating to the outstanding portion of a loan relating to a joint venture arrangement. Of the remaining US$133 million disclosed in note 29, US$40 million would be subject to reimbursement by a third party in the event that the Group was required to make payment under the guarantees.
In addition to the above, the Group has issued guarantees and indemnities totalling US$816 million relating to its close down, restoration and environmental remediation obligations. These are not disclosed as contingent liabilities because the obligations are included in the amounts recognised in the balance sheet as provisions for liabilities and charges.
A Group company has guaranteed that the quality of product from a joint venture in which it participates will be in accordance with agreed specifications. It has also undertaken to make up any shortfalls from minimum ore reserve quantities over the life of the joint venture. Currently, no shortfalls are anticipated.
As explained in Note 14 to the consolidated financial statements, the Group has a partnership interest in the Colowyo Coal Company and has undertaken, via a subsidiary company which entered into a management agreement, to cause the partnership to perform its obligations under certain coal supply contracts. The debt of US$156 million owed by the Colowyo Coal Company is to be serviced and repaid out of the proceeds of these contracts.
Variable Interest Entities
In January 2003, the FASB
issued interpretation No. 46, 'Consolidation of Variable Interest Entities' (FIN
46). Under FIN 46, certain entities labelled Variable Interest Entities (VIE) must be consolidated by the primary beneficiary of the entity. The primary beneficiary is generally defined as the party exposed to the majority of the risks and rewards arising from the VIE. For VIEs
in which a significant variable interest is held that is not a majority interest,
certain disclosures are required.
The Group has a 20% general partnership interest in the Colowyo limited partnership, which was acquired for US$25 million in December 1994. It is included in the UK GAAP Group accounts on the equity accounting basis. This joint venture falls within the definition of a Variable Interest Entity set out in FIN 46. The Colowyo joint venture produces coal, which is sold under long-term contracts. Colowyos total sales revenues for 2004 were US$119 million and its total assets as at 31 December 2004 were US$(150) million. A provision of US$160 million was recognised in 2004 for asset write-downs and contract obligations at Colowyo.
Colowyo has bonds in issue with outstanding capital of US$156 million at 31 December 2004. These are repayable by instalments up to 2016 with interest at rates between 9.56% and 10.19% per annum. The bonds are to be serviced and repaid exclusively out of the net revenues from certain specified sales contracts relating to coal supplies by Colowyo. The bondholders bear the risks of loss that might arise if the revenues are interrupted due to failure of the purchasers or force majeure. The Rio Tinto Group is responsible under a management contract in which it agreed, for the sole and exclusive benefit of the bondholders, to cause Colowyo to perform its obligations under the specified coal sales contracts.
A-71
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
New US Accounting Standards
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (SFAS 154), which replaced APB No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle by requiring voluntary changes in accounting principles to be reported using retrospective application, unless impracticable to do so. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.
In March 2005, the EITF reached consensus on Issue No. 04-06, Accounting for Stripping Costs Incurred during Production in the Mining Industry (EITF 04-06). EITF 04-06 sets out guidance that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the cost of the inventory produced during the period that the stripping costs are incurred (the inventory cost model). EITF 04-06 is effective for the first reporting period in fiscal years beginning after December 15, 2005, with early adoption permitted. Details of deferred stripping balances and costs deferred during each of the three years to 31 December 2004 are set out in Note 12 to the consolidated financial statements. On implementation of EITF 04-06, deferred post production stripping balances brought forward will be written off through the cumulative effect of a change in accounting policy; and deferred stripping costs incurred in each year will be charged against earnings.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123R), which replaces SFAS No. 123, Accounting for Stock-Based Compensation, (SFAS 123) and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first annual period after June 15, 2005. Since the Group currently applies the provisions of SFAS 123, it does not expect the adoption of SFAS 123(R) to have a material impact on its financial position, results of operations or cash flows.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets-An Amendment of APB Opinion No. 29. SFAS 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. The standard specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for the fiscal periods beginning after June 15, 2005. The Group does not expect the adoption of SFAS 153 to have a material impact on its financial position, results of operations or cash flows.
In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4, clarifying the existing requirements in ARB No. 43 that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current-period charges and requires the allocation of fixed production overheads to inventory based on normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Group does not expect the adoption of SFAS 151 to have a material impact on its financial position, results of operations or cash flows.
In March 2004, the EITF reached consensus on Issue No. 03-01, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments (EITF 03-01). EITF 03-01 was intended to address the meaning of other-than-temporary impairment and its application to certain investments in debt and equity securities. A consensus was reached regarding disclosure requirements concerning unrealized losses on available-for-sale debt and equity securities accounted for under Financial Accounting Standard No. 115, Accounting for Certain Investments in Debt and Equity Securities (FAS 115). The guidance for evaluating whether an investment is other-than-temporarily impaired has been applied beginning January 1, 2005. The Group does not expect application of this guidance to have a material impact on its results of operations. The disclosure requirements of EITF 03-01 have been included in the consolidated financial statements for the year ended December 31, 2004, for available-for-sale and cost method investments. For all other investments within the scope of EITF 03-01, the disclosures will be effective for the year ending December 31, 2005.
In March 2004, the EITF reached a consensus on Issue No. 04-03, Mineral Assets: Impairment and Business Combinations (EITF 04-03). EITF 04-03 provides guidance that the value attributable to the value beyond proven and probable reserves (VBPP) and the effects of anticipated fluctuations in future market prices of minerals should be considered in a manner that is consistent with the expectations of marketplace participants when an entity tests its mining assets for impairment, and also when an entity allocates the purchase price to assets acquired in a business combination. The consensus applies prospectively to business combinations completed and impairment tests performed in reporting periods beginning after March 31, 2004. Adoption of this EITF did not have a material impact upon the Group.
A-72
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Post Retirement benefits
Information in respect of the net periodic benefit cost and related obligation determined in accordance with US Statements of Financial Accounting Standards 87, 106 and 132 is given below. The measurement date used to establish year end asset values and benefit obligations was 30 September 2004. The previous measurement date, used to determine 2004 costs, was 30 September 2003.
Benefits under the major pension plans are principally determined by years of service and employee remuneration. The Groups largest defined benefit pension plans are in the UK, Australia, the US and Canada and a description of the investment policies and strategies followed is set out below
In the UK and the US, the investment strategy is determined by the pension plan trustee and investment committee respectively, after consulting the company. Agreed investment policies aim to ensure that the objectives are met in a prudent manner, consistent with established guidelines. The investment objectives include generating a return that exceeds consumer price and wage inflation over the long term. Ranges for the proportions to be held in each asset class have been agreed; a substantial proportion of the assets is invested in a spread of domestic and overseas equities, with a smaller proportion in fixed and variable income bonds, cash and, in the US, real estate. Risk is managed in various ways, including identifying investments considered to be unsuitable and placing limits on some types of investment. In particular, the funds are not allowed to invest directly in any Rio Tinto Group company.
In Australia, the investments reflect the various defined benefit and defined contribution liabilities and are primarily in Australian and overseas equities and fixed interest stocks.
At 30 September 2004, funded pension plans held assets invested in the following proportions:
UK target | US target* | Group actual | ||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||
Equities | 45%-85% | 45%-85% | 65% | 65% | 66% | 65% | ||||||
Debt securities | 15%-45% | 15%-45% | 30% | 30% | 26% | 27% | ||||||
Real estate | – | – | 5% | 5% | 3% | 3% | ||||||
Other | 0%-10% | 0%-10% | - | - | 5% | 5% | ||||||
*plus or minus 5% |
The expected rate of return on pension plan assets is determined as managements best estimate of the long term return of the major asset classes equity, debt, real estate and other weighted by the actual allocation of assets among the categories at the measurement date.
Pension plan funding policy is based on annual contributions at a rate that is intended to fund benefits as a level percentage of pay over the working lifetime of a plans participants, subject to local statutory minimum contribution requirements. Details of anticipated contributions in 2005 are set out in the FRS17 transitional disclosures on page A-56.
Assumptions used to determine the net periodic benefit cost and the end of year benefit obligation for the major pension plans varied between the limits shown below. The average rate for each assumption has been weighted by benefit obligation. The assumptions used to determine the end of year benefit obligation are also used to calculate the following years cost.
2004 Cost** | Year end benefit obligation | ||
Discount rate | 5.4% to 9.5% (Average: 5.9%) | 5.2% to 9.5% (Average: 5.6%) | |
Long term rate of return on plan assets | 6.3% to 11.0% (Average: 6.6%) | 6.3% to 7.9% (Average: 6.7%) | |
Increase in compensation levels | 3.7% to 6.5% (Average: 4.2%) | 4.0% to 6.5% (Average: 4.6%) | |
** 31st December 2003 year end benefit obligations were measured on the same assumptions as the 2004 cost. |
The actuarial calculations in respect of the UK plans assume a rate of increase of pensions in payment of 2.9 per cent per annum at the year end. This assumption is consistent with the expected rates of return and salary increase assumptions in the respective valuations. Appropriate assumptions were made for plans in other countries.
Other post retirement benefits are provided to employees who meet the eligibility requirements, and their beneficiaries and dependants, through unfunded self-insurance arrangements. The majority of these plans are for employees in the United States. The plans are non-contributory, although some contain an element of cost sharing such as deductibles and co-insurance.
In the US, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 provides an employer subsidy beginning in 2006. The Group's post retirement medical plans are expected to be eligible for this employer subsidy. Therefore, in accordance with FASB Staff Position 106-2, the change in Accumulated Post Retirement Benefit Obligation (APBO) due to the estimated impact of the employer subsidy has been treated as a one-off gain that offsets any net accumulated unrecognised loss. This reduction in APBO in turn reduces the net periodic post retirement benefit cost due to corresponding reductions in the service cost, interest cost, and the amortisation of the net accumulated loss.
The weighted average assumptions used in determining the costs and year end benefit obligation for the major post retirement benefit plans other than pension plans were as shown below:
2004 Cost** | Year end benefit obligation | ||
Discount rate | 5.4% to 9.5% (average 6.4%) | 5.2% to 9.5% (average 6.1%) | |
Average healthcare cost trend rate | |||
- trend in first year | 6.1% to 11.2% (average 10.6%) | 6.4% to 10.5% (average 10.1%) | |
- reducing to long term rate by 2011 | 4.6% to 9.5% (average 5.5%) | 5.0% to 7.5% (average 5.3%) | |
** 31st December 2003 year end benefit obligations were measured on the same assumptions as the 2004 cost. |
A-73
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 | Reconciliation to US Accounting Principles (continued) |
The components of net benefit expense under US GAAP are detailed in the table below.
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
Pension benefits | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Service cost | (58 | ) | (50 | ) | (42 | ) | (66 | ) | (53 | ) | (55 | ) | (124 | ) | (103 | ) | (97 | ) |
Interest cost on benefit obligation | (148 | ) | (140 | ) | (147 | ) | (90 | ) | (70 | ) | (60 | ) | (238 | ) | (210 | ) | (207 | ) |
Expected return on plan assets | 173 | 182 | 197 | 87 | 70 | 61 | 260 | 252 | 258 | |||||||||
Net amortisation and deferral: | ||||||||||||||||||
- transitional obligation | 5 | 10 | 10 | - | - | - | 5 | 10 | 10 | |||||||||
- recognised (gains) and losses | (13 | ) | 3 | 18 | (19 | ) | (9 | ) | (8 | ) | (32 | ) | (6 | ) | 10 | |||
- prior service cost recognised | (20 | ) | (21 | ) | (21 | ) | (2 | ) | (2 | ) | (1 | ) | (22 | ) | (23 | ) | (22 | ) |
Total net amortisation and deferral | (28 | ) | (8 | ) | 7 | (21 | ) | (11 | ) | (9 | ) | (49 | ) | (19 | ) | (2 | ) | |
Net periodic benefit (cost)/credit | (61 | ) | (16 | ) | 15 | (90 | ) | (64 | ) | (63 | ) | (151 | ) | (80 | ) | (48 | ) | |
Curtailment and settlement credit/(charge) | 37 | - | (8 | ) | - | - | - | 37 | - | (8 | ) | |||||||
Net benefit (expense)/credit | (24 | ) | (16 | ) | 7 | (90 | ) | (64 | ) | (63 | ) | (114 | ) | (80 | ) | (56 | ) | |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
Other benefits | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Service cost | (9 | ) | (8 | ) | (6 | ) | (1 | ) | (1 | ) | (1 | ) | (10 | ) | (9 | ) | (7 | ) |
Interest cost on benefit obligation | (28 | ) | (25 | ) | (23 | ) | (4 | ) | (3 | ) | (2 | ) | (32 | ) | (28 | ) | (25 | ) |
Net amortisation and deferral: | ||||||||||||||||||
- recognised (gains) and losses | 1 | 5 | 8 | - | - | - | 1 | 5 | 8 | |||||||||
- prior service cost recognised | 1 | 1 | 1 | (4 | ) | - | - | (3 | ) | 1 | 1 | |||||||
Total net amortisation and deferral | 2 | 6 | 9 | (4 | ) | - | - | (2 | ) | 6 | 9 | |||||||
Net periodic benefit cost | (35 | ) | (27 | ) | (20 | ) | (9 | ) | (4 | ) | (3 | ) | (44 | ) | (31 | ) | (23 | ) |
Curtailment and settlement gain/(charge) | 3 | 3 | (2 | ) | - | - | - | 3 | 3 | (2 | ) | |||||||
Net benefit expense | (32 | ) | (24 | ) | (22 | ) | (9 | ) | (4 | ) | (3 | ) | (41 | ) | (28 | ) | (25 | ) |
The 2004 pension cost recognised for defined contribution plans, of US$6 million (2003: US$9 million), is included in the above. The curtailment and settlement gain primarily reflects the allocation of a surplus to the employer in a South African plan.
The funded status of the Group's principal schemes is summarised in the table below.
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
Pension benefits | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Benefit obligation at end of year | (3,000 | ) | (2,680 | ) | (2,377 | ) | (1,817 | ) | (1,481 | ) | (989 | ) | (4,817 | ) | (4,161 | ) | (3,366 | ) |
Fair value of plan assets | 2,840 | 2,488 | 2,256 | 1,675 | 1,347 | 910 | 4,515 | 3,835 | 3,166 | |||||||||
Benefit obligations in excess of plan assets | (160 | ) | (192 | ) | (121 | ) | (142 | ) | (134 | ) | (79 | ) | (302 | ) | (326 | ) | (200 | ) |
Unrecognised prior service cost | 124 | 140 | 155 | 3 | 4 | 4 | 127 | 144 | 159 | |||||||||
Unrecognised net loss | 325 | 305 | 239 | 331 | 317 | 225 | 656 | 622 | 464 | |||||||||
Unrecognised transitional asset | (5 | ) | (9 | ) | (27 | ) | (2 | ) | (2 | ) | (2 | ) | (7 | ) | (11 | ) | (29 | ) |
Company contributions in fourth quarter | 12 | 4 | 2 | 27 | 25 | 5 | 39 | 29 | 7 | |||||||||
Net amount recognised at end of year | 296 | 248 | 248 | 217 | 210 | 153 | 513 | 458 | 401 | |||||||||
Comprising: | ||||||||||||||||||
- benefit prepayment | 281 | 243 | 212 | 171 | 171 | 134 | 452 | 414 | 346 | |||||||||
- benefit provision | (230 | ) | (293 | ) | (236 | ) | (120 | ) | (116 | ) | (83 | ) | (350 | ) | (409 | ) | (319 | ) |
- intangible asset | 46 | 52 | 53 | 2 | 1 | - | 48 | 53 | 53 | |||||||||
- amount recognised through accumulated | ||||||||||||||||||
other comprehensive income | 199 | 246 | 219 | 164 | 154 | 102 | 363 | 400 | 321 | |||||||||
Net amount recognised | 296 | 248 | 248 | 217 | 210 | 153 | 513 | 458 | 401 | |||||||||
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
Other benefits | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Benefit obligation at end of year | (458 | ) | (501 | ) | (396 | ) | (80 | ) | (62 | ) | (41 | ) | (538 | ) | (563 | ) | (437 | ) |
Unrecognised prior service cost | (2 | ) | (2 | ) | (2 | ) | - | - | - | (2 | ) | (2 | ) | (2 | ) | |||
Unrecognised net loss/(gain) | (16 | ) | 45 | (40 | ) | 16 | 9 | - | - | 54 | (40 | ) | ||||||
Company contributions in fourth quarter | 4 | 4 | - | 1 | 1 | - | 5 | 5 | - | |||||||||
Net amount recognised at end of year | (472 | ) | (454 | ) | (438 | ) | (63 | ) | (52 | ) | (41 | ) | (535 | ) | (506 | ) | (479 | ) |
Comprising: | ||||||||||||||||||
- benefit provision | (472 | ) | (454 | ) | (438 | ) | (63 | ) | (52 | ) | (41 | ) | (535 | ) | (506 | ) | (479 | ) |
Net amount recognised | (472 | ) | (454 | ) | (438 | ) | (63 | ) | (52 | ) | (41 | ) | (535 | ) | (506 | ) | (479 | ) |
A-74
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 |
Reconciliation to US Accounting Principles (continued) |
Change in benefit obligation
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
Pension benefits | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Benefit obligation at start of year | (2,680 | ) | (2,377 | ) | (1,903 | ) | (1,481 | ) | (989 | ) | (900 | ) | (4,161 | ) | (3,366 | ) | (2,803 | ) |
Service cost | (57 | ) | (50 | ) | (42 | ) | (81 | ) | (62 | ) | (55 | ) | (138 | ) | (112 | ) | (97 | ) |
Interest cost | (148 | ) | (140 | ) | (147 | ) | (90 | ) | (70 | ) | (60 | ) | (238 | ) | (210 | ) | (207 | ) |
Contributions by plan participants | (2 | ) | (3 | ) | (3 | ) | (25 | ) | (23 | ) | (6 | ) | (27 | ) | (26 | ) | (9 | ) |
Actuarial gains and (losses) | (322 | ) | (381 | ) | (246 | ) | (140 | ) | (172 | ) | 42 | (462 | ) | (553 | ) | (204 | ) | |
Benefits paid | 190 | 151 | 141 | 137 | 109 | 54 | 327 | 260 | 195 | |||||||||
Benefits bought out | - | 191 | - | (40 | ) | - | - | (40 | ) | 191 | - | |||||||
Plan amendments | 4 | (6 | ) | (16 | ) | (9 | ) | (1 | ) | - | (5 | ) | (7 | ) | (16 | ) | ||
Settlement, curtailment and other gain/(loss) | 40 | (13 | ) | - | - | 23 | - | 40 | 10 | - | ||||||||
Plans relating to companies sold | - | - | - | 8 | - | - | 8 | - | - | |||||||||
Currency and other adjustments | (25 | ) | (52 | ) | (161 | ) | (96 | ) | (296 | ) | (64 | ) | (121 | ) | (348 | ) | (225 | ) |
Benefit obligation at end of year | (3,000 | ) | (2,680 | ) | (2,377 | ) | (1,817 | ) | (1,481 | ) | (989 | ) | (4,817 | ) | (4,161 | ) | (3,366 | ) |
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
Other benefits | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Benefit obligation at start of year | (501 | ) | (396 | ) | (323 | ) | (62 | ) | (41 | ) | (39 | ) | (563 | ) | (437 | ) | (362 | ) |
Service cost | (9 | ) | (8 | ) | (6 | ) | (1 | ) | (1 | ) | (1 | ) | (10 | ) | (9 | ) | (7 | ) |
Interest cost | (28 | ) | (25 | ) | (23 | ) | (4 | ) | (3 | ) | (2 | ) | (32 | ) | (28 | ) | (25 | ) |
Actuarial gains and (losses) | 64 | (83 | ) | (48 | ) | (7 | ) | (10 | ) | - | 57 | (93 | ) | (48 | ) | |||
Benefits paid | 21 | 16 | 14 | 3 | 2 | 2 | 24 | 18 | 16 | |||||||||
Plan amendments | - | 5 | (2 | ) | (4 | ) | - | - | (4 | ) | 5 | (2 | ) | |||||
Settlement, curtailment and other gains | 3 | 3 | - | - | - | - | 3 | 3 | - | |||||||||
Currency and other adjustments | (8 | ) | (13 | ) | (8 | ) | (5 | ) | (9 | ) | (1 | ) | (13 | ) | (22 | ) | (9 | ) |
Benefit obligation at end of year | (458 | ) | (501 | ) | (396 | ) | (80 | ) | (62 | ) | (41 | ) | (538 | ) | (563 | ) | (437 | ) |
The benefit obligation shown above includes an allowance for future salary increases, where applicable; the accumulated benefit obligation does not include this allowance. The accumulated benefit obligations for pension plans at 30 September 2004 amounted to US$4,610 million. At 30 September 2003, the corresponding total of accumulated benefit obligations was US$3,973 million. For each plan, where the accumulated benefit obligation exceeds the fair value of the assets and this deficit is greater than the amount provided, an increase in the provision is charged to other comprehensive income. To the extent that the deficit relates to previous benefit improvements an intangible asset is created which reduces the charge to other comprehensive income.
In Australia there has been a merger of plans, leading to an increase in both the benefit obligation and the plan assets of $40m in the Group's main Australian plan.
Change in plan assets
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
Pension benefits | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Fair value of plan assets at start of year | 2,488 | 2,256 | 2,271 | 1,347 | 910 | 917 | 3,835 | 3,166 | 3,188 | |||||||||
Actual return/(loss) on plan assets | 456 | 486 | (108 | ) | 212 | 203 | (42 | ) | 668 | 689 | (150 | ) | ||||||
Contributions by plan participants | 2 | 3 | 3 | 25 | 23 | 6 | 27 | 26 | 9 | |||||||||
Contributions by employer | 50 | 25 | 13 | 102 | 67 | 17 | 152 | 92 | 30 | |||||||||
Benefits paid | (190 | ) | (151 | ) | (141 | ) | (137 | ) | (109 | ) | (54 | ) | (327 | ) | (260 | ) | (195 | ) |
Benefits bought out | - | (191 | ) | - | 40 | - | - | 40 | (191 | ) | - | |||||||
Settlement, curtailment and other gain/(loss) | (3 | ) | 4 | - | - | (23 | ) | - | (3 | ) | (19 | ) | - | |||||
Currency and other adjustments | 37 | 56 | 218 | 86 | 276 | 66 | 123 | 332 | 284 | |||||||||
Fair value of plan assets at end of year | 2,840 | 2,488 | 2,256 | 1,675 | 1,347 | 910 | 4,515 | 3,835 | 3,166 | |||||||||
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
Other benefits | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Fair value of plan assets at start of year | - | - | - | - | - | - | - | |||||||||||
Contributions by employer | 21 | 16 | 14 | 3 | 2 | 2 | 24 | 18 | 16 | |||||||||
Benefits paid | (21 | ) | (16 | ) | (14 | ) | (3 | ) | (2 | ) | (2 | ) | (24 | ) | (18 | ) | (16 | ) |
Fair value of plan assets at end of year | - | - | - | - | - | - | - | - | - | |||||||||
A-75
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 |
Reconciliation to US Accounting Principles (continued) |
Change in additional minimum liability before tax
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||
Pension benefits | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||
Accrued pension benefit expense | (53 | ) | 26 | 187 | 11 | 53 | 34 | (42 | ) | 79 | 221 | |||||||
Decrease/(increase) in intangible asset | 6 | 1 | (21 | ) | (1 | ) | (1 | ) | - | 5 | - | (21 | ) | |||||
Other comprehensive income before tax | (47 | ) | 27 | 166 | 10 | 52 | 34 | (37 | ) | 79 | 200 | |||||||
Sensitivity to change in healthcare trend
Changing the healthcare cost trend rates by 1% would result in the following effects:
Rio Tinto plc - | Rio Tinto Limited - | |||||||||||
part of Rio Tinto | part of Rio Tinto | |||||||||||
Group | Group | Rio Tinto Group | ||||||||||
1% Increase | 1% Decrease | 1% Increase | 1% Decrease | 1% Increase | 1% Decrease | |||||||
2004 | US$m | US$m | US$m | US$m | US$m | US$m | ||||||
(Increase)/decrease in service cost plus interest cost | (5 | ) | 4 | (1 | ) | 1 | (6 | ) | 5 | |||
(Increase)/decrease in benefit obligation at 30 September | (55 | ) | 44 | (9 | ) | 8 | (64 | ) | 52 | |||
2003 | ||||||||||||
(Increase)/decrease in service cost plus interest cost | (5 | ) | 4 | - | - | (5 | ) | 4 | ||||
(Increase)/decrease in benefit obligation at 30 September | (61 | ) | 54 | (7 | ) | 6 | (68 | ) | 60 | |||
2002 | ||||||||||||
(Increase)/decrease in service cost plus interest cost | (5 | ) | 4 | - | - | (5 | ) | 4 | ||||
(Increase)/decrease in benefit obligation at 30 September | (43 | ) | 35 | (5 | ) | 5 | (48 | ) | 40 |
Expected benefit payments
Rio Tinto plc - | Rio Tinto Limited - | |||||
part of Rio Tinto | part of Rio Tinto | |||||
Group | Group | Rio Tinto Group | ||||
US$m | US$m | US$m | ||||
Pension benefits | ||||||
Expected benefit payments in 2005 | (183 | ) | (63 | ) | (246 | ) |
Expected benefit payments in 2006 | (179 | ) | (61 | ) | (240 | ) |
Expected benefit payments in 2007 | (184 | ) | (70 | ) | (254 | ) |
Expected benefit payments in 2008 | (188 | ) | (68 | ) | (256 | ) |
Expected benefit payments in 2009 | (194 | ) | (64 | ) | (258 | ) |
Expected benefit payments from 2010 to 2014 | (1,078 | ) | (330 | ) | (1,408 | ) |
Other benefits | ||||||
Expected benefit payments in 2005 | (20 | ) | (4 | ) | (24 | ) |
Expected benefit payments in 2006 | (21 | ) | (4 | ) | (25 | ) |
Expected benefit payments in 2007 | (23 | ) | (4 | ) | (27 | ) |
Expected benefit payments in 2008 | (24 | ) | (4 | ) | (28 | ) |
Expected benefit payments in 2009 | (24 | ) | (5 | ) | (29 | ) |
Expected benefit payments from 2010 to 2014 | (128 | ) | (27 | ) | (155 | ) |
A-76
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Accumulated foreign currency translation gains and (losses) recorded directly in shareholders' funds under US GAAP
Rio Tinto plc - | Rio Tinto Limited - | |||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | ||||
US$m | US$m | US$m | ||||
At 1 January 2004 | (87 | ) | 568 | 287 | ||
Current period change | 388 | 255 | 551 | |||
At 31 December 2004 | 301 | 823 | 838 | |||
At 1 January 2003 | (871 | ) | (261 | ) | (1,014 | ) |
Current period change | 784 | 829 | 1,301 | |||
At 31 December 2003 | (87 | ) | 568 | 287 | ||
At 1 January 2002 | (1,189 | ) | (428 | ) | (1,436 | ) |
Current period change | 318 | 167 | 422 | |||
At 31 December 2002 | (871 | ) | (261 | ) | (1,014 | ) |
Additional US GAAP cash flow information
A summary of Rio Tinto's operating,
investing and financing cash flows classified in accordance with US GAAP is presented
below:
Rio Tinto plc - | Rio Tinto Limited - | ||||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | |||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||
Net cash flow from operating activities | 1,721 | 1,413 | 1,536 | 1,771 | 1,156 | 1,379 | 3,368 | 2,292 | 2,640 | ||||||||||
Net cash flow from investing activities | (680 | ) | 112 | (1,042 | ) | (1,317 | ) | (667 | ) | (592 | ) | (574 | ) | (1,268 | ) | (1,663 | ) | ||
Net cash flow from financing activities | (1,124 | ) | (1,439 | ) | (507 | ) | (387 | ) | (505 | ) | (948 | ) | (2,810 | ) | (954 | ) | (1,151 | ) | |
Increase/(decrease)
in cash and cash equivalents per US GAAP |
(83 | ) | 86 | (13 | ) | 67 | (16 | ) | (161 | ) | (16 | ) | 70 | (174 | ) | ||||
Increase/(decrease) in cash under UK GAAP | 44 | (9 | ) | (16 | ) | 134 | (74 | ) | (114 | ) | 178 | (83 | ) | (130 | ) | ||||
(Decrease)/increase
in additional liquid resources qualifying for inclusion under US GAAP |
(110 | ) | 110 | (2 | ) | 8 | 10 | (25 | ) | (102 | ) | 120 | (27 | ) | |||||
(Decrease)/increase
in bank borrowings repayable on demand included in cash under UK GAAP |
(17 | ) | (15 | ) | 5 | (75 | ) | 48 | (22 | ) | (92 | ) | 33 | (17 | ) | ||||
(Decrease)/increase
in cash and cash equivalents under US GAAP |
(83 | ) | 86 | (13 | ) | 67 | (16 | ) | (161 | ) | (16 | ) | 70 | (174 | ) | ||||
Cash per balance sheet under UK GAAP | 181 | 257 | 174 | 209 | 138 | 151 | 390 | 395 | 325 | ||||||||||
Qualifying liquid resources less non qualifying deposits |
(12 | ) | - | (1 | ) | (1 | ) | (36 | ) | (44 | ) | (13 | ) | (36 | ) | (45 | ) | ||
Cash and cash equivalents under US GAAP | 169 | 257 | 173 | 208 | 102 | 107 | 377 | 359 | 280 | ||||||||||
The year end cash and cash equivalents position under US GAAP included in the above table reflects both the movement in cash and cash equivalents in the year and the impact of exchange gains and losses in the year.
Deferred tax credit/(charge)
Rio Tinto plc - | Rio Tinto Limited - | ||||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | |||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||
The
credit/(charge) under UK GAAP for deferred taxation arises as follows: |
|||||||||||||||||||
- accelerated capital allowances | (58 | ) | (80 | ) | 158 | 36 | (3 | ) | 28 | (22 | ) | (83 | ) | 186 | |||||
- pension prepayments | 120 | 47 | (1 | ) | 4 | 1 | 12 | 124 | 48 | 11 | |||||||||
- provisions | (48 | ) | (26 | ) | 20 | 12 | 2 | (14 | ) | (36 | ) | (24 | ) | 6 | |||||
- provision against AMT credits and US tax losses | (7 | ) | 50 | (228 | ) | - | - | - | (7 | ) | 50 | (228 | ) | ||||||
- other timing differences | 65 | 28 | 30 | (11 | ) | 6 | 11 | 54 | 34 | 41 | |||||||||
72 | 19 | (21 | ) | 41 | 6 | 37 | 113 | 25 | 16 | ||||||||||
A-77
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Fixed asset investments
The aggregated profit and loss accounts and balance sheets
of equity and gross equity accounted companies on a 100 per cent basis are set
out below:
Rio Tinto plc - | Rio Tinto Limited - | ||||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | |||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||
Profit and loss account: | |||||||||||||||||||
Sales revenue | 11,913 | 11,541 | 9,529 | 1,566 | 1,085 | 1,871 | 6,945 | 7,133 | 6,666 | ||||||||||
Cost of sales | (7,561 | ) | (8,171 | ) | (7,060 | ) | (1,042 | ) | (901 | ) | (1,247 | ) | (3,502 | ) | (4,707 | ) | (4,428 | ) | |
Operating profit | 4,352 | 3,370 | 2,469 | 524 | 184 | 624 | 3,443 | 2,426 | 2,238 | ||||||||||
Profit of equity accounted companies | 300 | 137 | 325 | - | - | - | 1 | - | - | ||||||||||
Profit on sale of fixed asset investments | 139 | 126 | - | - | - | - | - | - | - | ||||||||||
Net interest | (315 | ) | (445 | ) | (475 | ) | (7 | ) | (8 | ) | (49 | ) | (155 | ) | (317 | ) | (377 | ) | |
Profit before tax | 4,476 | 3,188 | 2,319 | 517 | 176 | 575 | 3,289 | 2,109 | 1,861 | ||||||||||
Taxation | (970 | ) | (1,070 | ) | (911 | ) | (155 | ) | (4 | ) | (91 | ) | (648 | ) | (714 | ) | (579 | ) | |
Profit attributable to outside shareholders | (42 | ) | (59 | ) | 90 | - | - | - | - | (48 | ) | (36 | ) | ||||||
Net profit on ordinary activities (100 per cent basis) | 3,464 | 2,059 | 1,498 | 362 | 172 | 484 | 2,641 | 1,347 | 1,246 | ||||||||||
Rio Tinto plc - | Rio Tinto Limited - | ||||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | |||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||
Balance sheet: | |||||||||||||||||||
Intangible fixed assets | 994 | 1,062 | 988 | 2 | 1 | 1 | 2 | 64 | 194 | ||||||||||
Tangible fixed assets | 16,355 | 18,499 | 15,942 | 1,989 | 2,002 | 2,758 | 7,711 | 11,406 | 12,086 | ||||||||||
Investments | 1,277 | 1,247 | 1,235 | 2 | 2 | 3 | 53 | 78 | 166 | ||||||||||
Working capital | (814 | ) | 1,040 | (434 | ) | 73 | 17 | 86 | 616 | 775 | 593 | ||||||||
Net cash less current debt | (429 | ) | (1,182 | ) | (2,658 | ) | 16 | (13 | ) | (33 | ) | (48 | ) | 319 | (835 | ) | |||
Long term debt | (3,540 | ) | (6,954 | ) | (5,667 | ) | (361 | ) | (402 | ) | (1,005 | ) | (2,016 | ) | (5,066 | ) | (5,406 | ) | |
Provisions | (2,952 | ) | (3,457 | ) | (2,648 | ) | (204 | ) | (164 | ) | (361 | ) | (742 | ) | (1,462 | ) | (1,658 | ) | |
Outside shareholders' interests | (1,317 | ) | (1,580 | ) | (847 | ) | (1 | ) | (1 | ) | - | (1 | ) | (321 | ) | (290 | ) | ||
Aggregate shareholders' funds (100 per cent basis) | 9,574 | 8,675 | 5,911 | 1,516 | 1,442 | 1,449 | 5,575 | 5,793 | 4,850 | ||||||||||
For Rio Tinto plc the above disclosures include 100 per cent of the profit and loss account and balance sheet of Rio Tinto Limited.
The historical data for 2003 and 2002 has been reclassified for the impact of reporting reimbursement of certain shipping and handling costs incurred by the Group that are more appropriately classified as turnover rather than a reduction of net operating costs.
Joint arrangements equity accounted for under US GAAP
The Group accounts for nine joint arrangements using
proportional consolidation under UK GAAP for which the equity method of accounting
would be applied under US GAAP. The difference in treatment between proportional
consolidation
and the equity method of accounting has no impact on shareholders funds
or net income. Condensed financial information relating to the Groups proportionate
interest in the joint arrangements that would be equity accounted under US GAAP
is as follows:
Rio Tinto plc - | Rio Tinto Limited - | ||||||||||||||||||
part of Rio Tinto Group | part of Rio Tinto Group | Rio Tinto Group | |||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||
Profit and loss account: | |||||||||||||||||||
Operating (loss)/profit | - | - | - | (34 | ) | (75 | ) | (4 | ) | (34 | ) | (75 | ) | (4 | ) | ||||
(Loss)/profit after interest, tax and outside interests |
- | - | - | (56 | ) | (74 | ) | (22 | ) | (56 | ) | (74 | ) | (22 | ) | ||||
Cash flow statement | |||||||||||||||||||
Net cash flow from operating activities | - | - | - | 49 | 50 | 15 | 49 | 50 | 15 | ||||||||||
Net cash flow from investing activities | - | - | - | (40 | ) | (63 | ) | (74 | ) | (40 | ) | (63 | ) | (74 | ) | ||||
Net cash flow from financing activities | - | - | - | (8 | ) | (6 | ) | (6 | ) | (8 | ) | (6 | ) | (6 | ) | ||||
Balance sheet: | |||||||||||||||||||
Current assets | - | - | - | 675 | 599 | 525 | 675 | 599 | 525 | ||||||||||
Non-current assets | - | - | - | 1,732 | 1,724 | 1,484 | 1,732 | 1,724 | 1,484 | ||||||||||
Current liabilities | - | - | - | (318 | ) | (537 | ) | (672 | ) | (318 | ) | (537 | ) | (672 | ) | ||||
Non-current liabilities | - | - | - | (1,376 | ) | (1,036 | ) | (699 | ) | (1,376 | ) | (1,036 | ) | (699 | ) | ||||
Outside interests | - | - | - | (4 | ) | (5 | ) | (4 | ) | (4 | ) | (5 | ) | (4 | ) |
A-78
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Deferred Stripping
Information about the stripping ratios of the Business
Units that account for the majority of the deferred stripping balance at 31 December
2004, and the year in which deferred stripping is expected to be fully amortised
(as shown in brackets), is set out in the following table:
Actual stripping ratio | Life of mine stripping | |||||||||||
for year | ratio | |||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||
Kennecott Utah Copper (2017) | 1.83 | 1.86 | 2.05 | 1.24 | 1.24 | 1.19 | ||||||
Borax (2034) | 20.50 | 23.00 | 25.00 | 18.70 | 16.00 | 16.00 | ||||||
Argyle Diamonds (2008) | 6.70 | 6.10 | 7.29 | 4.91 | 4.10 | 4.40 | ||||||
Freeport Joint Venture (2014) | 3.39 | 2.84 | 2.35 | 2.43 | 1.93 | 1.77 | ||||||
Diavik (2009) | 14.52 | 20.31 | 24.93 | 4.69 | 8.54 | 8.87 |
In addition, Escondida, Rio Tinto's 30 per cent owned joint venture, defers stripping costs based on the ratio of waste tonnes to pounds of copper mined. The actual stripping ratio for 2004 was 0.1145 (2003: 0.1024, 2002: 0.1458). The life of mine stripping ratio for 2004 was 0.1129 (2003: 0.1110, 2002: 0.1094). The deferred stripping balance is expected to be fully amortised in 2040.
Unrealised holding gains and losses
Under SFAS 115, unrealised holding gains and losses on
investments classified as 'available for sale' are excluded from earnings and
reported within a separate component of shareholders' funds until realised.
The following tables show the investments in debt and equity securities which are held as 'available for sale' in accordance with SFAS 115, for the Rio Tinto Group, Rio Tinto plc part of the Group and Rio Tinto Limited part of the Group.
Unrealised | Unrealised | Net unrealised | |||||||||
Rio Tinto Group | Net book | holding | holding | Market | holding | ||||||
value | gains | losses | value | gains/(losses) | |||||||
US$m | US$m | US$m | US$m | US$m | |||||||
At 1 January 2004 | 79 | 19 | (6 | ) | 92 | 13 | |||||
Change | 16 | 35 | 1 | 52 | 36 | ||||||
At 31 December 2004 | 95 | 54 | (5 | ) | 144 | 49 | |||||
Unrealised | Unrealised | Net unrealised | |||||||||
Rio Tinto plc - part of the Group | Net book | holding | holding | Market | holding | ||||||
value | gains | losses | value | gains/(losses) | |||||||
US$m | US$m | US$m | US$m | US$m | |||||||
At 1 January 2004 | 69 | 19 | - | 88 | 19 | ||||||
Change | 16 | 34 | - | 50 | 34 | ||||||
At 31 December 2004 | 85 | 53 | - | 138 | 53 | ||||||
Unrealised | Unrealised | Net unrealised | |||||||||
Rio Tinto Limited - part of the Group | Net book | holding | holding | Market | holding | ||||||
value | gains | losses | value | gains/(losses) | |||||||
US$m | US$m | US$m | US$m | US$m | |||||||
At 1 January 2004 | 10 | - | (6 | ) | 4 | (6 | ) | ||||
Change | - | 1 | 1 | 2 | 2 | ||||||
At 31 December 2004 | 10 | 1 | (5 | ) | 6 | (4 | ) | ||||
Employee share-based payment plans
At 31 December 2004, Rio Tinto plc and Rio Tinto Limited
have a number of share-based payment plans, which are described below. Prior
to 2002 the Group accounted for share-based payment plans under the recognition
and measurement provisions of APB Opinion No. 25, 'Accounting for Stock Issued
to Employees', and related interpretations. In 2002, the Group adopted the fair
value recognition provisions of SFAS 123, 'Accounting for Stock-Based Compensation',
which is considered by the SEC to be a preferable accounting method for share
based employee compensation. As permitted by SFAS 148, 'Accounting for Stock-Based
Compensation - Transition and Disclosure', all prior periods presented have been
restated to reflect the compensation cost that would have been recognised had
the recognition provisions of SFAS 123 been applied to all awards granted to
employees after 1 January 1995.
The compensation cost that has been recognised in income for Rio Tinto's share-based option plans is set out in the table below.
Compensation cost | ||||||
recognised (US $m) | ||||||
2004 | 2003 | 2002 | ||||
Fixed Share Option Plan | ||||||
Rio Tinto plc | 2.0 | 2.5 | 2.3 | |||
Rio Tinto Limited | 2.3 | 3.0 | 1.8 | |||
Performance Based Share Option Plan | ||||||
Rio Tinto plc | 11.9 | 9.1 | 9.6 | |||
Rio Tinto Limited | 6.9 | 5.9 | 3.7 | |||
Totals (US$ million) | 23.1 | 20.5 | 17.4 | |||
A-79
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
Lattice-based option valuation model
The fair value of share options is estimated on the date of grant using a lattice-based option valuation model. The significant assumptions used in the valuation model are disclosed below. Expected volatilities are based on the historical volatility of Rio Tinto's stock returns under the UK and Australian listings and other factors. Historical data was used to estimate option exercise and employee termination rates within the valuation model. Under the Fixed Share Option Plan and the Performance Based Share Option Plan it is assumed that after options have vested, 20% of participants will exercise their options each year when the market price is at least 20% above the exercise price of the option. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate used in the valuation model is equal to the yield available on UK and Australian government bonds at the date of grant with a term equal to the expected term of the options.
Fixed Share Option Plans
The Rio Tinto Share Savings Plan is open to all employees. Employees who participate agree to save a fixed amount from monthly pay to a savings account for a term of between 2 and 5 years (depending on their location of employment). At the end of the savings term, the employees have a choice of using the money to buy shares in the relevant company, withdrawing the money, or a combination of both. The option to buy shares is based on a fixed exercise price which is equal to the market price of the relevant company's shares on the date of grant less a 20% discount.
The fair value of each award was estimated on the date of grant using a lattice-based option valuation model, including allowance for the exercise price being at a 20% discount to market price. The key assumptions used in the valuation are noted in the following table.
2004 | ||||||||||||||||||
Risk-free | Expected | Dividend | Turnover | Implied | ||||||||||||||
interest rate | volatility | yield | Rates | Lifetime | ||||||||||||||
% | % | % | % | years | ||||||||||||||
Rio Tinto plc | 4.7-4.8 | 32.0 | 2.3 | 10.0 | 2.2-5.4 | |||||||||||||
Rio Tinto Limited | 5.3-5.4 | 26.0 | 2.3 | 10.0 | 3.4-5.4 | |||||||||||||
2003 | 2002 | |||||||||||||||||
Risk-free | Expected | Dividend | Turnover | Implied | Risk-free | Expected | Dividend | Implied | ||||||||||
interest rate | volatility | yield | Rates | Lifetime | interest rate | volatility | yield | Lifetime | ||||||||||
% | % | % | % | years | % | % | % | years | ||||||||||
Rio Tinto plc | 4.3-4.6 | 30.0 | 2.6 | 10.0 | 2.2-5.6 | 4.4-4.5 | 31.8 | 4.5 | 2.2-5.6 | |||||||||
Rio Tinto Limited | 5.2-5.4 | 25.0 | 2.6 | 10.0 | 3.6-5.6 | 5.4 | 26.1 | 2.6 | 3.6-5.6 | |||||||||
A summary of the status of the companies fixed share option plans as at 31 December 2004, 2003 and 2002, and changes during the years ending on those dates is presented below:
Rio Tinto plc - Share Savings Plan | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Weighted | Weighted | Weighted | ||||||||||
average | average | average | ||||||||||
Number | exercise price | Number | exercise price | Number | exercise price | |||||||
£ | £ | £ | ||||||||||
Options outstanding at 1 January (a) | 1,995,504 | 8.63 | 2,079,845 | 8.14 | 2,010,403 | 7.74 | ||||||
Granted | 412,785 | 11.40 | 390,518 | 11.21 | 509,954 | 8.76 | ||||||
Forfeited | (121,112 | ) | 9.64 | - | - | - | - | |||||
Exercised | (527,641 | ) | 5.74 | (367,866 | ) | 8.47 | (278,134 | ) | 5.96 | |||
Cancellations (b) | (15,773 | ) | 10.09 | (182,067 | ) | 9.06 | (162,378 | ) | 8.85 | |||
Expired | (34,694 | ) | 8.41 | - | - | - | - | |||||
Options outstanding at 31 December | 1,709,069 | 10.11 | 1,920,430 | 8.61 | 2,079,845 | 8.14 | ||||||
Weighted-average grant-date fair value of options granted during the year (£): | 5.48 | 4.20 | 2.78 | |||||||||
(a) | The number of options outstanding as at 1st January 2004 includes the International SAR plan; prior disclosure figures excluded this plan. |
(b) | Prior to 2004, expiries and forfeitures were included in cancellations. |
Rio Tinto Limited - Share Savings Plan | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Weighted | Weighted | Weighted | ||||||||||
average | average | average | ||||||||||
Number | exercise price | Number | exercise price | Number | exercise price | |||||||
A$ | A$ | A$ | ||||||||||
Options outstanding at 1 January (a) | 2,415,421 | 26.71 | 2,246,174 | 26.59 | 1,380,826 | 27.86 | ||||||
Granted | 547,052 | 29.04 | 384,180 | 27.48 | 1,245,639 | 25.57 | ||||||
Forfeited | (254,478 | ) | 26.72 | - | - | - | - | |||||
Exercised | (27,009 | ) | 27.13 | (12,588 | ) | 27.67 | (2,130 | ) | 27.86 | |||
Cancellations (b) | - | - | (232,313 | ) | 26.76 | (378,161 | ) | 27.86 | ||||
Expired | - | - | - | - | - | - | ||||||
Options outstanding at 31 December | 2,680,986 | 27.18 | 2,385,453 | 26.71 | 2,246,174 | 26.59 | ||||||
Weighted-average grant date fair value of options granted during the year (A$): | 14.10 | 10.90 | 7.59 | |||||||||
(a) | The number of options outstanding as at 1st January 2004 includes the International SAR plan; previously this plan was excluded from the disclosure. |
(b) | Prior to 2004, expiries and forfeitures were included in cancellations. |
A-80
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting
Principles (continued)
Rio Tinto plc - Share Savings Plan | ||||||||||||
As at 31 December 2004: | ||||||||||||
Options outstanding | Options exercisable | |||||||||||
Weighted | Weighted | Weighted | Weighted | |||||||||
Range of exercise prices | average | average | average | average | ||||||||
Number | exercise price | contractual life | Number | exercise price | contractual life | |||||||
£ | years | £ | years | |||||||||
£7.11 - £10.00 | 917,888 | 9.09 | 1.5 | 2,133 | 7.11 | 0.1 | ||||||
£10.00 - £12.77 | 791,181 | 11.30 | 3.2 | 455 | 10.61 | 0.1 | ||||||
£7.11 - £12.77 | 1,709,069 | 10.11 | 2.3 | 2,588 | 7.73 | 0.1 | ||||||
At 31 December 2003 there were 5,263 (2002: 3,554) options exercisable with a weighted average exercise price of £7.97 (2002: £7.44).
Rio Tinto Limited - Share Savings Plan | ||||||||||||
As at 31 December 2004: | ||||||||||||
Options outstanding | Options exercisable | |||||||||||
Weighted | Weighted | Weighted | Weighted | |||||||||
Range of exercise prices | average | average | average | average | ||||||||
Number | exercise price | contractual life | Number | exercise price | contractual life | |||||||
A$ | years | A$ | years | |||||||||
A$25 - A$30 | 2,680,986 | 27.18 | 2.6 | - | - | - | ||||||
At 31 December 2003 and 31 December 2002 there were no options exercisable.
Performance Based Share Option Plan
Under its 1998 Executive Share Option Scheme and Share Option Plan, the Company grants selected executives and other key employees share option awards. For pre-2004 awards, vesting is contingent upon achieving increases in the Group's earnings per share above certain predetermined target levels over a three year performance period. There is an annual retest on a three year rolling basis until options fully vest or lapse at the end of the option period. This is a non-market condition under SFAS 123. As such, a best estimate of the service period (over which compensation cost is recognised) is made at the grant date and revised to reflect changes in the Group's earnings per share and market expectations for future earnings per share growth. For awards granted prior to 2004, the fair value is calculated assuming the performance conditions will be achieved. If such conditions are not met, no compensation cost is recognised and previously recognised compensation cost is then reversed.
For awards granted in 2004, vesting is contingent on the Group's Total Shareholder Return equalling or outperforming that of the HSBC Global Mining Index over a three year period. Vesting is based on a sliding scale with zero vesting for performance below the index up to full vesting for performance of 5%pa above the index. A single fixed base retest will be made five years after the date of grant. This "market condition" has been incorporated in the measurement of fair value for 2004 awards by modelling the correlation between Rio Tinto's TSR and that of the index. The relationship between Rio Tinto's TSR and the index was simulated many thousands of times to derive a distribution which, in conjunction with the lattice-based option valuation model, was used to determine the fair value of the options.
The Group has a policy of settling these awards by the issue of equity, although the directors at their discretion can offer a cash alternative.
The exercise price of each option, which has a 10-year life, is equal to the average market price of the Company's shares over a 5 working-day period prior to the date of grant. The fair value of each option grant was estimated on the date of grant using a lattice-based option valuation model. The key assumptions are noted in the following table.
2004 | ||||||||||||||||||
Risk-free | Expected | Dividend | Turnover | Implied | ||||||||||||||
interest rate | volatility | yield | Rates | Lifetime | ||||||||||||||
% | % | % | % | years | ||||||||||||||
Rio Tinto plc | 4.9 | 32.0 | 3.0 | 5.0 | 4.7 | |||||||||||||
Rio Tinto Limited | 5.7 | 26.0 | 2.8 | 5.0 | 5.0 | |||||||||||||
2003 | 2002 | ||||||||||||||||||
Risk-free | Expected | Dividend | Turnover | Implied | Risk-free | Expected | Dividend | Implied | |||||||||||
interest rate | volatility | yield | Rates | Lifetime | interest rate | volatility | yield | Lifetime | |||||||||||
% | % | % | % | years | % | % | % | years | |||||||||||
Rio Tinto plc | 4.3 | 30.0 | 3.1 | 5.0 | 5.3 | 5.2 | 30.8 | 2.8 | 10 | ||||||||||
Rio Tinto Limited | 5.3 | 25.0 | 3.1 | 5.0 | 5.8 | 6.5 | 25.9 | 2.8 | 10 | ||||||||||
A-81
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 Reconciliation to US Accounting Principles (continued)
A summary of the status of each company's performance-based share option plan as of 31 December 2004, 2003 and 2002, and changes during the years ending on those dates, is presented below:
Rio Tinto plc - Share Option Plan | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Weighted | Weighted | Weighted | ||||||||||
average | average | average | ||||||||||
Number | exercise price | Number | exercise price | Number | exercise price | |||||||
£ | £ | £ | ||||||||||
Options outstanding at 1 January | 7,662,925 | 11.93 | 7,186,254 | 11.35 | 5,785,625 | 9.97 | ||||||
Granted | 1,134,053 | 13.29 | 2,305,406 | 12.63 | 2,095,314 | 14.59 | ||||||
Exercised | (584,263 | ) | 8.69 | (1,009,307 | ) | 8.50 | (540,568 | ) | 8.16 | |||
Forfeited | (159,423 | ) | 13.09 | (797,927 | ) | 13.05 | (154,117 | ) | 14.72 | |||
Expired | - | - | (21,501 | ) | 12.98 | - | - | |||||
Options outstanding at 31 December | 8,053,292 | 12.33 | 7,662,925 | 11.93 | 7,186,254 | 11.35 | ||||||
Weighted-average fair value of options granted during the year (£): | 2.81 | 2.97 | 4.99 | |||||||||
Rio Tinto Limited - Share Option Plan | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Weighted | Weighted | Weighted | ||||||||||
average | average | average | ||||||||||
Number | exercise price | Number | exercise price | Number | exercise price | |||||||
A$ | A$ | A$ | ||||||||||
Options outstanding at 1 January | 3,602,137 | 33.58 | 2,439,330 | 33.42 | 1,694,730 | 28.09 | ||||||
Granted | 796,683 | 34.41 | 1,242,475 | 33.34 | 1,003,849 | 39.87 | ||||||
Exercised | (196,608 | ) | 22.25 | (58,975 | ) | 22.04 | (208,528 | ) | 20.15 | |||
Forfeited | (128,613 | ) | 34.91 | (18,197 | ) | 33.76 | (50,721 | ) | 37.65 | |||
Expired | - | - | (2,496 | ) | 33.01 | - | - | |||||
Options outstanding at 31 December | 4,073,599 | 34.24 | 3,602,137 | 33.58 | 2,439,330 | 33.42 | ||||||
Weighted-average fair value of options granted during the year A$ | 6.17 | 6.68 | 13.71 | |||||||||
Rio Tinto plc - Share Option Plan | ||||||||||||
As at 31 December 2004: | ||||||||||||
Options outstanding | Options exercisable | |||||||||||
Weighted | Weighted | Weighted | Weighted | |||||||||
Range of exercise prices | average | average | average | average | ||||||||
Number | exercise price | contractual life | Number | exercise price | contractual life | |||||||
£ | years | £ | years | |||||||||
£8 - £10 | 1,742,875 | 8.95 | 4.6 | 1,308,908 | 8.72 | 4.4 | ||||||
£12 - £15 | 6,310,417 | 13.27 | 7.6 | 1,626,166 | 12.66 | 6.2 | ||||||
£8 - £15 | 8,053,292 | 12.33 | 6.9 | 2,935,074 | 10.90 | 5.4 | ||||||
At 31 December 2003 there were 2.3 million (2002: 1.9 million) options exercisable with a weighted average exercise price of £8.89 (2002: £8.13)
Rio Tinto Limited - Share Option Plan | ||||||||||||
As at 31 December 2004: | ||||||||||||
Options outstanding | Options exercisable | |||||||||||
Weighted | Weighted | Weighted | Weighted | |||||||||
Range of exercise prices | average | average | average | average | ||||||||
Number | exercise price | contractual life | Number | exercise price | contractual life | |||||||
A$ | years | A$ | years | |||||||||
A$20 - A$25 | 309,660 | 23.67 | 4.8 | 227,337 | 23.52 | 4.6 | ||||||
A$30 - A$40 | 3,763,939 | 35.11 | 7.7 | 890,338 | 33.01 | 6.2 | ||||||
A$20 - A$40 | 4,073,599 | 34.24 | 7.4 | 1,117,675 | 31.08 | 5.9 | ||||||
At 31 December 2003 there were 0.5 million (2002: 0.3 million) options exercisable with a weighted average exercise price of A$23.12 (2002: A$22.18)
A-82
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 | Reconciliation to US Accounting Principles (continued) |
Rio Tinto plc - 1985 Executive Share Option Scheme | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Weighted | Weighted | Weighted | ||||||||||
average | average | average | ||||||||||
Number | exercise price | Number | exercise price | Number | exercise price | |||||||
£ | £ | £ | ||||||||||
Options outstanding at 1 January | 23,000 | 8.61 | 62,000 | 8.49 | 130,786 | 8.09 | ||||||
Exercised | (23,000 | ) | 8.61 | (39,000 | ) | 8.41 | (68,786 | ) | 7.73 | |||
Options outstanding at 31 December | - | - | 23,000 | 8.61 | 62,000 | 8.49 | ||||||
Number of options exercisable at year end | - | 23,000 | 62,000 | |||||||||
Weighted-average exercise price of options exercisable at year end |
8.61 | 8.49 |
As at 31 December 2004, Rio Tinto plc has no options outstanding under the 1985 Executive Share Option Scheme.
Employee Stock Purchase Plan
The Rio Tinto Share Ownership Plan
is a UK Inland Revenue approved share incentive plan which was approved by shareholders
at the 2001 annual general
meeting for Rio Tinto plc and introduced in 2002. Under this plan, eligible employees
may save up to £125 per month, which the plan administrator invests in Rio Tinto plc shares ("Partnership" shares). Rio Tinto matches these purchases on a one for one basis ("Matching" shares). In addition, eligible employees can receive an annual award of Rio Tinto shares up to a maximum of five per cent of salary, subject to a cap of £3,000 ("Free" Shares).
The fair values of awards of Matching and Free Shares made by Rio Tinto are taken to be the market value of the shares on the date of purchase. The minimum service requirement for employees to benefit from the Matching Shares is one year after they are awarded; there is no minimum service requirement to be able to benefit from the award of Free Shares. For accounting purposes, both Matching and Free Shares are assumed to vest immediately. These awards are settled in equity.
The compensation costs for stocks granted during 2002, 2003 and 2004 were US$0.3 million, US$1.4 million and US$1.6 million respectively.
A summary of the shares awarded under the Company's employee stock purchase plan during the years 2004, 2003 and 2002 is presented below:
Rio Tinto Share Ownership Plan | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Number
of shares awarded |
Weighted average share price |
Number
of shares awarded |
Weighted average share price |
Number
of shares awarded |
Weighted average share price |
|||||||
£ | £ | £ | ||||||||||
Matching Shares | 18,452 | 13.93 | 19,385 | 12.81 | 16,937 | 12.30 | ||||||
Free Shares | 49,182 | 12.53 | 50,942 | 11.96 | - | - | ||||||
Total | 67,634 | 12.91 | 70,327 | 12.19 | 16,937 | 12.30 | ||||||
Performance Based Stock Plan
The Mining Companies Comparative
Plan is a long-term performance share incentive plan which was approved by shareholders
at the 1998 annual general meeting. Under this plan, eligible senior executives
are annually awarded a conditional right to receive shares. These rights only
vest if the performance conditions approved by the committee are satisfied. The
current performance condition compares Rio Tinto's total shareholder return against
a comparator group of 15 other international mining companies over a four year
period. Vesting is based on a sliding scale from zero vesting for TSR performance
below that of the company ranked 11th in the comparator group, up to 100% vesting
for TSR performance above that of the company ranked 5th. (A different scale
applies to Directors and Product Group Chief Executives.) Awards are released
to participants in the form of shares all an equivalent amount in cash.
A summary of the status of each company's performance-based stock plan as of 31 December 2004, 2003 and 2002, and changes during the years ending on those dates is presented below:
Rio Tinto plc - Mining Companies Comparative Plan | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Weighted | Weighted | Weighted | ||||||||||
average | average | average | ||||||||||
Number | price at award | Number | price at award | Number | price at award | |||||||
£ | £ | £ | ||||||||||
Options outstanding at 1 January | 1,198,273 | 11.55 | 1,312,121 | 10.21 | 1,220,500 | 9.40 | ||||||
Awarded | 910,170 | 12.90 | 349,258 | 12.52 | 378,122 | 12.40 | ||||||
Forfeited | (41,805 | ) | 12.55 | (113,985 | ) | 11.86 | (22,326 | ) | 12.40 | |||
Vested | (170,184 | ) | 10.26 | (349,121 | ) | 7.39 | (264,175 | ) | 9.39 | |||
Lapsed | (102,140 | ) | 10.26 | - | - | - | - | |||||
Options outstanding at 31 December | 1,794,314 | 12.41 | 1,198,273 | 11.55 | 1,312,121 | 10.21 | ||||||
The compensation costs for stocks granted during 2004, 2003 and 2002 were £11.7 million, £4.4 million and £4.7 million respectively.
A-83
RIO TINTO PLC - RIO TINTO LIMITED
NOTES TO FINANCIAL STATEMENTS - (continued)
42 | Reconciliation to US Accounting Principles (continued) |
Rio Tinto Limited - Mining Companies Comparative Plan | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Weighted | Weighted | Weighted | ||||||||||
average | average | average | ||||||||||
Number | price at award | Number | price at award | Number | price at award | |||||||
A$ | A$ | A$ | ||||||||||
Options outstanding at 1 January | 711,683 | 30.07 | 774,606 | 25.56 | 804,920 | 22.22 | ||||||
Awarded | 603,686 | 32.88 | 183,997 | 34.95 | 182,060 | 33.68 | ||||||
Forfeited | (25,270 | ) | 32.88 | (3,612 | ) | 34.95 | (5,002 | ) | 33.38 | |||
Vested | (103,448 | ) | 25.10 | (243,308 | ) | 19.32 | (207,372 | ) | 19.55 | |||
Lapsed | (62,094 | ) | 25.10 | - | - | - | - | |||||
Options outstanding at 31 December | 1,124,557 | 32.25 | 711,683 | 30.07 | 774,606 | 25.56 | ||||||
The compensation costs for stocks granted during 2004, 2003 and 2002 were A$19.8 million, A$6.4 million and A$6.1 million respectively.
The following supplements segmental information provided elsewhere in this report to provide additional information required under US GAAP.
Property, plant and equipment by location
Rio Tinto Group | ||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||
% | % | % | US$m | US$m | US$m | |||||||
North America (a) | 35.1 | 36.2 | 42.7 | 5,825 | 5,504 | 5,204 | ||||||
Australia and New Zealand | 59.7 | 54.6 | 48.5 | 9,905 | 8,290 | 5,912 | ||||||
South America | 0.3 | 1.1 | 0.9 | 53 | 168 | 112 | ||||||
Africa | 3.4 | 5.6 | 5.0 | 565 | 851 | 608 | ||||||
Indonesia | 0.1 | 0.2 | 0.4 | 18 | 28 | 50 | ||||||
Europe and other countries | 1.4 | 2.3 | 2.5 | 239 | 355 | 297 | ||||||
100.0 | 100.0 | 100.0 | 16,605 | 15,196 | 12,183 | |||||||
(a) | North America includes US$3,512 million (2003: US$3,335 million, 2002: US$3,287 million) relating to the United States of America. |
Tax charge by product group (UK GAAP)
Rio Tinto Group | ||||||
2004 | 2003 | 2002 | ||||
US$m | US$m | US$m | ||||
Iron Ore | (267 | ) | (226 | ) | (215 | ) |
Energy | (151 | ) | (96 | ) | (197 | ) |
Industrial Minerals | (88 | ) | (93 | ) | (200 | ) |
Aluminium | (164 | ) | (106 | ) | (107 | ) |
Copper | (334 | ) | (223 | ) | (126 | ) |
Diamonds | (119 | ) | (76 | ) | (33 | ) |
Other operations | (7 | ) | (13 | ) | (16 | ) |
Tax on exploration | 14 | 17 | 18 | |||
Other items, including tax relief on asset write downs | 275 | 249 | 168 | |||
(841 | ) | (567 | ) | (708 | ) | |
Covenants
Of the Rio Tinto Group's medium and long term borrowings of US$3.3 billion, some US$0.7 billion relates to the Group's share of non-recourse borrowings which are the subject of various financial and general covenants with which the respective borrowers are in compliance.
Accounting for derivative instruments and hedging activities
During 2004, the following movements, before tax and minorities, took place in Other Comprehensive Income ('OCI') and earnings under US GAAP in relation to derivatives:
Derivative | Recorded in | |||||
assets less | Recorded in | retained | ||||
liabilities | OCI | earnings | ||||
US$m | US$m | US$m | ||||
Net derivative assets on balance sheet at 31 December 2003 | 267 | 88 | 179 | |||
Less:
net derivative assets marked to market through OCI at 1 January 2004
relating to contracts
maturing in 2004 (a) |
(38 | ) | (38 | ) | - | |
Less:
net derivative assets marked to market through retained earnings at 1
January 2004 relating to contracts maturing in 2004 (b) |
(95 | ) | - | (95 | ) | |
Add: mark to market
of net derivative assets designated as SFAS 133 cash
flow hedges at 31 December 2004 (c) |
18 | 18 | - | |||
Add: mark to market
of net derivative assets not designated as hedges under SFAS
133 at 31 December 2004 (d) |
8 | - | 8 | |||
On balance sheet at 31 December 2004 | 160 | 68 | 92 | |||
(a) | During 2004, net gains of US$38 million relating to derivatives designated as cash flow hedges under SFAS 133 were transferred from accumulated OCI to US GAAP earnings on maturity of the contracts. |
(b) | During 2004, accrued gains of US$95 million relating to derivatives that were not designated as hedges under SFAS 133 were realised on maturity of the contracts. |
(c) | The fair value of net derivative assets designated as cash flow hedges under SFAS 133 increased by US$18 million during 2004 resulting in a closing asset balance related to cash flow hedging activities of US$68 million in OCI. These cash flow hedges hedge the Group's exposure to the US dollar in relation to future trading transactions. The Group expects to reclassify US$13 million of this amount as increases in earnings over the next twelve months as these contracts and the transactions which they hedge mature. As at 31 December 2004, the Group had US$144 million of cash flow hedge derivative assets and US$76 million of cash flow hedge derivative liabilities. The cash flow hedges extend to 2010. |
(d) | Certain of the Group's derivative contracts do not qualify for hedge accounting under SFAS 133, principally because the hedge is not located in the entity with the exposure. The fair value of these net derivative assets increased by US$8 million during 2004. As at 31 December 2004, the Group had US$152 million of assets relating to derivatives which do not qualify for hedge accounting under SFAS 133, and US$60 million of liabilities. |
A-84
RIO TINTO PLC - RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7
Reserves have been prepared in accordance with Industry Guide 7 under the United States Securities Act of 1933 and the following definitions:
An Ore Reserve means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserves determination. To establish this, studies appropriate to the type of mineral deposit involved have been carried out to estimate the quantity, grade and value of the ore mineral(s) present. In addition, technical studies have been completed to determine realistic assumptions for the extraction of the minerals including estimates of mining, processing, economic, marketing, legal, environmental, social and governmental factors. The degree of these studies is sufficient to demonstrate the technical and economic feasibility of the project and depends on whether or not the project is an extension of an existing project or operation. The estimates of minerals to be produced include allowances for ore losses and the treatment of unmineralised materials which may occur as part of the mining and processing activities. Ore Reserves are sub-divided in order of increasing confidence into Probable Ore Reserves and Proven Ore Reserves as defined below.
The term "economically", as used in the definition of reserves, implies that profitable extraction or production under defined investment assumptions has been established through the creation of a mining plan, processing plan and cash flow model. The assumptions made must be reasonable, including costs and operating conditions that will prevail during the life of the project.
Reserves are determined using current prices in accordance with Industry Guide 7. For commodities for which the price is determined on public exchanges, current prices have been determined by using the average spot price for the three years before the date of the reserve estimate. For commodities for which the price is not determined on public exchanges, the average realised price for the previous three years has been used. To the extent that commodities are traded under contract, the contract prices in existence at the date of reserve determination have been used, for the contracted amounts.
The term "legally", as used in the definition of reserves, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for reserves to exist, there is reasonable assurance of the issuance of these permits or resolution of legal issues. Reasonable assurance means that, based on applicable laws and regulations, the issuance of permits or resolution of legal issues necessary for mining and processing at a particular deposit will be accomplished in the ordinary course and in a timeframe consistent with the Companys current mine plans.
The term "proven reserves" means reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established. Proven reserves represent that part of an orebody for which there exists the highest level of confidence in data regarding its geology, physical characteristics, chemical composition and probable processing requirements.
The term "probable reserves" means reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. This means that probable reserves generally have a wider drill hole spacing than for proven reserves.
The amount of proven and probable reserves shown below does not necessarily represent the amount of material currently scheduled for extraction, because the amount scheduled for extraction may be derived from a life of mine plan predicated on prices and other assumptions which are different to those used in the life of mine plan prepared in accordance with Industry Guide 7.
The estimated ore reserve figures in the following tables are as of 31 December 2004. Metric units are used throughout. The figures used to calculate Rio Tinto's share of reserves are often more precise than the rounded numbers shown in the tables, hence small differences might result if the calculations are repeated using the tabulated figures. Commodity price information is given in footnote (a).
A-85
RIO TINTO PLC - RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7 CONTINUED
Type of mine (b) |
Total ore reserves at end 2004 | Rio Tinto share | ||||||||||||
Tonnage | Grade | Interest | Recoverable | |||||||||||
% | mineral | |||||||||||||
BAUXITE (d) | millions | millions | ||||||||||||
Reserves at operating mine | of tonnes | %Al2O3 | of tonnes | |||||||||||
Weipa (Australia) | O/P | 1,259 | 53.7 | 100.0 | 1,259 | |||||||||
Marketable | ||||||||||||||
product | ||||||||||||||
BORATES (e) | millions | millions | ||||||||||||
Reserves at operating mines | of tonnes | of tonnes | ||||||||||||
Boron (US) | ||||||||||||||
- open pit | O/P | 23.1 | 100.0 | 23.1 | ||||||||||
- stockpiles (q) | S/P | 2.1 | 100.0 | 2.1 | ||||||||||
Total | 25.2 | |||||||||||||
Marketable | ||||||||||||||
COAL (f) | Coal type | reserves | Marketable coal quality | |||||||||||
(g) | Total | |||||||||||||
(h) | (h) | Marketable | ||||||||||||
reserves | ||||||||||||||
Reserves at operating mines | millions | Calorific | Sulphur | millions | ||||||||||
of tonnes | value | content | of tonnes | |||||||||||
MJ/kg | % | |||||||||||||
Coal & Allied Industries | ||||||||||||||
Bengalla (Australia) | O/C | SC | 161 | 28.30 | 0.50 | 30.3 | 49 | |||||||
Hunter Valley Operations (Australia) | O/C | SC + MC | 336 | 28.94 | 0.57 | 75.7 | 254 | |||||||
Mount Thorley Operations (Australia) | O/C | SC + MC | 24 | 28.20 | 0.53 | 60.6 | 14 | |||||||
Warkworth (Australia) | O/C | SC + MC | 246 | 29.35 | 0.53 | 42.1 | 104 | |||||||
Sub-total | 421 | |||||||||||||
Kennecott Energy | ||||||||||||||
Antelope (US) | O/C | SC | 249 | 20.59 | 0.22 | 100.0 | 249 | |||||||
Colowyo (US) (i) | O/C | SC | 24 | 24.31 | 0.40 | 100.0 | 24 | |||||||
Cordero Rojo (US) | O/C | SC | 365 | 19.59 | 0.30 | 100.0 | 365 | |||||||
Decker (US) (j) | O/C | SC | 25 | 22.10 | 0.37 | 50.0 | 13 | |||||||
Jacobs Ranch (US) | O/C | SC | 500 | 20.35 | 0.44 | 100.0 | 500 | |||||||
Spring Creek (US) | O/C | SC | 225 | 21.75 | 0.33 | 100.0 | 225 | |||||||
Sub-total | 1,375 | |||||||||||||
Rio Tinto Coal Australia | ||||||||||||||
Blair Athol (Australia) | O/C | SC | 61 | 27.95 | 0.32 | 71.2 | 43 | |||||||
Hail Creek (Australia) (k) | O/C | MC | 190 | 32.20 | 0.35 | 82.0 | 156 | |||||||
Kestrel (Australia) | U/G | SC + MC | 120 | 32.20 | 0.65 | 80.0 | 96 | |||||||
Tarong-Meandu (Australia) | O/C | SC | 93 | 21.05 | 0.30 | 100.0 | 93 | |||||||
Sub-total | 388 | |||||||||||||
Total reserves at operating mines | 2,184 | |||||||||||||
Undeveloped reserves (l) | ||||||||||||||
Coal & Allied Industries | ||||||||||||||
Mount Pleasant (Australia) | O/C | SC | 350 | 26.73 | 0.51 | 75.7 | 265 | |||||||
Rio Tinto Coal Australia | ||||||||||||||
Clermont (Australia) | O/C | SC | 189 | 27.90 | 0.33 | 50.1 | 95 | |||||||
SW Yarraman (Australia) | O/C | SC | 41 | 21.05 | 0.30 | 100.0 | 41 | |||||||
Tarong-Kunioon (Australia) | O/C | SC | 163 | 21.05 | 0.30 | 100.0 | 163 | |||||||
Sub-total | 299 | |||||||||||||
Total undeveloped reserves | 564 | |||||||||||||
See Notes on page A-94 and A-95 |
A-86
RIO TINTO PLC - RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7 CONTINUED
Type of mine (b) |
Total ore reserves at end 2004 | Average | Rio Tinto share | |||||||||||
mill | ||||||||||||||
Tonnage | Grade | recovery | Interest | Recoverable | ||||||||||
% | % | metal | ||||||||||||
COPPER | millions | millions | ||||||||||||
Reserves at operating mines | of tonnes | %Cu | of tonnes | |||||||||||
Bingham Canyon (US) (m) | ||||||||||||||
- open pit | O/P | 631 | 0.58 | 87 | 100.0 | 3.171 | ||||||||
- stockpiles (p) | S/P | 27 | 0.39 | 87 | 100.0 | 0.090 | ||||||||
Escondida (Chile) (n) | ||||||||||||||
- sulphide (open pit) | O/P | 1,163 | 1.23 | 84 | 30.0 | 3.590 | ||||||||
- sulphide leach (open pit) | O/P | 630 | 0.54 | 36 | 30.0 | 0.369 | ||||||||
- oxide (open pit) | O/P | 39.1 | 0.69 | 81 | 30.0 | 0.065 | ||||||||
- sulphide (stockpiles (p)) | S/P | 20.1 | 1.18 | 84 | 30.0 | 0.059 | ||||||||
- sulphide leach (stockpiles (p)) | S/P | 161 | 0.68 | 36 | 30.0 | 0.118 | ||||||||
- oxide (stockpiles (p)) | S/P | 118 | 0.70 | 81 | 30.0 | 0.198 | ||||||||
Escondida Norte (Chile) (n) | ||||||||||||||
- sulphide | O/P | 535 | 1.41 | 88 | 30.0 | 1.994 | ||||||||
- sulphide leach | O/P | 159 | 0.63 | 29 | 30.0 | 0.087 | ||||||||
- oxide | O/P | 123 | 0.78 | 54 | 30.0 | 0.156 | ||||||||
Grasberg (Indonesia) | O/P + U/G | 2,769 | 1.09 | 88 | (o) | 7.432 | ||||||||
Northparkes (Australia) | ||||||||||||||
- open pit | O/P | 1.8 | 0.60 | 78 | 80.0 | 0.007 | ||||||||
- stockpiles (p) | S/P | 2.8 | 0.65 | 71 | 80.0 | 0.010 | ||||||||
- underground | U/G | 47.2 | 1.17 | 89 | 80.0 | 0.392 | ||||||||
Palabora (South Africa) | ||||||||||||||
- underground block cave | U/G | 201 | 0.68 | 88 | 49.2 | 0.589 | ||||||||
Total | 18.327 | |||||||||||||
Recoverable | ||||||||||||||
diamonds | ||||||||||||||
DIAMONDS (d) | millions | carats | millions | |||||||||||
Reserves at operating mines | of tonnes | per tonne | of carats | |||||||||||
Argyle (Australia) (q) | ||||||||||||||
- AK1 pipe (open pit) | O/P + U/G | 35.0 | 2.9 | 100.0 | 100.4 | |||||||||
- AK1 pipe (stockpiles (p)) | S/P | 1.5 | 2.7 | 100.0 | 4.1 | |||||||||
Diavik (Canada) (r) | O/P + U/G | 29.8 | 3.2 | 60.0 | 57.7 | |||||||||
Murowa (Zimbabwe) | O/P | 23.0 | 0.7 | 77.8 | 12.3 | |||||||||
Total | 174.5 | |||||||||||||
Recoverable | ||||||||||||||
metal | ||||||||||||||
GOLD | millions | grammes | millions of | |||||||||||
Reserves at operating mines | of tonnes | per tonne | ounces | |||||||||||
Bingham Canyon (US) (m) | ||||||||||||||
- open pit | O/P | 631 | 0.32 | 64 | 100.0 | 4.224 | ||||||||
- stockpiles (p) | S/P | 27 | 0.22 | 64 | 100.0 | 0.121 | ||||||||
Cortez/Pipeline (US) (s) | ||||||||||||||
- open pit | O/P | 291 | 1.55 | 79 | 40.0 | 4.555 | ||||||||
- stockpiles (p) | S/P | 2 | 5.04 | 78 | 40.0 | 0.077 | ||||||||
Grasberg (Indonesia) | O/P + U/G | 2,769 | 0.97 | 72 | (o) | 15.208 | ||||||||
Greens Creek (US) | U/G | 6.0 | 3.89 | 68 | 70.3 | 0.359 | ||||||||
Kelian (Indonesia) (t) | O/P | - | - | - | ||||||||||
Lihir (PNG) (u) | ||||||||||||||
- open pit | O/P | 149 | 3.69 | 90 | 14.5 | 2.305 | ||||||||
- stockpiles (p) | S/P | 39 | 2.66 | 90 | 14.5 | 0.430 | ||||||||
Northparkes (Australia) | ||||||||||||||
- open pit | O/P | 1.8 | 0.60 | 57 | 80.0 | 0.016 | ||||||||
- stockpiles (p) | S/P | 2.8 | 0.48 | 58 | 80.0 | 0.020 | ||||||||
- underground | U/G | 47.2 | 0.46 | 74 | 80.0 | 0.416 | ||||||||
Total | 27.731 | |||||||||||||
See Notes on page A-94 and A-95 |
A-87
RIO TINTO PLC - RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7 CONTINUED
Type of mine (b) |
Total ore reserves at end 2004 | Rio Tinto share | ||||||||||||
Average | ||||||||||||||
mill | ||||||||||||||
Tonnage | Grade | recovery | Interest | Marketable | ||||||||||
% | % | product | ||||||||||||
IRON ORE (d) | ||||||||||||||
Reserves at operating mines | millions | |||||||||||||
and mines under construction | of tonnes | % Fe | ||||||||||||
Channar (Australia) | ||||||||||||||
- Brockman Ore | O/P | 120 | 63.5 | 60.0 | 72 | |||||||||
Corumbá (Brazil) | O/P | 217 | 67.2 | 100.0 | 217 | |||||||||
Eastern Range (Australia) | ||||||||||||||
- Brockman Ore | O/P | 113 | 62.9 | 54.0 | 61 | |||||||||
Hamersley (Australia) | ||||||||||||||
- Brockman 2 (Brockman Ore) | O/P | 24 | 62.5 | 100.0 | 24 | |||||||||
- Marandoo (Marra Mamba Ore) | O/P | 76 | 62.4 | 100.0 | 76 | |||||||||
- Mt Tom Price (Brockman Ore) | ||||||||||||||
- open pit | O/P | 154 | 64.6 | 100.0 | 154 | |||||||||
- stockpiles (p) | S/P | 14 | 64.5 | 100.0 | 14 | |||||||||
- Paraburdoo (Brockman Ore) | O/P | 23 | 63.8 | 100.0 | 23 | |||||||||
- Paraburdoo (Marra Mamba Ore) | O/P | 1 | 63.1 | 100.0 | 1 | |||||||||
- Nammuldi (Marra Mamba Ore) (v) | O/P | 39 | 61.4 | 100.0 | 39 | |||||||||
- Yandicoogina (w) | ||||||||||||||
- open pit | O/P | 244 | 59.7 | 100.0 | 244 | |||||||||
- stockpiles (p) | S/P | 4 | 58.5 | 100.0 | 4 | |||||||||
Iron Ore Company of Canada | ||||||||||||||
(Canada) (x) | O/P | 443 | 65.0 | 58.7 | 260 | |||||||||
Robe River (Australia) | ||||||||||||||
- Pannawonica (Pisolite Ore) | ||||||||||||||
- open pit | O/P | 158 | 57.1 | 53.0 | 84 | |||||||||
- stockpiles (p) | S/P | 14 | 57.0 | 53.0 | 7 | |||||||||
- West Angelas (Marra Mamba Ore) | ||||||||||||||
- open pit | O/P | 417 | 62.2 | 53.0 | 221 | |||||||||
- stockpiles (p) | S/P | 1 | 59.7 | 53.0 | 1 | |||||||||
Total | 1,503 | |||||||||||||
Recoverable | ||||||||||||||
metal | ||||||||||||||
LEAD | millions | millions | ||||||||||||
Reserves at operating mines | of tonnes | %Pb | of tonnes | |||||||||||
Greens Creek (US) | U/G | 6.0 | 4.04 | 66 | 70.3 | 0.113 | ||||||||
MOLYBDENUM | millions | millions | ||||||||||||
Reserves at operating mine | of tonnes | %Mo | of tonnes | |||||||||||
Bingham Canyon (US) (m) | ||||||||||||||
- open pit | O/P | 631 | 0.039 | 66 | 100.0 | 0.163 | ||||||||
- stockpiles (p) | S/P | 27 | 0.034 | 66 | 100.0 | 0.006 | ||||||||
Total | 0.169 | |||||||||||||
SILVER | millions | grammes | millions | |||||||||||
Reserves at operating mines | of tonnes | per tonne | of ounces | |||||||||||
Bingham Canyon (US) (m) | ||||||||||||||
- open pit | O/P | 631 | 2.68 | 78 | 100.0 | 42.190 | ||||||||
- stockpiles (p) | S/P | 27 | 1.92 | 78 | 100.0 | 1.272 | ||||||||
Grasberg (Indonesia) | O/P + U/G | 2,769 | 3.84 | 66 | (o) | 64.080 | ||||||||
Greens Creek (US) | U/G | 6.0 | 528 | 74 | 70.3 | 53.019 | ||||||||
Total | 160.562 | |||||||||||||
Marketable | ||||||||||||||
product | ||||||||||||||
TALC (e) | millions | millions | ||||||||||||
Reserves at operating mines | of tonnes | of tonnes | ||||||||||||
Luzenac Group | O/P + U/G | 50.3 | 99.9 | 50.2 | ||||||||||
(Europe/North America/Australia) | ||||||||||||||
See Notes on page A-94 and A-95 |
A-88
RIO TINTO PLC – RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7 CONTINUED
Type of | Total ore reserves at | Rio Tinto share | |||||||||||
mine | end 2004 | Average | |||||||||||
(b) | mill | ||||||||||||
Tonnage | Grade | recovery | Interest | Marketable | |||||||||
% | % | product | |||||||||||
TITANIUM DIOXIDE FEEDSTOCK (e) | millions | millions | |||||||||||
Reserves at operating mines | of tonnes | of tonnes | |||||||||||
Rio Tinto Iron & Titanium (y) | O/P + D/O | 75.3 | 75.3 | ||||||||||
(Canada/South Africa) | |||||||||||||
Recoverable | |||||||||||||
metal | |||||||||||||
URANIUM | millions | millions | |||||||||||
Reserves at operating mines | of tonnes | %U308 | of tonnes | ||||||||||
Energy Resources of Australia (Australia) | |||||||||||||
- Ranger #3 open pit | O/P | 11.7 | 0.26 | 90 | 68.4 | 0.019 | |||||||
- Ranger #3 stockpiled ore | S/P | 6.3 | 0.20 | 88 | 68.4 | 0.008 | |||||||
Rössing (Namibia) | |||||||||||||
- open pit | O/P | 21.2 | 0.039 | 85 | 68.6 | 0.005 | |||||||
- stockpiles (p) | 2.6 | 0.042 | 85 | 68.6 | 0.001 | ||||||||
Total | 0.032 | ||||||||||||
millions | millions | ||||||||||||
Undeveloped reserves (l) | of tonnes | %U308 | of tonnes | ||||||||||
Energy Resources of Australia (Australia) | |||||||||||||
- Jabiluka | U/G | 13.8 | 0.51 | 94 | 68.4 | 0.045 | |||||||
ZINC | millions | millions | |||||||||||
Reserves at operating mines | of tonnes | %Zn | of tonnes | ||||||||||
Greens Creek (US) | U/G | 6.0 | 10.2 | 78 | 70.3 | 0.333 | |||||||
See Notes on page A-94 and A-95 |
A-89
RIO TINTO PLC – RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7 CONTINUED
Type of | Proved ore reserves at end 2004 | Probable ore reserves at end 2004 | ||||||||||||
mine | ||||||||||||||
(b) | Drill hole | Drill hole | ||||||||||||
Tonnage | Grade | spacing (c) | Tonnage | Grade | spacing (c) | |||||||||
BAUXITE (d) | millions | millions | ||||||||||||
Reserves at operating mine | of tonnes | %Al2O3 | of tonnes | %Al2O3 | ||||||||||
Weipa (Australia) | O/P | 144 | 54.3 | 76 | m | 1,115 | 53.6 | Max 800m x 400m | ||||||
BORATES (e) | millions | millions | ||||||||||||
Reserves at operating mines | of tonnes | of tonnes | ||||||||||||
Boron (US) | ||||||||||||||
- open pit | O/P | 22.2 | 61 | m | 0.9 | 61m | ||||||||
- stockpiles (q) | S/P | 0.1 | 1.9 | |||||||||||
COAL (f) | Recoverable | % Yield to | ||||||||||||
reserves | give | Proved | Probable | |||||||||||
total | marketable | Drill hole | Drill hole | |||||||||||
reserves | spacing (c) | spacing (c) | ||||||||||||
Reserves at operating mines | millions | millions | millions | |||||||||||
of tonnes | of tonnes | of tonnes | ||||||||||||
Coal & Allied Industries | ||||||||||||||
Bengalla (Australia) | O/C | 197 | 81 | 98 | 50m to 350m | 62 | Four holes/km2 | |||||||
Hunter Valley Operations (Australia) | O/C | 491 | 68 | 262 | 300m | 74 | 500m | |||||||
Mount Thorley Operations (Australia) | O/C | 37 | 65 | 24 | 125m | |||||||||
Warkworth (Australia) | O/C | 386 | 64 | 149 | 450m | 97 | Max 1000m | |||||||
Kennecott Energy | ||||||||||||||
Antelope (US) | O/C | 249 | 100 | 249 | Max 457m | |||||||||
Colowyo (US) (i) | O/C | 24 | 100 | 24 | Max 229m | |||||||||
Cordero Rojo (US) | O/C | 365 | 100 | 365 | Max 457m | |||||||||
Decker (US) (j) | O/C | 25 | 100 | 25 | Max 457m | |||||||||
Jacobs Ranch (US) | O/C | 500 | 100 | 496 | Max 457m | 4 | Max 760m | |||||||
Spring Creek (US) | O/C | 225 | 100 | 225 | Max 457m | |||||||||
Rio Tinto Coal Australia | ||||||||||||||
Blair Athol (Australia) | O/C | 62 | 98 | 60 | 150m | 1 | 150m | |||||||
Hail Creek (Australia) (k) | O/C | 301 | 63 | 111 | 300m | 80 | 400m | |||||||
Kestrel (Australia) | U/G | 149 | 80 | 57 | 500m | 63 | 1000m | |||||||
Tarong-Meandu (Australia) | O/C | 136 | 68 | 86 | 200m | 7 | 400m | |||||||
Undeveloped reserves (l) | ||||||||||||||
Coal & Allied Industries | ||||||||||||||
Mount Pleasant (Australia) | O/C | 459 | 76 | 350 | 125m to 500m | |||||||||
Rio Tinto Coal Australia | ||||||||||||||
Clermont (Australia) | O/C | 197 | 96 | 163 | 220m | 26 | 150m to 300m | |||||||
SW Yarraman (Australia) | O/C | 54 | 76 | 41 | 450m | |||||||||
Tarong-Kunioon (Australia) | O/C | 257 | 63 | 163 | 400m | |||||||||
See Notes on page A-94 and A-95 |
A-90
RIO TINTO PLC – RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7 CONTINUED
Type of | Proved ore reserves at end 2004 | Probable ore reserves at end 2004 | ||||||||||||
mine | ||||||||||||||
(b) | Drill hole | Drill hole | ||||||||||||
Tonnage | Grade | spacing (c) | Tonnage | Grade | spacing (c) | |||||||||
COPPER | millions | millions | ||||||||||||
Reserves at operating mines | of tonnes | %Cu | of tonnes | %Cu | ||||||||||
Bingham Canyon (US) (m) | ||||||||||||||
- open pit | O/P | 34.8 | 0.63 | Max 25m | 596 | 0.57 | Max 215m | |||||||
- stockpiles (p) | S/P | 1.4 | 0.40 | 25 | 0.39 | |||||||||
Escondida (Chile) (n) | ||||||||||||||
- sulphide (open pit) | O/P | 594 | 1.40 | } | 569 | 1.05 | } | |||||||
- sulphide leach (open pit) | O/P | 251 | 0.53 | 55m to 60m | 379 | 0.54 | 60m to 110m | |||||||
- oxide (open pit) | O/P | 19.6 | 0.72 | 19.5 | 0.66 | |||||||||
- sulphide (stockpiles (p)) | S/P | 20.1 | 1.18 | |||||||||||
- sulphide leach (stockpiles (p)) | S/P | 161 | 0.68 | |||||||||||
- oxide (stockpiles (p)) | S/P | 118 | 0.70 | |||||||||||
Escondida Norte (Chile) (n) | ||||||||||||||
- sulphide | O/P | 187 | 1.65 | } | 48m to 60m | 348 | 1.28 | } | 60m to 125m | |||||
- sulphide leach | O/P | 28.7 | 0.57 | 130 | 0.65 | |||||||||
- oxide | O/P | 123 | 0.78 | |||||||||||
Grasberg (Indonesia) | O/P + U/G | 772 | 1.12 | 25m to 75m | 1,997 | 1.07 | 50m to 150m | |||||||
Northparkes (Australia) | ||||||||||||||
- open pit | O/P | 1.8 | 0.60 | 20m x 40m | ||||||||||
- stockpiles (p) | S/P | 2.8 | 0.65 | |||||||||||
- underground | U/G | 47.2 | 1.17 | 20m x 40m | ||||||||||
Palabora (South Africa) | ||||||||||||||
- underground block cave | U/G | 185 | 0.69 | 75m | 16.0 | 0.49 | 75m | |||||||
DIAMONDS (d) | millions | carats | millions | carats | ||||||||||
Reserves at operating mines | of tonnes | per tonne | of tonnes | per tonne | ||||||||||
Argyle (Australia) (q) | ||||||||||||||
- AK1 pipe (open pit) | O/P + U/G | 25.9 | 2.9 | 25m x 50m | 9.1 | 2.9 | 25m x 50m | |||||||
- AK1 pipe (stockpiles (p)) | S/P | 1.5 | 2.7 | |||||||||||
Diavik (Canada) (r) | O/P + U/G | 16.2 | 3.5 | 25m to 30m | 13.6 | 2.9 | 25m to 30m | |||||||
Murowa (Zimbabwe) | O/P | 23.0 | 0.7 | 50m | ||||||||||
GOLD | millions | grammes | millions | grammes | ||||||||||
Reserves at operating mines | of tonnes | per tonne | of tonnes | per tonne | ||||||||||
Bingham Canyon (US) (m) | ||||||||||||||
- open pit | O/P | 34.8 | 0.35 | Max 25m | 596 | 0.32 | Max 215m | |||||||
- stockpiles (p) | S/P | 1.4 | 0.23 | 25 | 0.22 | |||||||||
Cortez/Pipeline (US) (s) | ||||||||||||||
- open pit | O/P | 192 | 1.74 | 30.5m to 43m | 99.4 | 1.18 | 30.5m to 43m | |||||||
- stockpiles (p) | S/P | 2 | 5.04 | |||||||||||
Grasberg (Indonesia) | O/P + U/G | 772 | 1.10 | 25m to 75m | 1,997 | 0.93 | 50m to 150m | |||||||
Greens Creek (US) | U/G | 6.0 | 3.89 | 15m to 30.5m | ||||||||||
Kelian (Indonesia) (t) | O/P | - | - | |||||||||||
Lihir (PNG) (u) | ||||||||||||||
- open pit | O/P | 2.2 | 3.42 | 35m | 147 | 3.69 | 35m to 70m | |||||||
- stockpiles (p) | S/P | 38.7 | 2.66 | |||||||||||
Northparkes (Australia) | ||||||||||||||
- open pit | O/P | 1.8 | 0.60 | 20m x 40m | ||||||||||
- stockpiles (p) | S/P | 2.8 | 0.48 | |||||||||||
- underground | U/G | 47.2 | 0.46 | 20m x 40m | ||||||||||
See Notes on page A-94 and A-95 |
A-91
RIO TINTO PLC - RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7 CONTINUED
% Yield to | ||||||||||||||
Recoverable | give | |||||||||||||
Type of | reserves | marketable | Drill hole | Drill hole | ||||||||||
mine (b) | total | reserves | Proved | spacing (c) | Probable | spacing (c) | ||||||||
IRON ORE (d) | millions | millions | ||||||||||||
of tonnes | %Fe | of tonnes | %Fe | |||||||||||
Reserves at operating mines | ||||||||||||||
and mines under construction | ||||||||||||||
Channar (Australia) | ||||||||||||||
– Brockman Ore | O/P | 107 | 63.5 | 60m | 13 | 63.6 | Max 120m | |||||||
Corumbá (Brazil) | O/P | 111 | 67.2 | 100m to 400m | 106 | 67.2 | 200m x 400m | |||||||
Eastern Range (Australia) | ||||||||||||||
– Brockman Ore | O/P | 90 | 63.0 | 60m | 23 | 62.8 | Max 120m | |||||||
Hamersley (Australia) | ||||||||||||||
– Brockman 2 (Brockman Ore) | O/P | 17 | 62.5 | 50m | 7 | 62.7 | Max 100m | |||||||
– Marandoo (Marra Mamba Ore) | O/P | 73 | 62.4 | 75m | 3 | 62.6 | Max 150m | |||||||
– Mt Tom Price (Brockman Ore) | ||||||||||||||
– open pit | O/P | 112 | 64.5 | 30m | 42 | 64.8 | 60m x 30m | |||||||
– stockpiles (p) | S/P | 14 | 64.5 | |||||||||||
– Paraburdoo (Brockman Ore) | O/P | 17 | 63.8 | 30m | 6 | 63.6 | 60m x 30m | |||||||
– Paraburdoo (Marra Mamba Ore) | O/P | 1 | 63.1 | 60m | ||||||||||
– Nammuldi (Marra Mamba Ore) (v) | O/P | 11 | 61.4 | 50m | 28 | 61.4 | 100m x 50m | |||||||
– Yandicoogina (w) | ||||||||||||||
– open pit | O/P | 191 | 58.9 | 50m | 53 | 62.7 | 100m x 50m | |||||||
– stockpiles (p) | S/P | 4 | 58.5 | 100m x 50m | ||||||||||
Iron Ore Company of Canada (Canada) (x) | O/P | 361 | 65.0 | 122m x 61m | 82 | 65.0 | 122m | |||||||
Robe River (Australia) | ||||||||||||||
– Pannawonica (Pisolite Ore) | ||||||||||||||
– open pit | O/P | 112 | 57.0 | Max 50m | 46 | 57.1 | 50m | |||||||
– stockpiles (p) | S/P | 2 | 57.0 | 12 | 57.0 | |||||||||
– West Angelas (Marra Mamba Ore) | ||||||||||||||
– open pit | O/P | 141 | 62.8 | Max 50m | 276 | 61.9 | 200m x 100m | |||||||
– stockpiles (p) | S/P | 1 | 59.7 | |||||||||||
LEAD | millions | millions | ||||||||||||
of tonnes | %Pb | of tonnes | %Pb | |||||||||||
Reserves at operating mines | ||||||||||||||
Greens Creek (US) | U/G | 6.0 | 4.04 | 15m to 30.5m | ||||||||||
MOLYBDENUM | millions | millions | ||||||||||||
of tonnes | %Mo | of tonnes | %Mo | |||||||||||
Reserves at operating mine | ||||||||||||||
Bingham Canyon (US) (m) | ||||||||||||||
– open pit | O/P | 34.8 | 0.037 | Max 25m | 596 | 0.039 | Max 215m | |||||||
– stockpiles (p) | S/P | 1.4 | 0.031 | 25 | 0.034 | |||||||||
SILVER | millions | grammes | millions | grammes | ||||||||||
of tonnes | per tonne | of tonnes | per tonne | |||||||||||
Reserves at operating mines | ||||||||||||||
Bingham Canyon (US) (m) | ||||||||||||||
– open pit | O/P | 34.8 | 3.10 | Max 25m | 596 | 2.66 | Max 215m | |||||||
– stockpiles (p) | S/P | 1.4 | 2.33 | 25 | 1.90 | |||||||||
Grasberg (Indonesia) | O/P + U/G | 772 | 3.80 | 25m to 75m | 1,997 | 3.86 | 50m to 150m | |||||||
Greens Creek (US) | U/G | 6.0 | 528 | 15m to 30.5m | ||||||||||
See Notes on page A-94 and A-95 |
A-92
RIO TINTO PLC - RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7 CONTINUED
% Yield to | ||||||||||||||
Recoverable | give | |||||||||||||
Type of | reserves | marketable | Drill hole | Drill hole | ||||||||||
mine (b) | total | reserves | Proved | spacing (c) | Probable | spacing (c) | ||||||||
TALC (e) | millions | millions | ||||||||||||
of tonnes | of tonnes | |||||||||||||
Reserves at operating mines | ||||||||||||||
Luzenac Group | O/P + U/G | 32.4 | 15m to 100m | 17.9 | 15m to 100m | |||||||||
(Europe/North America/Australia) | ||||||||||||||
TITANIUM DIOXIDE FEEDSTOCK (e) | millions | millions | ||||||||||||
Reserves at operating mines | of tonnes | of tonnes | ||||||||||||
Rio Tinto Iron & Titanium (y) | O/P + D/O | 42.5 | Max 60m | 32.8 | 100m x 100m-800m | |||||||||
(Canada/South Africa) | ||||||||||||||
URANIUM | millions | millions | ||||||||||||
of tonnes | %U308 | of tonnes | %U308 | |||||||||||
Reserves at operating mines | ||||||||||||||
Energy Resources of Australia (Australia) | ||||||||||||||
– Ranger #3 open pit | O/P | 4.2 | 0.29 | Max 25m grid | 7.5 | 0.25 | Max 50m grid | |||||||
– Ranger #3 stockpiled ore | S/P | 6.3 | 0.20 | |||||||||||
Rössing (Namibia) | ||||||||||||||
– open pit | O/P | 4.8 | 0.051 | 15m to 20m | 16.4 | 0.035 | 60m to 120m | |||||||
– stockpiles (p) | 2.6 | 0.042 | ||||||||||||
millions | millions | |||||||||||||
of tonnes | %U308 | of tonnes | %U308 | |||||||||||
Undeveloped reserves (l) | ||||||||||||||
Energy Resources of Australia (Australia) | ||||||||||||||
– Jabiluka | U/G | 6.8 |
0.57 | Max 30m | 7.0 | 0.45 | Max 30m x 60m | |||||||
ZINC | millions | millions | ||||||||||||
of tonnes | %Zn | of tonnes | %Zn | |||||||||||
Reserves at operating mines | ||||||||||||||
Greens Creek (US) | U/G | 6.0 | 10.2 | 15m to 30.5m | ||||||||||
See Notes on page A-94 and A-95 |
A-93
RIO TINTO PLC - RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7 CONTINUED
Notes
(a) Commodity prices (based on a three year average historical
price) used in these reserve estimates include the following exchange quoted
prices :
ALUMINIUM | LEAD | |||
Weipa (Australia) | US$ 0.65/lb | Greens Creek (US) | US$ 0.24/lb | |
COPPER | MOLYBDENUM | |||
Bingham Canyon (US) | US$ 0.82/lb | Bingham Canyon (US) | US$ 5.17/lb | |
Escondida (Chile)* | US$ 0.82/lb | |||
Escondida Norte (Chile)* | US$ 0.74/lb | SILVER | ||
Grasberg (Indonesia)* | US$ 0.85/lb | Bingham Canyon (US) | US$ 4.95/oz | |
Northparkes (Australia) | US$ 0.82/lb | Grasberg (Indonesia)* | US$ 5.00/oz | |
Palabora (South Africa) | US$ 0.82/lb | Greens Creek (US) | US$ 4.95/oz | |
GOLD | ZINC | |||
Bingham Canyon (US) | US$ 338/oz | Greens Creek (US) | US$ 0.38/lb | |
Cortez/Pipeline (US)* | US$ 338/oz | |||
Grasberg (Indonesia)* | US$ 270/oz | (Note * = Non-managed operations) | ||
Greens Creek (US) | US$ 338/oz | |||
Lihir (PNG)* | US$ 380/oz | |||
Northparkes (Australia) | US$ 338/oz | |||
(b) | Type of mine: O/P = open pit, O/C = open cut, U/G = underground, D/O = dredging operation, S/P = stockpile. |
(c) | Drill hole spacings are either average distances, a specified grid distance (a regular pattern of drill holes - the distance between the drill holes along the two axes of the grid will be aligned to test the size, shape and continuity of the mineral deposit; as such there may be different distances between the drill holes along the two axes of a grid) or the maximum drill hole spacing that is sufficient to determine the reserve category for a particular deposit. As the continuity of mineralisation varies from deposit to deposit, the drill hole spacing required to categorise a reserve varies between and within deposit types. |
(d) | Reserves of iron ore, bauxite and diamonds are shown as recoverable reserves of saleable product after accounting for all mining and processing losses. Mill recoveries are therefore not shown. |
(e) | Reserves of industrial minerals are expressed in terms of marketable product, i.e. after all mining and processing losses. In the case of borates, the saleable product is B2O3. |
(f) | Coal reserves are shown as both recoverable and marketable. The yield factors shown reflect the impact of further processing, where necessary, to provide marketable coal. All reserves at operating mines are assigned, all undeveloped reserves are unassigned. By assigned and unassigned, we mean the following: Assigned reserves means coal which has been committed by the coal company to operating mine shafts, mining equipment, and plant facilities, and all coal which has been leased by the company to others. Unassigned reserves represent coal which has not been committed, and which would require new mineshafts, mining equipment, or plant facilities before operations could begin in the property. |
(g) | Coal type: SC = steam/thermal coal; MC = metallurgical/coking coal. |
(h) | Analyses of coal from the US were undertaken according to "American Standard Testing Methods" (ASTM) on an "As Received" moisture basis whereas the coals from Australia have been analysed on an "Air Dried" moisture basis according to Australian Standards (AS). MJ/kg = megajoules per kilogramme. 1 MJ/kg = 430.2 Btu/lb. |
(i) | Kennecott Energy has a partnership interest in the Colowyo mine, but, as it is responsible under a management agreement for the operation of the mine, all of Colowyo's reserves are included in Rio Tinto's share shown above. |
(j) | Reserves at Decker have decreased following a reduction of tonnage commitments under a sales contract. |
(k) | Rio Tinto reduced its shareholding in Hail Creek from 92.0 per cent to 82.0 per cent on 15 November 2004. |
A-94
RIO TINTO PLC - RIO TINTO LIMITED
ORE RESERVES UNDER INDUSTRY GUIDE 7 CONTINUED
Notes (Continued) | |
(l) | The term 'undeveloped reserves' is used here to describe material that is economically viable on the basis of technical and economic studies but for which construction and commissioning have yet to be commenced. |
(m) | Open pit reserves at Bingham Canyon have increased following revisions to the geological model and development of a revised mine plan. |
(n) | Reserves at Escondida have changed following the development of a new geological model that includes additional drilling and revised cut-off grades. Approval of the Sulphide Leach Project has resulted in a new reserve category, 'Sulphide Leach', that includes material in the previously named 'Low Grade Float' and 'Mixed' categories. The significant increase in the reserve tonnages of this material are a consequence of low grade primary mineralisation now being considered to be processable by the sulphide leach process. |
(o) | Rio Tinto completed the sale of its interest in Freeport-McMoRan-Copper & Gold (FCX) on 30 March 2004. Under the terms of a joint venture agreement between Rio Tinto and FCX, Rio Tinto is entitled to a direct 40 per cent share in reserves discovered after 31 December 1994 and it is this entitlement that is shown. |
(p) | Stockpile components of reserves are shown for all operations, where relevant. |
(q) | Reserves at Argyle have decreased following the development of a new geological model and revised mine plan which has resulted in the reclassification of some reserves as mineralised material. |
(r) | Reserves at Diavik have increased following the development of a new geological model that incorporates additional drilling and a revised diamond valuation. |
(s) | Reserves at Cortez increased as a result of the transfer of mineralised material to reserves at the Cortez Hills and Pediment deposits. |
(t) | At 2004 year end, Kelian was in the process of closing and only minor amounts of stockpiled material remain. |
(u) | Reserves at Lihir increased as a result of additional drilling which has led to significant re-modelling of the Minifie deposit and re-modelling of the Kapit, Coastal and Lienitz deposits and the subsequent development of a new geological model. |
(v) | Reserves of Marra Mamba ore at Nammuldi are included following the completion of a feasibility study. |
(w) | Reserves at Yandicoogina have decreased mainly as a result of production, cut-off grade and recovery factor adjustments. |
(x) | Reserves at IOC have decreased as a result of revisions to the geological model and the pit design. |
(y) | Comprises reserves at QIT Fer et Titane (Rio Tinto 100 per cent) and Richards Bay Minerals (Rio Tinto 50 per cent). |
(z) | The following operations were sold during 2004: Neves Corvo (Portugal), Morro do Ouro (Brazil), Rio Tinto Zimbabwe, Fortaleza (Brazil) and Zinkgruvan (Sweden). |
(aa) | Reserves at the following mines were reclassified as mineralised material during 2004: Maules Creek (Australia), Oaklands (Australia) and Mt Tom Price - Marra Mamba ore (Australia). |
A-95
Exhibit 1.1
No. 719885
The Companies Act 1985
MEMORANDUM |
AND ARTICLES OF |
ASSOCIATION OF |
Rio Tinto plc |
Incorporated 30th March, 1962
(New Articles of Association adopted by Special Resolution
passed on 11th April 2002 and amended on 14 April 2005)
RIO
TINTO
No. 719885
The Companies Act 1985
MEMORANDUM |
AND ARTICLES OF |
ASSOCIATION OF |
Rio Tinto plc |
Incorporated 30th March, 1962
(New Articles of Association adopted by Special Resolution
passed on 11th April 2002 and amended on 14 April 2005)
Linklaters
One Silk Street, London EC2Y 8HQ
2
3
4
5
RIO TINTO PLC |
RESOLUTION
(passed on 11 April 2002)
The following resolution proposed at the fortieth Annual General Meeting of the Company duly convened and held on 11th April 2002 at the Queen Elizabeth II Conference Centre, Broad Sanctuary, London SW1 was duly passed as an Ordinary Resolution on that day by Rio Tinto plc shareholders and became effective on 18th April 2002 following the Annual General Meeting of Rio Tinto Limited held on that date:
Resolution 4
That
(a) | subject to the passing of resolution 5, the authorised share capital of the Company be increased from £142,123,283.20 to £142,123,283.30 by the creation of one DLC Dividend Share of 10p, having the rights and subject to the restrictions set out in the new articles of association of the company referred to in paragraph (a) of resolution 5 below; and |
(b) | subject to the passing of resolution 5, Rio Tinto Limited be authorised to create and issue a new class of share, entitled a "DLC Dividend Share", having the rights and subject to the restrictions proposed to be incorporated into the constitution of Rio Tinto Limited referred to in paragraph (b) of resolution 5 below. |
A V Lawless
Secretary
10
RIO TINTO PLC |
RESOLUTIONS
(passed on 11 April 2002)
The following resolutions proposed at the fortieth Annual General Meeting of the Company duly convened and held on 11th April 2002 at The Queen Elizabeth ll Conference Centre, Broad Sanctuary, London SW1 were duly passed as Special Resolutions on that day by Rio Tinto pic shareholders and became effective on 18th April 2002 following the Annual General Meeting of Rio Tinto Limited held on that date:
Resolution 5
That
(a) | subject to the passing of resolution 4, the articles of association contained in the document submitted to the meeting, marked 'B' and initialled by the Chairman for the purpose of identification, be adopted as the articles of association of the Company in substitution for and to the exclusion of the existing articles of association of the Company; and |
(b) | subject to the passing of resolution 4, the amendments to the constitution contained in the document submitted to the meeting, marked 'C' and initialled by the Chairman for the purpose of identification, be approved and such amendments be made to the constitution of Rio Tinto Limited, provided that, if resolution 6 is passed, such new articles of association and amended constitution shall also incorporate the amendments made by resolution 6. |
Resolution 6
That
(a) | the authority and power conferred on the directors by Article 75 of the Company's articles of association be amended so that, subject to the exceptions set out in that Article, the ordinary remuneration of the directors, shall not (when aggregated with any fees received by the directors in their capacity as directors of Rio Tinto Limited) exceed £750,000 per annum in aggregate and so that Australian dollar amounts shall be converted at the rate of £1=A$2.75; and |
(b) | Rule 89 of the Rio Tinto Limited constitution be amended by deleting the conversion rate "£1=$2.10" and replacing it with "£1=$2.75". |
A V Lawless
Secretary
11
RIO TINTO PLC |
RESOLUTIONS
(passed on 14 April 2005)
At the forty-third Annual General Meeting of the Company duly convened and held on 14th April 2005 at The Queen Elizabeth II Conference Centre, Broad Sanctuary, London SW1, the following resolutions were duly passed as Special Resolutions:
Resolution 2
That the authority and power conferred on the directors in relation to rights issues and in relation to the Section 89 Amount by paragraph (B) of Article 9 of the Company's articles of association be renewed for the period ending on the date of the annual general meeting in 2006 or on 13 April 2006, whichever is the later, and for such period the Section 89 Amount shall be £6.90 million.
Resolution 3
(a) | That Rio Tinto plc, Rio Tinto Limited and any subsidiaries of Rio Tinto Limited be and are hereby authorised to purchase ordinary shares of 10p each issued by Rio Tinto plc ("RTP Ordinary Shares"), such purchases to be made, in the case of Rio Tinto plc, by way of market purchase (within the meaning of Section 163 of the Companies Act 1985), provided that this authority shall be limited | |
(i) | so as to expire on 13 October 2006; | |
(ii) | so that the number of RTP Ordinary Shares which may be purchased pursuant to this authority shall not exceed 106.8 million RTP Ordinary Shares (representing approximately ten per cent of the issued share capital of the Company as at 14 February 2005); | |
(iii) | so that the maximum price payable for each such RTP Ordinary Share shall be not more than five per cent above the average of the middle market quotations for RTP Ordinary Shares as derived from the London Stock Exchange Daily Official List during the period of five business days immediately prior to such purchase; and | |
(iv) | so that the minimum price payable for each such RTP Ordinary Share shall be 10p; | |
(b) | That Rio Tinto plc be and is hereby authorised to purchase off-market from Rio Tinto Limited and any of its subsidiaries any RTP Ordinary Shares acquired under the authority set out under (a) above on the terms set out in the proposed agreement between Rio Tinto plc and Rio Tinto Limited (a draft of which has been produced to the meeting and is for the purpose of identification marked 'A' and initialled by the chairman), such authorisation to expire on 13 October 2006 and such proposed agreement be hereby approved for the purpose of Section 165 of the Companies Act 1985. |
A V Lawless
Secretary
12
RIO TINTO PLC |
RESOLUTIONS
(passed on 14 April 2005)
The following resolutions proposed at the forty-third Annual General Meeting of the Company duly convened and held on 14 April 2005 at the Queen Elizabeth II Conference Centre, Broad Sanctuary, London SW1 were duly passed as Special Resolutions on that day by Rio Tinto plc shareholders and became effective on 29 April 2005 following the Annual General Meeting of Rio Tinto Limited held on that date:
Resolution 4
That, subject to the consent in writing of the holder of the Special Voting Share, approval is hereby given to buy-backs by Rio Tinto Limited of fully paid ordinary shares in Rio Tinto Limited ("RTL Ordinary Shares") in the 12 month period following this approval:
(a) | under one or more off-market buy-back tender schemes in accordance with the terms described in the Explanatory notes which accompany this Notice ("the Buy-Back Tenders"), but only to the extent that the number of RTL Ordinary Shares bought back under the Buy-Back Tenders, together with the number of RTL Ordinary Shares bought back on-market by Rio Tinto Limited, does not exceed in that 12 month period ten per cent of the minimum number of RTL Ordinary Shares on issue (excluding from the calculation of that minimum number for all purposes those RTL Ordinary Shares held by or on behalf of Tinto Holdings Australia Pty Limited ("THA") or any other subsidiary of Rio Tinto plc during such period; and |
(b) | following any Buy-Back Tender, from THA upon the terms and subject to the conditions set out in the draft buy-back agreement between Rio Tinto Limited and THA (entitled 'THA Matching Buy-Back Agreement'), a draft copy of which has been produced to the meeting and for the purposed of identification, market 'B' and initialled by the Chairman. |
Resolution 5
That, subject to the consent in writing of the holder of the Special Voting Share and subject to the passing of resolution 6, Article 33(A)(iii) of the Company's articles of association and Rule 7(a)(iii) of Rio Tinto Limited's constitution each be amended by adding after the words "of its own ordinary shares", the following:
"(except for such a purchase at, around or below prevailing market prices for those shares where the purchase occurs in accordance with Applicable Regulation)." |
13
Resolution 6
That, subject to the consent in writing of the holder of the Special Voting Share and subject to the passing of resolution 5, approval is hereby given for the following amendments to the DLC Merger Sharing Agreement dated 21 December 1995 (the "Sharing Agreement") between the Company and Rio Tinto Limited:
(a) | adding the following words to the end of Clause 5.1.2 (b) of the Sharing Agreement: | |
"(except for such a purchase at, around or below prevailing market prices for those shares where the purchase occurs in accordance with Applicable Regulation)"; and | ||
(b) | amending paragraph 3 of Schedule 1 of the Sharing Agreement by deleting the words "at or around prevailing market prices" and inserting in their place the words "at, around or below prevailing market prices for the shares being purchased". |
A V Lawless
Secretary
14
MEMORANDUM OF ASSOCIATION |
OF THE RTZ CORPORATION PLC |
(Reprinted to reflect amendments up to 14 April 2005) |
(1) | The name of the Company is "THE RTZ CORPORATION PLC".1 |
(2) | The Company is to be a public company. |
(3) | The Registered Office of the Company will be situated in England. |
(4) | The objects for which the Company is established are: |
(A) To enter into, operate and carry into effect an Agreement with CRA Limited ("CRA2") known as the DLC Merger Sharing Agreement and a Deed known as the Rio Tinto Deed Poll Guarantee with full power to:
(i) agree any amendment or termination of all or any of the terms of that Agreement or Deed in accordance with the terms thereof;
(ii) enter into, operate and carry into effect any further or other agreements or arrangements with or in connection with CRA2; and
(iii) do all such things as in the opinion of the Directors of the Company are necessary or desirable for the furtherance of this object or for the furtherance, maintenance or development of the relationship with CRA2 constituted by or arising out of any agreement or arrangement mentioned in or made in accordance with this sub-clause.
(B) To carry on business as an investment holding company.
(C) To subscribe for, underwrite, purchase or otherwise acquire shares, stock, debentures, debenture stock, bonds, obligations or other securities or investments of any kind whatsoever and wheresoever created or issued, and to hold the same with a view to investment, or to sell, exchange or otherwise dispose of the same for reinvestment purposes or otherwise in the ordinary course of management of the Company's investments.
(D) To purchase or otherwise acquire for any estate or interest any property or assets which may appear to be necessary or convenient.
(E) To borrow and raise money and to secure or discharge any debt or obligation of or binding on the Company in such manner as may be thought fit and in particular by mortgages and charges upon the undertaking and all or any of the property and assets (present and future) and the uncalled Capital of the Company, or by the creation and issue on such terms and conditions as may be thought expedient of debentures, debenture stock or other securities of any description.
(F) To draw, make, accept, endorse, discount, negotiate, execute, and issue, and to buy, sell and deal with bills of exchange, promissory notes, and other negotiable or transferable instruments.
(G) To amalgamate with and to co-operate in any way with or assist or subsidise any company, firm, or person, and to purchase or otherwise acquire and undertake all or any part of the business, property and liabilities of any person, body or company carrying on any business which this Company is authorised to carry on or possessed of any property suitable for the purposes of the Company.
15
(H) To promote or concur in the promotion of any company, the promotion of which shall be considered desirable.
(I) To lend money to and guarantee or give security for the performance of the contracts or obligations of any company, firm or person, and the payment and repayment of the capital and principal of, and dividends, interest or premiums payable on, any stock, shares and securities of any company, whether having objects similar to those of this Company or not, and to give all kinds of indemnities.
(J) To sell, lease, grant licences, easements and other rights over, and in any other manner deal with or dispose of the undertaking, property, assets, rights and effects of the Company or any part thereof for such consideration as may be thought fit, and in particular for stocks, shares or securities of any other company whether fully or partly paid up.
(K) To procure the registration of the Company in or under the laws of any place outside England.
(L) To subscribe or guarantee money for any national, charitable, benevolent, public, general or useful object or for any exhibition, or for any purpose which may be considered likely directly or indirectly to further the objects of the Company or the interests of its members.
(M) To grant pensions or gratuities to any employees or ex-employees and to officers and ex-officers (including Directors and ex-Directors) of the Company or its predecessors in business, or the relations, connections or dependants of any such persons, and to establish or support schemes, associations, institutions, clubs, funds and trusts which may be considered calculated to benefit any such persons (with or without others) or otherwise advance the interests of the Company or of its members, and to establish and contribute to any scheme for the purchase by trustees of shares in the Company to be held for the benefit of the Company's employees, and to lend money to the Company's employees to enable them to purchase shares of the Company and to formulate and carry into effect any scheme for sharing the profits of the Company with its employees or any of them.
(MM) | (i) To purchase and maintain insurance for or for the benefit of any persons who are or were at any time directors, officers, employees or auditors of the Company, or of any other company which is its holding company or in which the Company or such holding company has any interest whether direct or indirect or which is in any way allied to or associated with the Company, or of any subsidiary undertaking of the Company or of any such other company, or who are or were at any time trustees of any pension fund in which any employees of the Company or of any such other company or subsidiary undertaking are interested, including (without prejudice to the generality of the foregoing) insurance against any liability incurred by such persons in respect of any act or omission in the actual or purported execution and/or discharge of their duties and/or in the exercise or purported exercise of their powers and/or otherwise in relation to their duties, powers or offices in relation to the Company or any such other company, subsidiary undertaking or pension fund; and |
(ii) To such extent as may be permitted by law otherwise to indemnify or to exempt any such person against or from any such liability. For the purposes of this clause "holding company" and "subsidiary undertaking" shall have the same meanings as in the Companies Act 1989. |
16
(N) To do all or any of the things and matters aforesaid in any part of the world, and either as principals, agents, contractors, trustees or otherwise, and by or through trustees, agents or otherwise, and either alone or in conjunction with others.
(O) To do all or any of the things as may be considered to be incidental or conducive to the above objects or any of them.
And it is hereby declared that the objects of the Company as specified in each of the foregoing paragraphs of this clause (except only if and so far as otherwise expressly provided in any paragraph) shall be separate and distinct objects of the Company and shall not be in anywise limited by reference to any other paragraph or the order in which the same occur or the name of the Company.
(5) The liability of the members is limited.
(6) The Share Capital of the Company is £l003, divided. into 200 shares of 10s (50p) each.
Notes:
1: | By Special Resolution passed on 21st May, 1997, the name of the Company was changed from "The RTZ Corporation PLC" to "Rio Tinto plc". |
2: | By Special Resolution passed on 21st May, 1997, the name of CRA Limited was changed to Rio Tinto Limited. |
3: | (i) By Special Resolution passed on 2nd July, 1962, the authorised share capital was increased from £100 to £50,000,000 divided into 7,732,967 4 per cent. 'A' Cumulative Preference Shares of £1 each, 3,143,750 5 per cent. 'B' Cumulative Preference Shares of £1 each and 78,246,566 Ordinary Shares of 10s (50p) each. |
(ii) By Ordinary Resolution passed on 15th May, 1965, the authorised share capital was increased from £50,000,000 to £60,000,000 by the creation of 20,000,000 additional Ordinary Shares of 10s (50p) each. | |
(iii) By Ordinary Resolution passed on 16th May, 1968, the authorised share capital was increased from £60,000,000 to £70,000,000 by the creation of 20,000,000 additional Ordinary Shares of 10s (50p) each. | |
(iv) By Ordinary Resolutions passed on 20th May, 1970, each of the 118,246,566 Ordinary Shares of 10s (50p) (whether issued or unissued) was sub-divided into two Ordinary Shares of 5s (25p) each and the authorised share capital was increased from £70,000,000 to £75,000,000 by the creation of an additional 20,000,000 Ordinary Shares of 5s (25p) each. | |
(v) By Special Resolution passed on 16th May, 1973, the 4 per cent. 'A' Cumulative Preference Shares of £1 each were re-designated as 3.325 per cent. 'A' Cumulative Preference Shares of £1 each and the 5 per cent. 'B' Cumulative Preference Shares of £1 each were re-designated as 3.5 per cent. 'B' Cumulative Preference Shares of £1 each. | |
(vi) By Special Resolution passed on 17th October, 1973, each of the unissued Ordinary Shares of 25p each of the Company became Unclassified Shares of 25p each available for issue as either Ordinary Shares or Accumulating Ordinary Shares. |
17
(vii) By Ordinary Resolution passed on 21st May, 1975, the authorised share capital was increased from £75,000,000 to £90,000,000 by the creation of 60,000,000 Unclassified Shares of 25p each. | |
(viii) By Ordinary Resolution passed on 27th May, 1981, the authorised share capital was increased from £90,000,000 to £100,000,000 by the creation of 40,000,000 Unclassified Shares of 25p each. | |
(ix) By Ordinary Resolution passed on 26th May, 1983, the authorised share capital was increased from £100 million to £110 million by the creation of 40 million Unclassified Shares of 25p each. | |
(x) By Ordinary Resolution passed on 24th May, 1984, the authorised share capital was increased from £110 million to £125 million by the creation of 60 million Unclassified Shares of 25p each. | |
(xi) By Ordinary Resolution passed on 4th June, 1987, the authorised share capital was increased from £125 million to £130 million by the creation of 20 million Unclassified Shares of 25p each. | |
(xii) By Special Resolution passed on 22nd October, 1987, each of the Ordinary Shares and Accumulating Ordinary Shares of 25p each was sub-divided into five Ordinary (or, as the case might be, Accumulating Ordinary) Shares of 5p each and every two of the resulting Ordinary Shares or Accumulating Ordinary Shares of 5p each were consolidated into one Ordinary Share or Accumulating Ordinary Share of 10p, and the Unclassified Shares in the unissued capital were similarly subdivided and consolidated. | |
(xiii) By Resolution of the Directors passed on 2nd June, 1988, the whole of the Accumulating Ordinary Shares (being less than 5 per cent. of the number of Ordinary Shares in issue) were converted into Ordinary Shares with effect from 1st July, 1988. | |
(xiv) By Ordinary Resolution, passed on 15th June, 1989, the authorised share capital was increased from £130 million to £142 million by the creation of 120 million Ordinary Shares. | |
(xv) By Ordinary Resolution passed on 10th May, 1995, the authorised share capital was increased from £142 million to £153 million by the creation of 110 million Ordinary Shares. | |
(xvi) By Special Resolution passed on 20th December, 1995 the authorised share capital was increased from £153 million to £153,000,000.20 by the creation of one Equalisation Share of 10p and one Special Voting Share of 10p. | |
(xvii) By Special Resolution passed on 12th May, 1999 and confirmed by the High Court on 23rd June, 1999 the authorised share capital was reduced from £153,000,000.20 to £142,123,283.20 by the cancellation and extinguishing of all the 7,732,967 3.325 per cent 'A' Cumulative Preference Shares and all the 3,143,750 3.5 per cent 'B' Cumulative Preference Shares. | |
(xviii) The capital of Rio Tinto plc was by virtue of a Special Resolution and with the sanction of an Order of the High Court of Justice dated 23rd June 1999 reduced from £153,000,000.20 divided into 7,732,967 3.325 per cent 'A' Cumulative Preference Shares of £1 each, 3,143,750 3.5 per cent 'B' Cumulative Preference Shares of £ 1 each, one Special Voting Share of 10p, one Equalisation Share of 10p and 1,421,232,830 Ordinary Shares of 10p each to £142,123,283.20 divided into one Special Voting Share of 10p, One Equalisation Share of 10p and 1,421,232,830 Ordinary Shares of 10p each. At the date of registration of this Minute the said Special Voting Share and 1,060,962,100 of the said Ordinary Shares have been issued and are deemed to be fully paid up and the Equalisation Share and the remainder of the Ordinary Shares are unissued. |
18
(xix) By Ordinary Resolution passed on 11 April, 2002 the authorised share capital was increased from £142,123,283.20 to £142,123,283.30 by the creation of one DLC Dividend Share of 10p. |
We, the several persons whose names and addresses are subscribed, are desirous of being formed into a Company, in pursuance of this Memorandum of Association, and we respectively agree to take the number of shares in the Capital of the Company set opposite our respective names.
Names, addresses and descriptions of subscribers | Number of Shares |
taken by each | |
Subscriber | |
John W. Mayo, | One |
Barrington House, 59/67 Gresham Street, London EC2 | |
Solicitor | |
C. Hilary Scott, | One |
18 Austin Friars, London EC2 | |
Solicitor | |
Total Shares taken . . . | Two |
Dated the 22nd day of March, 1962.
Witness to the above Signatures:
F. E. Farres,
Barrington House, 59/67 Gresham Street, London EC2
Clerk
19
"Act" | means the Companies Act 1985; | |
"Aggregate Publicly-held Ordinary Shares" | means all of the Publicly-held Rio Tinto Ordinary Shares and all of the Publicly-held RTL Ordinary Shares from time to time; | |
"Alternate Director" | means a person appointed from time to time as an Alternate Director in accordance with these Articles; | |
"Applicable" | means, in the case of RTL, applicable Australian law and regulations (including listing rules) and, in the case of the Company, applicable English laws and regulations (including listing rules and guidelines with which companies listed on the London Stock Exchange customarily comply), in each case for the time being in force and taking account of all waivers or variations from time to time applicable (in particular situations or generally) to RTL or, as the case may be, the Company; | |
"Articles" | means these Articles of Association as from time to time altered; | |
"Auditor" | means the auditor or auditors appointed by the Company from time to time; | |
"Australian dollars" | means the lawful currency from time to time of Australia; | |
"Australian Stock Exchange" | means the Australian Stock Exchange Limited (ACN 008 624 691) or any successor to that body; | |
"Board of RTL" | means the board of directors of RTL (or a duly appointed committee of that board) from time to time; |
20
"Business Day" | means a day on which banks are ordinarily open for business in both London and Melbourne, excluding Saturdays and Sundays; | |
"Class Rights Action" | means, in relation to the Company or RTL, any of the actions listed in Article 33(A); | |
"Companies Act Subsidiary" | has the meaning ascribed to the term "subsidiary" in Section 736 of the Companies Act 1985 (as in force at the date of adoption of these Articles) and when used in relation to a company means any subsidiary of that company from time to time; | |
"Corporations Act" | means the Corporations Act 2001 (Cth) of Australia; | |
"Corporations Act Subsidiary" | has the meaning given to "subsidiary" in Section 9 of the Corporations Act as at the date of the Sharing Agreement and when used in relation to a body corporate means any subsidiary of that body corporate from time to time; | |
"Corporations Law" | means the Corporations Law as at the date of the Sharing Agreement as defined by Section 13(2) of the Corporations (Victoria) Act 1990 of Victoria, Australia as at that date and includes a reference to the Corporations Regulations referred to in that section as at that date; | |
"Deed Poll Guarantee" | means the deed executed by the Company for the benefit of certain present and future creditors of RTL as amended from time to time; | |
"Director" | means a person appointed or elected from time to time to the office of Director of the Company in accordance with these Articles and includes any Alternate Director duly acting as a Director; | |
"DLC Dividend Share" | means the dividend share of 10p in the Company, issued in accordance with Article 8A, until it is cancelled, redeemed or otherwise ceases to exist or until it converts to an Ordinary Share in accordance with these Articles; | |
"Equalisation Fraction" | means the Equalisation Ratio expressed as a fraction with the numerator being the number relating to the RTL Ordinary Shares and the denominator being the number relating to the Ordinary Shares; | |
"Equalisation Ratio" | means the ratio of the dividend, capital and voting rights per RTL Ordinary Share to the dividend, capital and voting rights per Ordinary Share as set out in the Sharing Agreement and as adjusted from time to time in accordance with the Sharing Agreement; | |
"Equalisation Share" | means the equalisation share of l0p in the Company; |
21
"Excluded RTL Holder" | means any person who is a Relevant Person (other than a Permitted Person) both as defined in the RTL Constitution on whom a notice has been served by the Directors of RTL pursuant to Rule 145D of the RTL Constitution which has not been complied with to the satisfaction of the RTL directors or withdrawn; | ||
"in writing" | means written or produced by any substitute for writing or partly one and partly another and shall include, except where otherwise expressly specified in these Articles or the context otherwise requires, and subject to any limitations, conditions or restrictions contained in or the provisions of the Statutes, any representation of words in some visible form, whether in a physical document or in an electronic communication or form or otherwise howsoever; | ||
"Joint Decision" | means in relation to a General Meeting a resolution put to the vote of the meeting on a Joint Decision Matter; | ||
"Joint Decision Matter" | means any of the following: | ||
(i) | the appointment or removal of a Director of the Company and/or a director of RTL; | ||
(ii) | the receipt or adoption of the annual accounts of the Company and/or RTL (if shareholders are to be asked to vote on the receipt or adoption of such accounts); | ||
(iii) | a change of name by the Company and/or RTL; | ||
(iv) | any proposed acquisition or disposal and any proposed transaction with a substantial shareholder, director or other related party which (in any case) is required under Applicable Regulation to be authorised by shareholders; | ||
(v) | the appointment or removal of the Auditors of the Company and/or the auditors of RTL; | ||
(vi) | the creation of a new class of shares (or securities convertible into, exchangeable for or granting rights to subscribe for or purchase shares of a new class) in the Company or RTL; | ||
(vii) | a change of the corporate status of or reregistration of the Company or RTL; | ||
(viii) | a matter referred to in Clause 9.2 of the Sharing Agreement; and |
22
(ix) | any other matter which the Directors (or a duly constituted committee of the Directors) of the Company and the Board of RTL agree (generally or in a particular case) should be decided upon by Joint Decision; | ||
"Limiting Restriction" | refers to the limit (if any) on offers for cash (otherwise than pro rata by way of rights to existing holders of Ordinary Shares or RTL Ordinary Shares) of shares or other securities existing under restrictions for the time being applicable to RTL or the Company under Applicable Regulation, and for the purpose of ascertaining the most Limiting Restriction at any time in any situation:- | ||
(a) | a restriction applicable to RTL shall be treated as also applicable to the Company (converting the restrictions, expressed in terms of a number of RTL shares, into a number of shares in the Company by application of the Equalisation Ratio), and vice versa in relation to a restriction applicable to the Company; | ||
(b) | a restriction expressed in terms of a nominal amount of the Company's equity share capital shall be treated as if it related to the number of Ordinary Shares represented by that nominal amount and then converted into a number of RTL Ordinary Shares by application of the Equalisation Ratio and any restriction in relation to RTL shall be similarly treated; | ||
(c) | a restriction (when expressed as a number of RTL Ordinary Shares or Ordinary Shares) that, under Applicable Regulation, has been derived by application of a percentage to a number or nominal amount of RTL Ordinary Shares and/or number or nominal amount of Ordinary Shares rather than to the number of the Aggregate Publicly-held Ordinary Shares (taking into account the application of the Equalisation Ratio as described in (a) and (b) above) shall be adjusted to the number that would have been derived from the application of such percentage to the number of the Aggregate Publicly-held Ordinary Shares (after so taking into account the application of Equalisation Ratio); and |
23
(d) | any restriction which under Applicable Regulation comes into force in relation to either RTL or the Company after the date of the Sharing Agreement which does not fall within (a), (b) or (c) above shall be applied to the Aggregate Publicly-held Ordinary Shares in the way which the Directors (or a duly constituted committee of the Directors) and the Board of RTL agree best reflects the rationale underlying paragraphs (a), (b) and (c) of this definition; | ||
"Liquidation Exchange Rate" | means, as at any date, the closing mid-point spot Australian dollar-sterling exchange rate on the Business Day before such date (as shown in the London Edition of the Financial Times, or such other point of reference as the liquidator and the auditor (or, as the case may be, liquidator) of RTL may determine); | ||
"London Stock Exchange" | means London Stock Exchange Ltd or any successor to that body; | ||
"Market Value" | means, in respect of an issue of a relevant share or security, the weighted average sale price derived from the Australian Stock Exchange (in the case of RTL) and the middle market quotation derived from the London Stock Exchange Daily Official List (in the case of the Company) in each case on the dealing day immediately preceding the date on which any such issue is publicly announced except that in the case of an allotment of Ordinary Shares pursuant to Article 128 it shall mean the value of an Ordinary Share as defined in Article 128(D) and in the case of an allotment of RTL Ordinary Shares by way of dividend it shall mean the weighted average sale price of a RTL Ordinary Share derived from the Australian Stock Exchange over the five business days (being trading days on the Australian Stock Exchange) prior to the books closing date in respect of that dividend; | ||
"Matching Offers" | means offers by way of rights either by both RTL and the Company to their respective ordinary shareholders or by RTL on its own or by the Company on its own to both the holders of Ordinary Shares and the holders of RTL Ordinary Shares which, so far as is practicable, take place contemporaneously and which the auditors of RTL have certified do not materially disadvantage a holder of a RTL Ordinary Share in comparison with a holder of an Ordinary Share and which the Auditors have certified do not materially disadvantage a holder of an Ordinary Share in comparison with a holder of a RTL Ordinary Share; |
24
"Month" | means calendar month; | ||
"Office" | means the registered office of the Company for the time being; | ||
"Operator" | means CRESTCo Limited or such other person as may for the time being be approved by H.M. Treasury as Operator under the Regulations; | ||
"Operator-instruction" | means a properly authenticated dematerialised instruction attributable to the Operator; | ||
"Ordinary Shares" | means the ordinary shares of 10p each in the Company from time to time; | ||
"Paid" | means paid or credited as paid; | ||
"participating security" | means a security title to units of which is permitted by the Operator to be transferred by means of a relevant system; | ||
"Publicly-held RTL Ordinary Shares" | means RTL Ordinary Shares the beneficial owners of which are not members of the Rio Tinto Group; | ||
"Publicly-held Ordinary Shares" | means, in relation to the Company, Publicly-held Rio Tinto Ordinary Shares and, in relation to RTL, Publicly-held RTL Ordinary Shares; | ||
"Publicly-held Rio Tinto Ordinary Shares" | means Ordinary Shares the beneficial owners of which are not members of the RTL Group; | ||
"Publicly-held Rio Tinto Voting Shares" | means Ordinary Shares the beneficial owners of which are not members of the RTL Group; | ||
"Publicly-held Shares" | means, in relation to the Company, Publicly-held Rio Tinto Voting Shares and, in relation to RTL, Publicly-held RTL Ordinary Shares; | ||
"relevant period" | when used in Article 33 refers to the period by reference to which any Limiting Restriction applies; | ||
"relevant system" | means a computer-based system, and procedures, which enable title to units of a security to be evidenced and transferred without a written instrument pursuant to the Regulations; | ||
"Register" | means the register of members of the Company; | ||
"Regulations" | means the Uncertificated Securities Regulations 2001 (SI 2001 No.2001/3755); | ||
"Rio Tinto Entrenched Provision" | means any of the following provisions: | ||
(a) | Clause 4(A) of the Company's Memorandum of Association as in force at the date of adoption of these Articles; |
25
(b) | any of the following provisions of the Company's Articles of Association as in force at the date of adoption of these Articles:- the definitions in this Article 2 of "Aggregate Publicly-held Ordinary Shares", "Applicable Regulation", "Australian dollars", "Board of RTL", "Class Rights Action", "Companies Act Subsidiary", "Corporations Act, "Corporations Act Subsidiary", "RTL", "RTL Deed Poll Guarantee", "RTL Entrenched Provision", "RTL Equalisation Share", "RTL Group", "RTL Constitution", "RTL Ordinary Shares", "RTL Shareholder SVC", "RTL Shareholder Voting Agreement", "RTL Special Voting Share", "Deed Poll Guarantee", "Equalisation Fraction", "Equalisation Ratio", "Equalisation Share", "Excluded RTL Holder", "Joint Decision", "Joint Decision Matter", "Limiting Restriction", "Liquidation Exchange Rate", "Market Value", "Matching Offers", "Ordinary Shares", "Publicly-held RTL Ordinary Shares", "Publicly-held Ordinary Shares", "Publicly-held Rio Tinto Ordinary Shares", "Publicly-held Rio Tinto Voting Shares", "Publicly-held Shares", "relevant period", "Rio Tinto Entrenched Provision", "Rio Tinto Group", "RTP Shareholder SVC", "Rio Tinto Shareholder Voting Agreement", "Sharing Agreement", "Special Voting Share" and "sterling" and the paragraph defining procedural resolutions; the provisions of Article 3 (so far as it relates to the Special Voting Share or the Equalisation Share); Article 9(B)(iv)(a)(iii); Article 31; Article 33; Article 36(C); Article 55; Article 56(A) (so far as it relates to or affects the rights of the holder of the Special Voting Share or the requirement that polls be held on matters on which such holder is entitled to vote); Article 59; Article 60; Article 64; Article 69; the third sentence of Article 80; Article 82; Article 83; paragraph (E) and the following sentence of Article 84; Article 86(B) and the last sentence of Article 86; Article 88; Article 89(vii); the proviso in brackets in Article 90; Article 97 and Article 105; | ||
"Rio Tinto Group" | means the Company and its Companies Act Subsidiaries and a member of the Rio Tinto Group means any of them; |
26
"RTL" | means Rio Tinto Limited (ACN 004 458 404), a company incorporated in Victoria, Australia with its registered office at 55 Collins Street, Melbourne, Victoria, Australia; | |
"RTL Constitution" | means the Constitution of RTL as amended from time to time; | |
"RTL Deed Poll Guarantee" | means the deed executed by RTL for the benefit of certain present and future creditors of the Company as amended from time to time; | |
"RTL Entrenched Provision" | has the meaning given to it in the RTL Constitution; | |
"RTL Equalisation Share" | means the equalisation share in RTL; | |
"RTL Group | means RTL and its Corporations Act Subsidiaries; | |
"RTL Ordinary Shares" | means the issued ordinary shares in RTL from time to time; | |
"RTL Shareholder SVC" | means RTL Shareholder SVC Limited, a company incorporated in England with registered number 3115178 whose registered office is at Princes House, 95 Gresham Street, London EC2V 7LY or such other company as replaces RTL Shareholder SVC Limited pursuant to the RTL Shareholder Voting Agreement; | |
"RTL Shareholder Voting Agreement" | means the agreement entered into between RTL Shareholder SVC, The Law Debenture Trust Corporation p.l.c., RTL and the Company relating, inter alia, to how the Special Voting Share is to be voted, as amended from time to time; | |
"RTL Special Voting Share" | means the special voting share in RTL; | |
"RTP Shareholder SVC" | means RTP Shareholder SVC Pty Limited (ACN 070 481 908), a company incorporated in Victoria, Australia, whose registered office is at 27th Floor, 530 Collins Street, Melbourne, 3000, Victoria, Australia or such other company as replaces RTP Shareholder SVC Pty Limited pursuant to the terms of the Rio Tinto Shareholder Voting Agreement; | |
"RTP Shareholder Voting Agreement" | means the Agreement entered into between RTP Shareholder SVC, The Law Debenture Trust Corporation p.l.c., the Company, Rio Tinto Australian Holdings Limited and RTL relating, inter alia, to how the RTL Special Voting Share and the RTL Ordinary Shares held by Tinto Holdings Australia Pty Limited (ACN 004 327 922) or beneficially owned by any other member of the Rio Tinto Group are to be voted, as amended from time to time; |
27
"Seal" | means the Common Seal of the Company; | |
"Securities Seal" | means an official seal kept by the Company by virtue of Section 40 of the Act; | |
"Share Warrant" | means a warrant to bearer issued by the Company in respect of its shares; | |
"Sharing Agreement" | means the agreement entered into between RTL and the Company headed "DLC Merger Sharing Agreement" as amended from time to time; | |
"Special Voting Share" | means the special voting share of 10p in the Company; | |
"Statutes" | means the Act, the Regulations and every other statute for the time being in force applying to or concerning companies and affecting the Company; | |
"sterling" | means the lawful currency from time to time of the United Kingdom; | |
"Transfer Office" | means the place where the Register is situate for the time being; | |
"UK Listing Authority" | means the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000; | |
"United Kingdom" | means Great Britain and Northern Ireland; | |
"wholly owned subsidiary" | in relation to a body corporate, means a body corporate none of whose members is a person other than the first mentioned body corporate, a wholly owned subsidiary of the first mentioned body corporate or a nominee of the first mentioned body corporate or its wholly owned subsidiary; and | |
"Year" | means calendar year. | |
The expressions "debenture" and "debenture holder" shall respectively include debenture stock and debenture stockholder. | ||
The expressions "notice", "instrument" and "document" and similar terms shall include, except where otherwise expressly specified in these Articles, where the context requires or permits and subject to the provisions of the Statutes, any representation of words in visible form delivered or communicated electronically or by other data transmission process or otherwise howsoever; provided, however, that the Directors may require any evidence they think appropriate to satisfy themselves as to the authenticity of any notice, instrument or document delivered or communicated to them or to the Company in electronic form or by other data transmission process and no provision of these Articles requiring a physical signature or signatures shall, except where otherwise expressly specified in these Articles, apply to any such notice, instrument or document. The expression "in physical form" and similar expressions shall mean that a physical document must be used. |
28
The expressions "communication" and "electronic communication" shall have the same respective meanings as in the Electronic Communications Act 2000, the latter including, without limitation, e-mail, facsimile, CD-Rom, audio tape and telephone transmission and (in the case of electronic communication by the Company in accordance with Article 138A(A)) publication on a web site. | |
The expression "address" shall include, in relation to electronic communication, any number or address used for the purposes of such communication. | |
The expressions "recognised clearing house" and "recognised investment exchange" shall mean any clearing house or investment exchange (as the case may be) granted recognition under the Financial Services and Markets Act 2000. | |
The expression "Secretary" shall include any person appointed by the Directors to perform any of the duties of the Secretary including, but not limited to, a joint, assistant or deputy Secretary. | |
The expression "shareholders' meeting" shall include both a General Meeting and a meeting of the holders of any class of shares of the Company. | |
All such of the provisions of these Articles as are applicable to paid-up shares shall apply to stock, and the words share and shareholder shall be construed accordingly. | |
Words denoting the singular shall include the plural and vice versa. Words denoting the masculine shall include the feminine. Words denoting persons shall include bodies corporate and unincorporated associations. | |
References to any statute or statutory provision of the United Kingdom or Australia shall unless the context otherwise requires be construed as relating to any statutory modification or re-enactment thereof for the time being in force (whether coming into force before or after the adoption of these Articles). | |
Subject as aforesaid any words or expressions defined in the Act or the Regulations shall (if not inconsistent with the subject or context) bear the same meanings in these Articles. | |
A Special or Extraordinary Resolution shall be effective for any purpose for which an Ordinary Resolution is expressed to be required under any provision of these Articles. | |
In these Articles references to an "equivalent resolution" considered by holders of Publicly-held RTL Ordinary Shares mean the resolution considered at the most nearly contemporaneous general meeting of RTL which bears a close relationship to the relevant resolution being considered at a General Meeting of the Company. For example, but without limitation, a resolution to appoint or remove an individual as a director of RTL, to appoint or remove the auditors of RTL or to receive and adopt the accounts of RTL would, if no resolution considering such matters in relation to the Company were put to the RTL general meeting, be the "equivalent resolution" to a resolution relating to the appointment or removal of the same individual as a Director of the Company, the appointment or removal of the same international firm of auditors as the Company's Auditors or the receipt or adoption of the Company's accounts as the case may be. |
29
30
Subject to the rights of shares having a preferred right to participate as regards capital up to but not beyond a specified amount in a distribution, on a return of assets on liquidation the assets of the Company remaining available for distribution among the members, after giving effect to such rights and to any provision made under Section 187 of the Insolvency Act 1986, shall be applied first in paying to the holder of the Special Voting Share the nominal amount paid up on such Share and then in paying to the holder of the Equalisation Share the nominal amount paid up thereon and then in paying any amounts standing to the credit of the holder of the Equalisation Share in any reserve set up in the books of the Company pursuant to paragraph 3.6.2(a) of Schedule 2 to the Sharing Agreement and then in paying to the relevant holders of the Ordinary Shares any amounts standing to the credit of any reserve for their benefit set up in the books of the Company pursuant to paragraph 3.6.2(b) or (c) of Schedule 2 to the Sharing Agreement and any surplus remaining after application of the assets in accordance with the above shall be applied in making payments to the holder of the Equalisation Share and/or the holders of the Ordinary Shares, in accordance with their entitlements, which shall be determined as follows:- | |
(a) The liquidator of the Company shall determine as at the earliest date (the "Reference Date") on which the liquidator is able to make a final distribution to members and creditors of the Company the gross amount which would be available for distribution to the holders of Ordinary Shares on the liquidation of the Company after payment in full of any amount standing to the credit of:- | |
(I) the holder of the Equalisation Share in any reserve set up in the books of the Company, pursuant to paragraph 3.6.2(a) of Schedule 2 to the Sharing Agreement; and | |
(II) holders of Ordinary Shares in any reserve set up in the books of the under Company paragraph, 3.6.1(b) or 3.6.2(c) of Schedule 2 to the Sharing Agreement | |
and to calculate the amount thereof available for distribution to holders of Publicly-held Rio Tinto Ordinary Shares or the amount (expressed as a negative sum) of the shortfall which would need to be obtained before the holders of Publicly-held Rio Tinto Ordinary Shares would receive any payment by way of distribution (in either case the "Company's Own Distribution Amount"), on the assumption that distribution to the Company's creditors and members took place on the Reference Date. The liquidator of the Company shall certify the result of such calculation to RTL. | |
(b) Whether or not proceedings have been commenced for the liquidation of RTL, RTL shall be required under the Sharing Agreement to instruct the Relevant Officer for the time being of RTL to draw up accounts as at the Reference Date of all assets (valued as if RTL was in liquidation and those assets were to be realised by a liquidator of RTL in an orderly manner) and liabilities which would be admissible to proof if RTL were in liquidation on the Reference Date (other than the asset or liability represented by any Equalisation Payment as defined in paragraph 4.1 of Schedule 2 to the Sharing Agreement to be made in accordance with the Sharing Agreement or any payment on the RTL Equalisation Share under Rule 143(d)(v) or (vi) of the RTL Constitution) to show the gross amount which would be available for distribution to holders of RTL Ordinary Shares on the liquidation of RTL (if it were to occur on the Reference Date) after payment in full of any amount standing to the credit of | |
(I) the holder of the RTL Equalisation Share in any reserve set up in the books of RTL pursuant to paragraph 3.6.2(a) of Schedule 2 to the Sharing Agreement; or | |
(II) the holders of RTL Ordinary Shares in any reserve set up in the books of RTL under paragraph 3.6.2(b) or 3.6.2(c) of Schedule 2 to the Sharing Agreement |
31
and to calculate the amount thereof available for distribution to holders of Publicly-held RTL Ordinary Shares or the amount (expressed as a negative sum) of the shortfall which would need to be obtained before the holders of Publicly-held RTL Ordinary Shares would receive any payment by way of distribution (in either case, the "RTL Own Distribution Amount"), on the assumption that the distribution to RTL's creditors and members on liquidation took place on the Reference Date. RTL is obliged under the Sharing Agreement to instruct the Relevant Officer of RTL to certify the result of such calculation to the Company. | ||||
(c) The liquidator of the Company shall make, and certify to RTL, the results of the following calculation as at the Reference Date and agree such calculation with the Relevant Officer of RTL, which calculation shall be expressed in sterling, with any Australian dollar amounts being converted to sterling at the Liquidation Exchange Rate as at the Reference Date:- | ||||
(COD + RTLD) x | COS |
|||
(RTLOS x EF) + COS | ||||
where:- | ||||
COD = the Company's Own Distribution Amount; |
||||
RTLD = the RTL Own Distribution Amount; | ||||
COS = the number of Publicly-held Rio Tinto Ordinary Shares in issue on the Reference Date; |
||||
RTLOS = the number of Publicly-held RTL Ordinary Shares in issue on the Reference Date; and |
||||
EF = the Equalisation Fraction. |
||||
The result of such calculation is referred to below as the "Adjusted Company Distribution Amount". |
||||
(d) If the Adjusted Company Distribution Amount is equal to or more than the Company's Own Distribution Amount, then the assets remaining available for distribution (which shall include any distribution made on the RTL Equalisation Share pursuant to Rule 143(d)(v) or (vi) of the RTL Constitution, any amounts paid by RTL under paragraph 4.1.4 of Schedule 2 to the Sharing Agreement and any amounts paid by RTL from reserves set up in the books of RTL under paragraph 3.6.2(a) of Schedule 2 to the Sharing Agreement) shall belong to and be distributed among the holders of Ordinary Shares rateably according to the numbers of Ordinary Shares held by them. |
||||
(e) If the Adjusted Company Distribution Amount is equal to or more than zero, but is less than the Company's Own Distribution Amount, the liquidator of the Company shall pay out of the assets available for distribution an amount by way of return of capital on the Equalisation Share in priority to any amounts payable to the holders of Ordinary Shares such that (taking account of any tax payable on the making or receipt of the distribution of that amount, after allowing for any offsetting tax credits, losses or deductions) the ratio of the amount available for distribution on each Publicly-held RTL Ordinary Share:- |
||||
(I) apart from in each case any undistributed amounts resulting from the payment by RTL to a member of the Rio Tinto Group or the Company to a member of the RTL Group of any reserves under paragraph 3.6.2(a) of Schedule 2 to the Sharing Agreement or any amounts credited to any reserve in the books of the Company for the benefit of holders of Ordinary Shares or any amounts credited to any reserve in the books of RTL for the benefit of holders of RTL Ordinary Shares, in each case under paragraphs 3.6.2(b) and 3.6.2(c) of Schedule 2 to the Sharing Agreement; and |
32
(II) on the assumption that distribution to the Company's members and creditors and RTL's members and creditors took place on the Reference Date; and | |
(III) after taking into account the amounts available for distribution on each Publicly-held RTL Ordinary Share prior to such payment | |
to the amount available for distribution on each Publicly-held Rio Tinto Ordinary Share (converting Australian dollar amounts to sterling by application of the Liquidation Exchange Rate as at the Reference Date) is equal to the Equalisation Ratio (and the balance of the assets of the Company available for distribution remaining after any such payment on the Equalisation Share shall belong to and be distributed, among the holders of Ordinary Shares rateably according to the numbers of Ordinary Shards held by them). | |
(f) If the Adjusted Company Distribution Amount is zero or a negative amount and the Company's Own Distribution Amount is a positive amount then the liquidator of the Company shall pay out of the assets available for distribution an amount by way of return of capital on the Equalisation Share in priority to any amounts payable to the holders of Ordinary Shares such that (taking account of any tax payable on the making or receipt of the distribution of that amount after allowing for any offsetting tax credits, losses or deductions) the amount available for distribution to holders of Publicly-held Ordinary Shares, on the assumption that distribution to the Company's members and creditors took place on the Reference Date, is zero. | |
(g) If the Company's Own Distribution Amount is zero or a negative amount and the RTL Own Distribution Amount is zero or a negative amount, then no distribution shall be made by the liquidator of the Company on the Equalisation Share or to holders of Ordinary Shares. | |
(h) In making the calculations referred to in this paragraph (ii), the Relevant Officer of RTL and the liquidator shall take into account the distributions which fall to be made on those Ordinary Shares and those RTL Ordinary Shares which are not Publicly-held Ordinary Shares it being acknowledged that for each company the per share distributions on the Publicly-held Ordinary Shares will be the same as the distributions on that company's non-Publicly-held Ordinary Shares. | |
(i) In this paragraph "Relevant Officer" of RTL means the auditor of RTL or if RTL is in liquidation, the liquidator of RTL. | |
(j) In this paragraph "the gross amount which would be available for distribution" to shareholders means such amount ignoring any distribution on the Equalisation Share or RTL Equalisation Share or any Equalisation Payment (as defined in paragraph 4.1 of Schedule 2 to the Sharing Agreement) made in accordance with the Sharing Agreement and any tax payable on the making or receipt of the Equalisation Payment or distribution and both "the gross amount which would be available for distribution" and "the amount available for distribution" refer to such amount before deduction of any amount in respect of tax required to be deducted or withheld from the distribution to ordinary shareholders by or on behalf of the company paying or making the distribution but net of any tax payable by that company on the distribution to its ordinary shareholders. |
33
34
35
8A | DLC Dividend Share | |
Without limiting Article 8 but notwithstanding any other provision to the contrary in these Articles, the Directors may issue a DLC Dividend Share in the capital of the Company to RTL or a wholly owned subsidiary of RTL on the following terms: | ||
(a) | the DLC Dividend Share does not confer on its holder any right: | |
(i) to vote or to attend or be heard at any General Meeting; | ||
(ii) to redemption or, in a winding-up, to repayment of capital; or | ||
(iii) subject to Article 8A(b), to participate in assets or profits of the Company; or | ||
(iv) to receive notices of any General Meeting; | ||
(b) | the holder of the DLC Dividend Share shall not be entitled to receive a dividend on the share unless and until the following conditions have been satisfied: | |
(i) the Directors in their absolute discretion resolve to pay the dividend on the DLC Dividend Share; | ||
(ii) the legal and beneficial owner of the DLC Dividend Share at the time of payment and declaration of the dividend is RTL or a wholly owned subsidiary of RTL; | ||
(iii) in the case of the first dividend to be paid on the DLC Dividend Share, there has been at least one dividend paid on Ordinary Shares since the date of issue of the DLC Dividend Share; | ||
(iv) in the case of subsequent dividends paid on the DLC Dividend Share, there has been at least one dividend paid on Ordinary Shares since the date of payment of the last dividend on the DLC Dividend Share; and | ||
(v) the amount of the dividend on the DLC Dividend Share shall not exceed the prescribed percentage of the aggregate amount of the last dividend paid on Ordinary Shares. | ||
For the purposes of this Article, the prescribed percentage shall be 100% or such lower percentage as the Board resolves at the date of issue of the DLC Dividend Share; and | ||
(c) | upon the earlier of: | |
(i) the registration of a transfer of the DLC Dividend Share to a person other than RTL or a wholly owned subsidiary of RTL; and | ||
(ii) a person other than RTL or a wholly owned subsidiary of RTL becoming the beneficial owner of the DLC Dividend Share, |
36
37
38
39
40
(A) | the death of such member; | |
(B) | the non-payment of any income tax or other tax by such member; |
41
42
43
(a) by way of rights (otherwise than by Matching Offers), where the proposed offer (when aggregated with (I) any previous offers by either company of shares or other securities for cash by way of rights or otherwise but not under Matching Offers, (II) any sales other than intra Rio Tinto Group sales by a member of the Rio Tinto Group of RTL Ordinary Shares and (III) any sales, other than intra RTL Group sales, by a member of the RTL Group of Ordinary Shares, in each case in the relevant period) exceeds the then most Limiting Restriction that for the time being would be applicable were shares or other securities of the description proposed to be offered in fact offered for cash otherwise than pro rata by way of rights to existing shareholders of the relevant class either by RTL or by the Company; or | |
(b) otherwise than by way of rights, at below Market Value; | |
(ii) the reduction or redemption of the company’s ordinary share capital by way of a capital repayment to holders of its ordinary shares or a cancellation of unpaid ordinary share capital; | |
(iii) the purchase by the company of its own ordinary shares (except for such a purchase at, around or below prevailing market prices for those shares where the purchase occurs in accordance with Applicable Regulation); | |
(iv) the voluntary liquidation of the company; | |
(v) an adjustment to the Equalisation Ratio otherwise than in accordance with paragraph 5 of Schedule 2 to the Sharing Agreement; | |
(vi) the amendment to the terms of, or termination of, the Sharing Agreement, the Rio Tinto Shareholder. Voting Agreement or the RTL Shareholder Voting Agreement other than, in the case of the RTL Shareholder Voting Agreement or the Rio Tinto Shareholder Voting Agreement, an amendment to conform such agreement with the terms of the Sharing Agreement or, in any case, by way of formal or technical amendment which is not materially prejudicial to the interests of the shareholders of either company or is necessary to correct any inconsistency or manifest error or is by way of an amendment agreed between the companies pursuant to Clause 17.6 of the Sharing Agreement or the equivalent provisions of any other such document; | |
44
45
46
47
48
47 | Convening and Location of General Meetings |
(A) The Directors may whenever they think fit, and shall on requisition in accordance with the Statutes, proceed with proper expedition to convene an Extraordinary General Meeting. | |
(B) In the case of any General Meeting the Directors or the chairman of the meeting may, notwithstanding the notice specifying the place of the meeting or adjourned meeting (the “principal place”), make arrangements for simultaneous attendance at and participation in (including by way of video link) the meeting or adjourned meeting at that or any other place by persons entitled to attend the meeting, provided that persons attending at any particular place shall be able to see and hear, and be seen and heard by, persons attending at the other place or places at which the meeting is convened. | |
(C) The Directors may, from time to time, make such arrangements for the purpose of ensuring that the level of attendance at any place at which any General Meeting takes place is consistent with the orderly conduct of the meeting as they shall, in their absolute discretion, consider appropriate, and may from time to time vary any such arrangements or make any new arrangements in place of them, provided that the entitlement of a member to attend a meeting or adjourned meeting shall be satisfied by his being given the entitlement to attend at such place (fulfilling the conditions specified in paragraph (B) of this Article) as may be specified by the Directors for the purposes of this Article. |
49
50
51
52
53
54
the member shall not (for so long as the default continues) nor shall any transferee to whom any of such shares are transferred other than pursuant to an approved transfer or pursuant to paragraph (C)(ii) below be entitled to attend or vote either personally or by proxy at a shareholders' meeting or to exercise any other right conferred by membership in relation to shareholders' meetings. | |
(C) Where the default shares represent 0.25 per cent. or more of the issued shares of the class in question, the direction notice may also direct that:- | |
(i) any dividend or part thereof or other money which would otherwise be payable in respect of the default shares shall be retained by the Company without any liability to pay interest thereon when such money is finally paid to the member and the member shall not be entitled to elect to receive shares in lieu of dividend; and/or | |
(ii) no transfer of any of the shares held by such member shall be registered unless the transfer is an approved transfer or:- | |
(a) the member is not himself in default as regards supplying the information required; and | |
(b) the transfer is of part only of the member's holding and, when presented for registration, is accompanied by a certificate by the member in a form satisfactory to the Directors to the effect that after due and careful enquiry the member is satisfied that none of the shares the subject of the transfer are default shares provided that, in the case of shares in uncertificated form, the Directors may only exercise their discretion not to register a transfer if permitted to do so by the Regulations. | |
Any direction notice may treat shares of a member in certificated and uncertificated form as separate holdings and either apply only to the former or to the latter or make different provision for the former and the latter. | |
(D) The Company shall send to each other person appearing to be interested in the shares the subject of any direction notice a copy of the notice, but the failure or omission by the Company to do so shall not invalidate such notice. | |
(E) (i) Save as herein provided any direction notice shall have effect in accordance with its terms for so long as the default in respect of which the direction notice was issued continues and shall cease to have effect thereafter upon the Directors so determining (such determination to be made within a period of one week of the default being duly remedied with written notice thereof being given forthwith to the member). | |
(ii) Any direction notice shall cease to have effect in relation to any shares which are transferred by such member by means of an approved transfer or in accordance with paragraph (C)(ii) above. | |
(F) For the purposes of this Article:- | |
(i) a person shall be treated as appearing to be interested in any shares if the member holding such shares has been served with a notice under the said Section 212 and either (a) the member has named such person as being so interested or (b) (after taking into account the response of the member to the said notice and any other relevant information) the Company knows or has reasonable cause to believe that the person in question is or may be interested in the shares; and |
55
56
(vii) “Entitlement” in relation to shares in RTL means the entitlement in respect of shares resulting through a person being entitled to those shares as that term is defined in Section 609 of the Corporations Law; | |
(viii) “Holder” is as defined in paragraph (K) below; | |
(ix) “Interest” in relation to shares in the Company, means:- | |
(a) any interest in Ordinary Shares which would be taken into account in determining for the purposes of Part VI of the Original Act whether a person has a notifiable interest (including any interest which he would be taken as having for those purposes); and | |
(b) any interest in Ordinary Shares (an “Additional Interest”) mentioned in Section 209(1)(a), (b), (c), (d), (e), (f), (g) or (h) of the Original Act (except that of a bare trustee) or mentioned in Section 208(4)(b) of the Original Act (but on the basis that the entitlement there referred to could arise under an agreement within the meaning in Section 204(5) and (6) of that Act), | |
and “Interested” shall be construed accordingly; | |
(x) the “Original Act” means the Companies Act 1985 as in force at the date of adoption of this Article and notwithstanding any repeal, modification or re-enactment thereof after that date (including for the avoidance of doubt, any amendment, replacement or repeal by regulations made by the Secretary of State pursuant to Section 210A of that Act to the definition of relevant share capital in Section 198(2) or to the provisions as to what is taken to be an interest in shares in Section 208 or as to what interests are to be disregarded in Section 209 or the percentage giving rise to a notifiable interest in Section 199(2)); | |
(xi) “Permitted Holding” means:- | |
(a) any Entitlement to RTL Ordinary Shares, arising as a result of two or more persons becoming Associates, in relation to the acquisition of which an exemption or declaration under Section 655A of the Corporations Act is in force, with the effect that the acquisition of such Entitlement would not breach Section 606 of the Corporations Act; | |
(b) any Interest in shares in the Company or an Entitlement to RTL Ordinary Shares held solely by a person as a bare trustee or by a person who, if the incidents of that person's Interest or Entitlement were governed by the laws of England, would in the opinion of the Directors be regarded as a bare trustee in respect of that Interest or Entitlement; | |
(c) any Interest of a person in shares in the Company or any Entitlement of a person to any RTL Ordinary Shares which under arrangements approved by the Directors and the directors of RTL respectively have been allotted or issued with a view to that person (or purchasers from that person) offering the same to the public within a period not exceeding three months from the date of the relevant allotment or issue; | |
(d) any Interest of a person in shares in the Company or any Entitlement of a person to any RTL Ordinary Shares which the Directors are satisfied is held by virtue only of that person being entitled to exercise or control the exercise of 20 per cent. or more of the voting power at general meetings of a company which is a Permitted Person; |
57
(e) any Interest or Entitlement of a Permitted Person, other than RTL Shareholder SVC or RTP Shareholder SVC; | |
(xii) “Permitted Person” means:- | |
(a) any member of the Rio Tinto Group; | |
(b) any member of the RTL Group; | |
(c) RTL Shareholder SVC; | |
(d) RTP Shareholder SVC; | |
(e) an ADR Depositary, acting in his capacity as such; | |
(f) The Depositary Trust Company or any successor and/or its nominee acting in the capacity of a clearing agency in respect of dealings in American Depositary Receipts; | |
(g) a clearing house or a nominee of a recognised clearing house or of a recognised investment exchange who is designated as mentioned in Section 185(4) of the Original Act (a “recognised person”); | |
(h) a trustee (acting in that capacity) of any employees' share scheme of the Company or of RTL; | |
(i) any person (an “Offeror”) who has made an offer to acquire all the outstanding RTL Ordinary Shares (other than those already owned by the Offeror) which may, if the Offeror so decides, be conditional upon an offer which has been made by the Offeror (or a subsidiary of, a parent company of, or a subsidiary of a parent company of the Offeror) on terms which satisfy each of subparagraphs (I), (II) and (III) of Rule 145(B)(x)(i) of the RTL Constitution) to acquire all the outstanding Ordinary Shares (other than those already owned by the Offeror or such subsidiary, parent company or subsidiary of a parent company) becoming unconditional and shall:- | |
(I) be unconditional when made or contain only such conditions as any such offer must contain pursuant to the Corporations Act; | |
(II) disclose the highest price paid or value of consideration given for Ordinary Shares by the Offeror or its concert parties and for RTL Ordinary Shares by the Offeror and its Associates since the beginning of the period commencing 12 months before the date on which the Offeror or any of its Associates or concert parties became a Relevant Person and include a cash offer (or an offer with a cash alternative) to acquire all the RTL Ordinary Shares (other than those already directly or indirectly owned by the Offeror) at a price per RTL Ordinary Share which (subject to paragraph (xix) below) is not less than the higher of:- | |
(aa) the highest price paid or value of consideration given for Ordinary Shares by the Offeror or its Associates since the beginning of the period commencing 12 months before the date on which the Offeror or any of its concert parties became a Relevant Person multiplied by the Equalisation Fraction as at the date of the offer and converted into Australian dollars. Such conversion shall be made at the closing mid-point spot Australian dollar-sterling exchange rate, on the date on which the Offeror or any of its concert parties became a Relevant Person as published in the Financial Times; and |
58
(bb) the highest price paid or value of consideration given for RTL Ordinary Shares by the Offeror (or its Associates) in Australian dollars (or equivalent, converted into Australian dollars by a method comparable to that set out in (aa) above) since the beginning of the period commencing 12 months before the date on which the Offeror or any of its Associates became a Relevant Person; | |
provided that if no such shares have been acquired by the Offeror or any of its Associates or concert parties during that period the price (subject to paragraph (xix)) shall be not less than the higher of: | |
(cc) the middle market quotation derived from the London Stock Exchange Daily Official List in respect of Ordinary Shares on the dealing day preceding the date on which the offer is announced, multiplied by the Equalisation Ratio as at that day and converted into Australian dollars at the closing mid-point Australian dollar-sterling exchange rate as at such date as published in the Financial Times; and | |
(dd) the weighted average sale price derived from the Australian Stock Exchange in respect of RTL Ordinary Shares on the Business Day preceding the date on which the offer is announced; and | |
(III) comply with the provisions of the Corporations Act as if it were an offer made under the Corporations Act; | |
provided that if the terms of any such offer would, at the time it would be required to be made, be illegal or contravene any applicable law or regulatory requirement (including the Corporations Act) then the offer shall be on such terms as may be necessary to comply with such applicable law or regulatory requirement but otherwise shall approximate as far as is possible the requirements set out in (I) to (III) above and provided further that references to the price paid for an Ordinary Share or a RTL Ordinary Share shall be deemed to include the price paid for an interest through an American Depositary Receipt representing such a share converted into sterling or Australian dollars as appropriate at the closing mid-point exchange rate of the purchase currency and sterling or Australian dollars (as appropriate) on the date of acquisition of such interest obtained from the Financial Times (in the case of Ordinary Shares) or from the Australian Financial Review in the case of RTL Ordinary Shares; | |
(j) any person who (i) owns directly or indirectly Publicly-held Voting Shares in the Company which carry the right to cast more than 50 per cent. of the total votes attaching to all Publicly-held Voting Shares capable of being cast on a poll at a General Meeting and (ii) owns directly or indirectly Publicly-held RTL Ordinary Shares which carry the right to cast more than 50 per cent, of the total votes attaching to all Publicly-held RTL Ordinary Shares capable of being cast on a poll at a general meeting of RTL, and has reached that level of ownership by receiving acceptances under offers to acquire all the outstanding Ordinary Shares and RTL Ordinary Shares (other than those already owned by that person) or as a result of a scheme of arrangement approved by the High Court or as a result of a compromise or arrangement approved by the relevant court of Australia under Part 5.1 of the Corporations Act or by any combination of these; | |
(k) any concert party or Associate of an Offeror; |
59
(xiii) "Relevant Holding" means an Interest in shares in the Company or an Entitlement to RTL Ordinary Shares or both (disregarding any part of that Interest or Entitlement which is a Permitted Holding) which together would otherwise entitle their holder to cast on a poll (either directly as a member of the Company or through any votes which may be cast by the holder of the Special Voting Share to reflect votes which the holder of the Relevant Holding is entitled to cast in respect of RTL Ordinary Shares) 20 per cent. or more of the total votes attaching to all share capital of the Company of all classes on a Joint Decision (assuming that all the Publicly-held RTL Ordinary Shares including those comprised in such Entitlement were voted on the equivalent resolution at the nearly contemporaneous general meeting of RTL and counted in calculating the votes attached to the Special Voting Share on such decision) provided that if the Relevant Holding does not include any RTL Ordinary Shares, the Relevant Holding includes an Interest in shares in the Company (other than the Special Voting Share) which carry the right on a poll to cast 30 per cent. or more of the total votes attaching to all share capital of the Company of all Classes (apart from the Special Voting Share) taken as a whole and capable of being cast on a poll at a General Meeting; | |
(xiv) "Relevant Person" means any person (whether or not identified) who has, or who appears to the Directors to have, a Relevant Holding or who is deemed for the purposes of this Article to be a Relevant Person; | |
(xv) "Relevant Share Capital" means the relevant share capital (as defined in section 198(2) of the Original Act) of the Company; | |
(xvi) "Relevant Shares" means all the shares in which a Relevant Person or an Excluded RTL Holder has, or appears to the Directors to have, an Interest or which are deemed for the purposes of this Article to be Relevant Shares; | |
(xvii) "Required Disposal" means a disposal or disposals of such a number of Relevant Shares (or interests therein) as will cause a Relevant Person to cease to be a Relevant Person, not being a disposal to another Relevant Person (other than a Permitted Person) or a disposal which constitutes any other person (other than a Permitted Person) a Relevant Person; | |
(xviii) references to the Financial Times mean the London Edition, and includes, if that newspaper fails to be published or fails to publish the relevant information any other daily newspaper circulating in London nominated by the Board which does publish the relevant information and references to the Australian Financial Review include, if that newspaper ceases to be published or fails to publish the relevant information, any other daily newspaper circulating in Melbourne nominated by the Board which does publish the relevant information; | |
(xix) references in paragraph (xii)(i) to "price" or "value of consideration" mean such price or value: | |
(a) adjusted to reflect the effect of any share consolidation or subdivision, allotment of shares, rights issue, issue of options, issue of convertible securities or reduction of capital which occurred after that price or consideration was paid or given and before the offer to acquire all the RTL Ordinary Shares referred to in that paragraph occurred; and | |
(b) adjusted to reflect the net amount of any dividend which had been declared or announced at the time the price or consideration was paid or given if the shares acquired were at that time trading cum-dividend and at the time of the offer the shares are trading ex-dividend or vice versa, |
60
and the certificate of the Auditors stating the appropriate amount of an adjustment required by (a) or (b) shall be conclusive, | |
and, for the purposes of this Article, where the Directors resolve in good faith that they have made reasonable enquiries and that they are unable to determine: | |
(c) whether or not a particular person has an Interest in any particular shares; or | |
(d) who is Interested in any particular shares, | |
the shares concerned shall be deemed to be Relevant Shares and all persons interested in them to be Relevant Persons. | |
(C) Subject to paragraphs (D), (K) and (L) below and without prejudice to Article 63, the provisions of Part VI of the Original Act shall apply in relation to the Company as if those provisions extended to Additional Interests and accordingly the rights and obligations arising under that Part shall apply in relation to the Company, its members and all persons Interested in Relevant Share Capital, as extended by this paragraph; but so that Additional Interests shall, when disclosed to the Company, be entered in a separate register kept by the Company for that purpose. The rights and obligations created by this paragraph in respect of Interests in shares (including, but not limited to, Additional Interests) are in addition to and separate from those arising under Part VI of the Act. | |
(D) Sections 210(3) to (6), 211(10), 213(3) (so far as it relates to Section 211(10)), 214(5), 215(8), 216(1) to (4), 217(7), 218(3), 219(3) and (4), 454, 455, 732 and 733 of the Original Act shall not apply in respect of Additional Interests. | |
(E) If, to the knowledge of the Directors, any person other than a Permitted Person is or becomes (or appears to be or to be likely to become) a Relevant Person (including, without limitation, by virtue of being deemed to be one), the Directors shall give notice to that Relevant Person (other than persons referred to in paragraph (H) below) and to any other person who appears to the Directors to have Interests in the Relevant Shares and, if different, to the registered holders of those shares. The notice shall set out the restrictions referred to in paragraph (F) below and specify what conditions are to be satisfied in order for the notice to be withdrawn. If the Relevant Shares are held by the ADR Depositary, the notice shall state that: | |
(a) a specified purchaser or purchasers (the "Relevant Purchasers(s)") (excluding the ADR Depositary itself) or Holder or Holders (the "Relevant Holders(s)"), as the case may be, is or are believed or deemed to be Relevant Persons or is or are believed or deemed to be purchasers or Holders through which a Relevant Person or Relevant Persons has or have Interests in either case as specified in the notice; and | |
(b) the Directors believe that each Relevant Purchaser or Relevant Holder or the Relevant Person or Relevant Persons believed or deemed to have Interests through such Relevant Purchaser or Relevant Holder, as the case may be, is or are deemed to be Interested in a specific number of Relevant Shares. |
61
The Directors may extend the period in which any such notice is required to be complied with and may withdraw any such notice (whether before or after the expiration of the period referred to) if it appears to them that there is no Relevant Person in relation to the shares concerned. | |
(F) A holder of a Relevant Share on whom a notice has been served in accordance with paragraph (E) above shall not in respect of that share be entitled, until such time as the notice has been complied with to the satisfaction of the Directors or withdrawn: | |
(a) to attend or vote at any general meeting of the Company or meeting of the holders of Relevant Share Capital or of any class thereof, or to exercise any other right conferred by membership in relation to any such meeting; | |
(b) to receive any dividend or other money which would otherwise be payable in respect of a Relevant Share, which shall be retained by the Company without any liability to pay interest when the money is finally paid to the member; or | |
(c) to elect to receive shares in lieu of any dividend referred to in (b) above. | |
If a notice under paragraph (E) is not complied with by the Relevant Person within the time limit specified, the Directors may appoint a person to execute any documents and implement any procedures as may be required to procure a Required Disposal on behalf of the Relevant Person and to receive and give a good discharge for the purchase price. Brokerage, stamp duty and any other costs of the transfer shall be paid out of the sale proceeds. The net proceeds of any sale under this paragraph shall be paid to the registered holder who held the Relevant Shares sold under this paragraph provided that the registered holder has delivered to the Company such documents or information as may be reasonably required by the Directors. Upon the name of the purchaser being entered in the Register in purported exercise of the powers under this paragraph, the validity of the sale by way of a Required Disposal shall not be challenged by any person. The Directors may not authorise a Required Disposal of any Ordinary Shares held by an Accepting Shareholder during a period in which offers for both Ordinary Shares and RTL Ordinary Shares remain open for acceptance. | |
(G) Without prejudice to the provisions of the Original Act and subject to paragraph (B)(vii) above, the Directors may assume without enquiry that a person is not a Relevant Person unless the information contained in the registers kept by the Company under Part VI of the Act or under Part VI of the Original Act (as applied and extended by this Article), including the separate register to be kept under paragraph (C) above, appear to the Directors to indicate to the contrary or the Directors have reason to believe otherwise, in which circumstances the Directors shall make reasonable enquiries to discover whether any person is a Relevant Person. | |
(H) The Directors shall not be obliged to give any notice required under this Article to be given to any person if they do not know either (i) his identity or (ii) his address. The absence of such a notice in those circumstances and any accidental error in or failure to give any notice to any person to whom notice is required to be given under this Article shall not prevent the implementation of, or invalidate, any procedure under this Article. |
62
63
64
65
66
67
68
69
70
71
72
73
74
COMMITTEES OF THE DIRECTORS | |
75
76
(B) The Directors shall restrict the borrowings of the Company and exercise all voting and other rights and powers of control exercisable by the Company in relation to its subsidiaries so as to secure that the aggregate amount for the time being remaining undischarged of all moneys borrowed by (1) the Company and any of its subsidiaries and (2) RTL and any of its Corporations Act Subsidiaries (exclusive of moneys borrowed by any company in the Rio Tinto Group from and for the time being owing to any other company in the Rio Tinto Group or any company in the RTL Group or by any company in the RTL Group from and for the time being owing to any other company in the RTL Group or any company in the Rio Tinto Group) shall not at any time without the previous sanction of an Ordinary Resolution of the Company exceed one and a half times the Unified Group Share Capital and Reserves. | |
(C) No person dealing with the Company shall by reason of the foregoing provision be concerned to see or inquire whether this limit is observed, and no debt incurred or security given in excess of such limit shall be invalid or ineffectual unless the lender or the recipient of the security had at the time when the debt was incurred or security given express notice that the limit hereby imposed had been or would thereby be exceeded. | |
(D) For the purposes aforesaid: | |
(i) the expression "Unified Group Share Capital and Reserves" means at any time: | |
(a) the amount standing to the credit of the unified share capital account (by whatever name called) of the Company and RTL; plus | |
(b) the aggregate amount standing to the credit of the unified reserves (including any share premium account or capital redemption reserve and the unified profit and loss account of the Company and its subsidiary undertakings and RTL and its controlled entities), all as shown in the latest published audited unified balance sheet of the Company and its subsidiary undertakings and RTL and its controlled entities, which in this Article shall have the meaning given to that expression in the Corporations Act but (i) adjusted as may be necessary and appropriate to take account of any increase in or reduction of the issued and paid-up share capital of the Company or RTL since the date to which the said unified balance sheet shall have been made up and any distributions (other than dividends paid out of profits earned since such date) in cash or in specie made from such reserves or profit and loss account since such date; (ii) excluding any sums set aside for taxation and any share capital or reserves derived from any writing-up by way of revaluation after the date of adoption of these Articles of the Company or any of its subsidiary undertakings or RTL or any of its controlled entities (or, in the case of a company becoming a subsidiary undertaking of the Company or a controlled entity of RTL after that date, the date on which such company became such a subsidiary undertaking or controlled entity) of the book values of any fixed assets; (iii) deducting any amount for goodwill or any other intangible asset shown as an asset in such unified balance sheet; (iv) not including any amounts attributable to minority interests in subsidiary undertakings of the Company or in controlled entities of RTL; and (v) after making such adjustments as the Auditors may consider appropriate (including without prejudice to the generality of the foregoing any adjustments considered appropriate in respect of any shares or other securities or any business or undertaking or part thereof acquired in whole or in part in exchange for or out of the proceeds of issue of any shares of the Company or RTL or in respect of any subsidiary undertaking of the Company or controlled entity of RTL not dealt with by the said unified balance sheet); |
77
(ii) moneys borrowed for the purpose of and within four months applied in repaying other borrowed moneys falling to be taken into account shall not themselves be taken into account until such application; | |
(iii) there shall be excluded from moneys borrowed by any company in the Rio Tinto Group or any company in the RTL Group any such moneys borrowed which is a Project Finance Borrowing. The expression "Project Finance Borrowing" means moneys borrowed to finance a project: | |
(a) which is borrowed by a single purpose company (being a company in the Rio Tinto Group or the RTL Group) whose principal assets and business are constituted by such project and whose liabilities in respect of such moneys borrowed are not the subject of a guarantee, indemnity or any other form of assurance, undertaking or financial support from another company in the Rio Tinto Group or the RTL Group except as expressly provided for in sub-paragraph (b)(3) below; or | |
(b) in respect of and in connection with which the lender or lenders making such moneys borrowed available to the relevant borrower (being a company in the Rio Tinto Group or the RTL Group) have no recourse whatsoever to a company in the Rio Tinto Group or the RTL Group for the repayment of or payment of any sum relating to such moneys borrowed other than: | |
(1) recourse to the borrower for amounts limited to the aggregate cash flow or net cash flow (other than historic cash flow or historic net cash flow) from such project; and/or | |
(2) recourse to the borrower for the purpose only of enabling amounts to be claimed in respect of such moneys borrowed upon an enforcement of a security interest given by the borrower over the assets comprised in such project and/or by any shareholder or the like in the borrower over its shares or the like in the capital of the borrower to secure such moneys borrowed and/or any recourse permitted by (3) below, provided that (A) the extent of such recourse to the borrower is limited solely to the amount of any recoveries made on any such enforcement, and (B) such person or persons are not entitled, by virtue of any right or claim arising out of or in connection with such moneys borrowed, to commence proceedings for the winding-up or dissolution of the borrower or to appoint or procure the appointment of any receiver, trustee or similar person or official in respect of the borrower or any of its assets (save for the assets the subject of such security interest); and/or | |
|
(3) recourse to the borrower, or another company in the Rio Tinto Group or the RTL Group under a guarantee, indemnity or other form of assurance, undertaking or financial support, which in any case (A) is limited to a claim for damages for breach of an obligation (not being a payment obligation) of the person against whom such recourse is available, and/or (B) entitles the creditor for such moneys borrowed, upon default by the borrower, such person or any other person, to require a payment to be made (whether to or for the benefit of such creditor, the borrower or another person) provided that, in the case of (B), where such payment is capable of being for an amount which is material either alone or as a percentage of the moneys borrowed financing the project, such recourse is capable of being called on only during the period prior to practical completion of the project or of that proportion of the project being financed by such moneys borrowed; |
78
79
80
81
82
83
(C) The Directors may either offer such rights of election in respect of the next dividend (or part thereof) proposed to be paid; or may offer such rights of election in respect of that dividend and all subsequent dividends, until such time as the election is revoked; or may allow shareholders to make an election in either form. | |
(D) The basis of allotment on each occasion shall be determined by the Directors so that, as nearly as may be considered convenient, the value of the Ordinary Shares to be allotted in lieu of any amount of dividend shall equal such amount. For such purpose the value of an Ordinary Share shall be the average of the middle market quotations of an Ordinary Share in registered form on the London Stock Exchange, as derived from the Daily Official List, on each of the first five business days on which such Ordinary Shares are quoted ex the relevant dividend. | |
(E) If the Directors determine to offer such rights of election they shall give notice in writing to ordinary shareholders of such rights or shall advertise such offer in one leading daily newspaper published in London, and in such other newspapers (if any) as they shall think fit, and shall specify the procedures to be followed in order to exercise such rights Provided that they need not give such notice to a shareholder who has previously made, and has not revoked, an earlier election to receive Ordinary Shares in lieu of all future dividends, but instead shall send him a reminder that he has made such an election, indicating how that election may be revoked in time for the next dividend proposed to be paid, or shall advertise such reminder in one leading daily newspaper in London, and in such other newspapers (if any) as they shall think fit. | |
(F) On each occasion the dividend (or that part of the dividend in respect of which a right of election has been accorded) shall not be payable on Ordinary Shares in respect of which an election under this Article has been duly exercised and has not been revoked (the elected Ordinary Shares) and in lieu thereof additional shares (but not any fraction of a share) shall be allotted to the holders of the elected Ordinary Shares on the basis of allotment determined as aforesaid. For such purpose the Directors shall capitalise, out of such of the sums standing to the credit of reserves (including any share premium account or capital redemption reserve fund) or profit and loss account as the Directors may determine, a sum equal to the aggregate nominal amount of additional Ordinary Shares to be allotted on that occasion on such basis and shall apply the same in paying up in full the appropriate number of unissued Ordinary Shares for allotment and distribution to and amongst the holders of the elected Ordinary Shares on such basis. | |
(G) The additional Ordinary Shares so allotted on any occasion shall rank pari passu in all respects with the fully-paid Ordinary Shares then in issue save only as regards participation in the relevant dividend. | |
(H) Article 127 shall apply (mutatis mutandis) to any capitalisation made pursuant to this Article. | |
(I) No fraction of an Ordinary Share shall be allotted. The Directors may make such provisions as they think fit for any fractional entitlements including, without limitation, provisions whereby, in whole or in part, the benefit thereof accrues to the Company and/or under which fractional entitlements are accrued and/or retained and in either case accumulated on behalf of any ordinary shareholder. |
84
85
86
87
88
DESTRUCTION OF DOCUMENTS | |
142 | Subject to compliance with the requirements of any relevant system applicable to shares of the Company in uncertificated form, the Company shall be entitled to destroy:- |
(A) all instruments of transfer or other documents which have been registered or on the basis of which, registration was made at any time after the expiration of seven years from the date of registration thereof; | |
(B) all Share Warrants (including coupons or talons detached therefrom) which shall have been cancelled at any time after the expiration of seven years from the date of cancellation thereof; | |
(C) all registered share certificates and dividend mandates which have been cancelled or have ceased to have effect at any time after the expiration of three years from the date of such cancellation or cessation; and | |
(D) all notifications of change of name or address after the expiration of one year from the date of recording thereof; | |
and it shall conclusively be presumed in favour of the Company that every entry in the Register purporting to have been made on the basis of an instrument of transfer or other document so destroyed was duly and properly made and every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and every share certificate, Share Warrant, coupon or talon so destroyed was a valid and effective document duly and properly cancelled and every other document hereinbefore mentioned so destroyed was a valid and effective document in accordance with the recorded particulars thereof in the books or records of the Company. Provided always that:- | |
(i) the provisions aforesaid shall apply only to the destruction of a document in good faith and without notice of any claim (regardless of the parties thereto) to which the document might be relevant; | |
(ii) nothing herein contained shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than as aforesaid or in any other circumstances which would not attach to the Company in the absence of this Article; | |
(iii) references herein to the destruction of any document include references to the disposal thereof in any manner; and |
89
90
(i) the holding of shares of that class in uncertificated form; | |
(ii) the transfer of title to shares of that class by means of a relevant system; or | |
(iii) any provision of the Regulations. |
91
Exhibit 1.2
Constitution of
Rio Tinto Limited
(ACN 004 458 404)
(As adopted by special resolution
passed on 24 May 2000 and amended by
special resolutions passed on 18 April 2002 and on 29 April 2005)
Table of Contents |
Page i
Page ii
Page iii
Page iv
Page v
Page vi
Corporations Act
Company Limited by Shares
MEMORANDUM OF ASSOCIATION OF RIO TINTO LIMITED
(ACN 004 458 404)
1. | The name of the Company is Rio Tinto Limited. | |
2. | The objects for which the Company is established are all or any of the following: | |
(1) | To enter into, operate and carry into effect the Agreement with Rio Tinto plc known as the DLC Merger Sharing Agreement and a Deed known as the CRA Deed Poll Guarantee with full power to: | |
(i) | Agree any amendment or termination or abrogation of all or any of the terms of that Agreement or Deed in accordance with the terms thereof; | |
(ii) | Enter into, operate and carry into effect any further or other agreements or arrangements with or in connection with Rio Tinto plc; and | |
(iii) | Do all such things as in the opinion of the Board of Directors of the Company are necessary or desirable for the furtherance of this object or for the furtherance, maintenance or development of the relationship with Rio Tinto plc constituted by or arising out of any agreement or arrangement mentioned in or made in accordance with this sub-clause. | |
(2) | To acquire and hold shares, stocks, debentures, debenture stock, bonds, unsecured notes, obligations and securities of any company incorporated or carrying on business in Australia or in the United Kingdom or in any other place and of any government, sovereign public body or authority supreme, municipal, local or otherwise. | |
(3) | To acquire any such shares, stocks, debentures, debenture stocks, bonds, unsecured notes, obligations and securities by original subscription, tender, purchase, exchange or otherwise and to subscribe for the same, either conditionally or otherwise, and hold in trust, sell, mortgage, charge, deal with and otherwise acquire or dispose of the same on commission or otherwise. | |
(4) | To apply for, purchase, or otherwise acquire concessions, grants or rights of any kind from any person, firm or corporation or any supreme, municipal, local or other authority and to comply with the conditions of any concession or grant obtained and to sell, lease or otherwise deal with the same or any interest therein and to work, exploit and otherwise turn to account the same or any part thereof. | |
(5) | To guarantee the capital dividends or interest of or upon any shares, stocks, debentures, debenture stock, bonds or other securities or any obligation or contract entered into by any company, association, body, person or authority. |
Page 1 |
(6) | To undertake and execute trusts and agencies of all kinds, and to accept money, securities and property of all kinds for safe custody or otherwise, and to undertake any transaction and carry on any business commonly undertaken or carried on by financiers, bankers, brokers, underwriters, concessionaries, contractors, agents, capitalists or merchants and to transact and carry on all kinds of guarantee, agency, commission and mercantile business. |
(7) | To prospect for, explore, quarry, develop, excavate, dredge for, open, work, win, purchase or otherwise obtain, uranium, lead, zinc, copper, sulphur, tin, silver, alumina, zircon, rutile, ilmenite, monazite, ores or aluminium, iron, gold, platinum, coal, precious stones, atomic minerals or deposits, oil, pyrites, asbestos, wolfram and all other minerals, metals and substances and minerals, and other rights, properties and works. |
(8) | To carry on business as proprietors of and to purchase, take on lease, or in exchange or otherwise acquire, for any estate term or interest therein and to manage supervise and control mineral and other properties, lands and hereditaments of any tenure, mines, mining and other rights or options thereon, and grant, concessions, leases, claims, charters, privileges, licences or authorities of an over lands and mines and mineral, oil-bearing, natural gas-bearing, agricultural and other properties and also mining, dredging, water and other rights. |
(9) | To raise, win, get, quarry, crush, smelt, calcine, refine, dress, amalgamate, manipulate and otherwise treat, prepare for market, sell dispose of and deal in ores, metals, fluxes, tailings, concentrates, slimes, mineral substances and other product of mines either in a manufactured state or otherwise, and any materials or substances resulting from or to be obtained in the process of crushing, smelting, calcining, dressing or amalgamating the same and either free form or in combination with other substances. |
(10) | To apply for, purchase, or otherwise acquire, concessions, grants or rights of any kind from any person, firm or corporation or any supreme, municipal, local or other authority, and to comply with the conditions of any concession or grant obtained, and to sell, lease or otherwise deal with the same or any interest therein and to work, exploit and otherwise turn to account for the same of any part thereof. |
(11) | To carry on business as ship owners, railway proprietors, motor car, lorry and coach proprietors and garage proprietors, carriers and haulers, bankers, storekeepers, wharfingers, cartage and storage contractors, and building and general contractors, and to buy, sell or otherwise deal in real or personal property of any kind. |
(12) | To carry on business as manufacturers of and dealers in and exporters and importers of goods and merchandise of all kinds and merchants generally. |
(13) | To advance, deposit and lend money, securities and property to or with such persons and on such terms as may seem expedient, and to discount, buy, sell and deal in bills, notes, warrants, coupons, and other negotiable or transferable securities or documents. |
(14) | To apply for, purchase or otherwise acquire any patents, brevets d'invention, licences, concessions and the like, conferring any exclusive or non-exclusive or limited right to use, or any secret or other information as to any invention which may seem capable of being used for any of the purposes of the Company, or the acquisition of which may seem calculated directly or indirectly to benefit this Company, and to use, exercise, develop or grant licences in respect of, or otherwise turn to account the property, rights or information so acquired, and also to acquire, use and register trade marks, trade names, registered or other designs, rights of copyright or other rights or privileges in relation to any business for the time being carried on by the Company. |
Page 2
|
(15) | To manufacture and deal in all kinds of articles and things required for the purposes of any such business as aforesaid, or commonly dealt in by persons engage in such business. |
(16) | To purchase or otherwise acquire for any estate or interest any property, assets or rights of any kind which may appear to be necessary, or convenient for any business of the Company, and to develop and turn to account and deal with the same in such manner as may be thought expedient. |
(17) | To borrow and raise money and to secure or discharge any debt or obligation or binding on the Company in such manner as may be thought fit, and in particular by mortgages and charges upon the undertaking and all or any of the property and assets (present or future) and the uncalled capital of the Company, or by the creation and issue on such terms as may be thought expedient of debentures, debenture stock or other securities of any description. |
(18) | To purchase with a view to closing or re-selling or otherwise dealing with the whole or in part any business or properties which may be deemed likely to injure by competition or otherwise any business or branch of business which the Company is authorised to carry on. |
(19) | To promote any company whose objects shall include the acquisition of all or any of the assets or liabilities of the Company, or the promotion of which shall be considered to be calculated to advance directly or indirectly the objects of this Company or the interests of its members. |
(20) | To lend money to subsidise and otherwise assist any company, firm or person in any case in which such subsidy, assistance or loan may be considered likely, directly or indirectly, to further the objects of this Company or the interests of its members. |
(21) | To guarantee the payment of premiums on any sinking fund or endowment policy or policies taken out by any company having objects similar to the objects of the Company to secure the discharge of any mortgage charge or debenture of such company and to guarantee the payment of the principal and of any interest in respect of any such mortgage, charge or debenture and to charge the Company's assets accordingly. |
(22) | To sell, lease, grant licences, easements and other rights over an in any other manner deal with or dispose of the undertaking, property, assets, rights and effects of the Company or any part thereof for such consideration as may be thought fit, and in particular for stocks, shares or securities of any other company. |
(23) | To take all necessary or proper steps in Parliament and with the authorities, national, local, municipal or otherwise, of any place in which the Company may have interests, and to carry on any negotiations or operations for the purpose of, directly or indirectly, carrying out the objects of the Company, or effecting any modification in the constitution of the Company, or furthering the interests of its members, and to oppose any such steps taken by any other company, firm or person which may be considered likely, directly or indirectly, to prejudice the interests of the Company or its members. |
Page 3
|
(24) | To subscribe or guarantee money for any national, charitable, benevolent, public, general, commercial or useful object, of for any exhibition, or for any purpose which may be considered likely, directly or indirectly to further the objections of the Company or the interests of any of its members. |
(25) | To grant or otherwise provide or contribute towards the provisions of pensions or other allowances or gratuities to or for the benefit of any Directors, officer, employee or ex-employee of the Company or its predecessors in business, or the relations, connections or dependents of any such persons, and to establish or support associations, institutions, clubs, funds and trusts which may be considered calculated to benefit any such persons or otherwise advance the interests of the Company or its members. |
(26) | To invest any moneys of the Company not for the time being required for the general purposes of the Company in such investments (other than shares in the Company) as may be thought proper, and to hold, sell or otherwise deal with such investments. |
(27) | To carry out and perform as separate and independent objects all or any of the objects set out in the Third Schedule to the Companies Act 1958 AND IT IS HEREBY DECLARED that this paragraph shall operate independently of and without prejudice to the provisions of Section 15 of the Companies Act 1958. |
(28) | To carry out and perform any of the objects of the Company in any part of the world, AND IT IS HEREBY DECLARED that the Company shall have power to carry out and perform any of the matters abovementioned (whether in one or different paragraphs) apart from any other of the said matters and that none of the above descriptions shall be limited or restrained by reference to the name of the Company or to matters of the same or some similar kind elsewhere in this Clause referred to or shall be otherwise limited or restrained by any other part of this Clause nor by any inference to be drawn from such other part and so that wherever such construction is possible the objects specified in this Clause may be construed in as wide a sense as if each of the paragraphs hereof defined the objects of a separate and independent company. |
3. | The share capital of the company may, without limitation, be divided into ordinary shares, one Special Voting Share, one Equalisation Share and one DLC Dividend Share. |
4. | The liability of the members is limited. |
5. | A special resolution altering or amending any of the provisions listed in Rule 7(a)(vii) of the Company's Rules (each a "Rio Tinto Limited Entrenched Provision") does not have any effect unless and until the holder of the Special Voting Share (as defined in the Rules) has consented in writing to the alteration or amendment. A reference in this Clause to a special resolution altering or amending any Rio Tinto Limited Entrenched Provision includes a reference to any resolution of any type which has the effect of altering, adding to or omitting any Rio Tinto Limited Entrenched Provision or any other effect which is equivalent or substantially similar to that effect (which for the avoidance of doubt shall be taken to include ratification of any breach of any such Rio Tinto Limited Entrenched Provision). |
Page 4 |
6. | A special resolution altering or amending sub-Clause (1) of Clause 2, Clause 5 or this Clause 6 of this Memorandum (each an "Entrenching Provision") does not have any effect unless and until the holder of the Special Voting Share (as defined in the Rules) has consented in writing to the alteration or amendment. A reference to this Clause to a special resolution altering or amending this Clause includes a reference to any resolution of any type which has the effect of altering, adding to or omitting this Clause or any other effect which is equivalent or substantially similar to that effect (which for the avoidance of doubt shall be taken to include ratification of any breach of any such Entrenching Provision). |
WE, the several persons whose names, addresses and occupations are subscribed, are desirous of being formed into a Company in pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the capital of the Company set opposite our respective names.
Names, addresses and occupation of subscribers | Signature of subscribers | Number of shares taken by each subscriber |
John Miller Rodd | ||
360 Collins Street | ||
Melbourne | ||
Solicitor | John Rodd | One |
Hugh Oliver Clark | ||
360 Collins Street | ||
Melbourne | ||
Solicitor | H O Clark | One |
Total Number of Shares | Two |
DATED this 16th day of December, 1959.
WITNESS to the above signatures:
G H Fewster, Solicitor
360 Collins Street, Melbourne
Page 5
|
Note: The share capital of the Company was:
(1) on incorporation:
Date | Amount | Number of Shares | Par Value | |||
17/12/59 | £5,000,000 | 5,000,000 | £1 | |||
(2) subsequently increased to: | ||||||
Date | Amount | Number of shares | Par Value | |||
27.10.60 | £10,000,000 | 10,000,000 | £1 | |||
06.01.61 | £10,000,000 | 40,000,000+ | 5/ | |||
16.07.62 | £15,000,000 | 60,000,000 | 5/ | |||
31.03.65 | £20,000,000 | 80,000,000 | 5/ | |||
30.11.66 | $60,000,000 | 120,000,000 | 50 cents | |||
09.10.70 | $125,000,000 | 250,000,000 | 50 cents | |||
26.09.73 | $225,000,000 | 450,000,000 | 50 cents | |||
06.05.80 | $300,000,000 | 600,000,000 | 50 cents | |||
03.05.83 | $1,500,000,000 | 750,000,000 | $2* | |||
02.05.89 | $3,000,000,000 | 1,500,000,000 | $2 |
+ | Each share subdivided into 4 shares of 5/- each. |
* | Capital reconstruction on 9.5.83 from 50 cent shares to $2 shares. | ||
Page 6
|
Corporations Act
Company Limited by Shares
RULES of RIO TINTO LIMITED
ACN 004 458 404
Page 7 |
(xi) | "Business Day" when used in the definition of "Liquidation Exchange Rate" means a day on which banks are ordinarily open for business in both London and Melbourne, excluding Saturdays and Sundays but for all other purposes has the meaning ascribed to it in the Listing Rules; | ||
(xii) | "call" includes any instalment of a call and any amount due on allotment of any share; | ||
(xiii) | "capital" means share capital; | ||
(xiv) | "Chairman" includes an Acting Chairman under Rule 64; | ||
(xv) | "Class Rights Action" means, in relation to the Company or Rio Tinto plc, any of the actions listed in Rule 7(a); | ||
(xvi) | "Committee" means a Committee to which powers have been delegated by the Board pursuant to Rule 105; | ||
(xvii) | "Companies Act" means the Companies Act 1985 (United Kingdom); | ||
(xviii) | "Companies Act Subsidiary" has the meaning ascribed to the term "subsidiary" in section 736 of the Companies Act as at the date of adoption of these Rules and when used in relation to a company means any such subsidiary of that company from time to time; | ||
(xix) | "the Company" means Rio Tinto Limited; | ||
(xx) | "Constitution" means these Rules and the Memorandum; | ||
(xxi) | "Corporations Act" means the Corporations Act 2001 (Cth); | ||
(xxii) | "Corporations Act Subsidiary" has the meaning given to "subsidiary" in section 9 of the Corporations Act as at the date of the Sharing Agreement and when used in relation to a body corporate means any subsidiary of that body corporate from time to time; | ||
(xxiii) | "Deed Poll Guarantee" means the deed executed by the Company for the benefit of certain present and future creditors of Rio Tinto plc (as amended from time to time); | ||
(xxiv) | "Deputy Chairman" means a person appointed to the Office of Deputy Chairman in accordance with Rule 63; | ||
(xxv) | "Director" means a person appointed or elected from time to time to the office of Director of the Company in accordance with these Rules and includes any Alternate Director duly acting as a Director; | ||
(xxvi) | "DLC Dividend Share" means the DLC Dividend Share issued in accordance with Rule 5A until it is cancelled, redeemed or otherwise ceases to exist or until it converts to an Ordinary Share in accordance with these Rules or the Corporations Act; | ||
(xxvii) | "Entrenching Provision" has the meaning ascribed to that term in Clause 6 of the Company's Memorandum; |
Page 8 |
(xxviii) | "Equalisation Fraction" means the Equalisation Ratio expressed as a fraction with the numerator being the number relating to the Ordinary Shares of the Company and the denominator being the number relating to the Rio Tinto plc Ordinary Shares; | |||
(xxix) | "Equalisation Ratio" means the ratio of the dividend, capital and voting rights per Ordinary Share to the dividend, capital and voting rights per Rio Tinto plc Ordinary Share as set out in the Sharing Agreement and as adjusted from time to time in accordance with the Sharing Agreement; | |||
(xxx) | "Equalisation Share" means the equalisation share in the Company; | |||
(xxxi) | "Excluded Rio Tinto plc Holder" means any person who is a Relevant Person (other than a Permitted Person) (both as defined in Article 64 of the Rio Tinto plc Articles) on whom a notice has been served under Article 64(E) of the Rio Tinto plc Articles or on whom a direction notice has been served under Article 63 of the Rio Tinto plc Articles which in either case has not been complied with to the satisfaction of the directors of Rio Tinto plc or withdrawn; | |||
(xxxii) | "Home Branch" means the state office of Australian Stock Exchange Limited designated to the Company by Australian Stock Exchange Limited as its Home Branch for administrative purposes; | |||
(xxxiii) | "Joint Decision" means, in relation to a general meeting, a resolution put to the vote of the meeting on a Joint Decision Matter; | |||
(xxxiv) | "Joint Decision Matter" means any of the following: | |||
(A) | the appointment or removal of a Director of the Company and/or a director of Rio Tinto plc; | |||
(B) | the receipt or adoption of the annual accounts of the Company and/or Rio Tinto plc (if shareholders are to be asked to vote on the receipt or adoption of such accounts); | |||
(C) | a change of name by the Company and/or Rio Tinto plc; | |||
(D) | any proposed acquisition or disposal and any proposed transaction with a substantial shareholder, director or other related party which (in any case) is required under Applicable Regulation to be authorised by shareholders; | |||
(E) | the appointment or removal of the Auditors of the Company and/or the auditors of Rio Tinto plc; | |||
(F) | the creation of a new class of shares (or securities convertible into, exchangeable for or granting rights to subscribe for or purchase shares of a new class) in the Company or Rio Tinto plc; | |||
(G) | a change in the corporate status or reregistration of the Company or Rio Tinto plc; | |||
(H) | a matter referred to in Clause 9.2 of the Sharing Agreement; and |
Page 9 |
(I) | any other matter which the Board and the Board of Rio Tinto plc each decide (generally or in a particular case) should be decided upon by Joint Decision; | |||
(xxxv) | "Law" means the Corporations Law as at the date of the Sharing Agreement as defined by Section 13(2) of the Corporations (Victoria) Act 1990 as at that date and includes a reference to the Corporations Regulations as at that date; | |||
(xxxvi) | "Limiting Restriction" has the meaning ascribed to it in Rule 2(b); | |||
(xxxvii) | "Liquidation Exchange Rate" means, as at any date, the closing mid-point spot Australian dollar-sterling exchange rate on the Business Day before such date (as published in the London Edition of the Financial Times, or such other point of reference as the Auditor and the liquidator of Rio Tinto plc (or, as the case may be, the Auditor of Rio Tinto plc and the liquidator of the Company or the liquidators of both the Company and Rio Tinto plc) may determine); | |||
(xxxviii) | "the Listing Rules" means the Listing Rules of Australian Stock Exchange Limited; | |||
(xxxix) | "London Stock Exchange" means London Stock Exchange Ltd or any successor to that body; | |||
(xl) | "Market Value" for the purposes of Rule 7 means, (in the case of the Company) in respect of an issue of a relevant share or security, the weighted average sale price derived from the Australian Stock Exchange and (in the case of Rio Tinto plc) the middle market quotation derived from the London Stock Exchange Daily Official List in each case on the dealing day immediately preceding the date on which any such issue is publicly announced except that in the case of an allotment of Ordinary Shares by way of dividend it shall mean the weighted average sale price of an Ordinary Share derived from the Australian Stock Exchange over the five Business Days prior to the books closing date in respect of that dividend and in the case of an allotment of Rio Tinto plc Ordinary Shares pursuant to Article 128 of the Rio Tinto plc Articles it shall mean the value of a Rio Tinto plc Ordinary Share as defined in Article 128(D) of the Rio Tinto plc Articles; | |||
(xli) | "Matching Offers" means offers by way of rights either by both the Company and Rio Tinto plc to their respective holders of ordinary shares or by the Company on its own or by Rio Tinto plc on its own to both the holders of Ordinary Shares and the holders of Rio Tinto plc Ordinary Shares which, so far as is practicable, take place contemporaneously and which the Auditors have certified do not materially disadvantage a holder of an Ordinary Share in comparison with a holder of a Rio Tinto plc Ordinary Share and which the auditors of Rio Tinto plc have certified do not materially disadvantage a holder of a Rio Tinto plc Ordinary Share in comparison with a holder of an Ordinary Share; |
Page 10 |
(xlii) | "member" means a member of the Company in accordance with the Corporations Act; | ||
(xliii) | "members present" (or a "member present") means members (or a member) present at a general meeting of the Company in person or by duly appointed representative, proxy or attorney; | ||
(xliv) | "Memorandum" means the Company's Memorandum of Association as altered from time to time; | ||
(xlv) | "Office" means the registered office from time to time of the Company; | ||
(xlvi) | "Ordinary Shares" means the ordinary shares in the Company on issue from time to time; | ||
(xlvii) | "person" and words importing persons shall include partnerships, associations and corporations, unincorporated and incorporated by Ordinance, Act of Parliament or registration as well as individuals; | ||
(xlviii) | "procedural resolution" comprises any resolution put to a general meeting which was not included in the notice of such meeting but nevertheless falls to be considered by that meeting; | ||
(xlix) | "proper SCH transfer" has the meaning given to that term in Section 9 of the Corporations Act; | ||
(l) | "Publicly-held Rio Tinto Limited Ordinary Shares" means Ordinary Shares the beneficial owners of which are not members of the Rio Tinto plc Group;` | ||
(li) | "Publicly-held Ordinary Shares" means, in relation to the Company, Publicly-held Rio Tinto Limited Ordinary Shares and, in relation to Rio Tinto plc, Publicly-held Rio Tinto plc Ordinary Shares; | ||
(lii) | "Publicly-held Rio Tinto plc Ordinary Shares" means Rio Tinto plc Ordinary Shares the beneficial owners of which are not members of the Rio Tinto Limited Group; | ||
(liii) | "Publicly-held Rio Tinto plc Voting Shares" means Rio Tinto plc Ordinary Shares the beneficial owners of which are not members of the Rio Tinto Limited Group; | ||
(liv) | "Publicly-held Shares" means, in relation to the Company, Publicly-held Ordinary Shares and, in relation to Rio Tinto plc, Publicly-held Rio Tinto plc Voting Shares; | ||
(lv) | "Register" means the Register of members of the Company to be kept pursuant to the Corporations Act; | ||
(lvi) | "Rio Tinto Limited Entrenched Provision" has the meaning ascribed to that term in Clause 5 of the Company's Memorandum; |
Page 11 |
(lvii) | "Rio Tinto Limited Group" means the Company and its Corporations Act Subsidiaries from time to time and a member of the Rio Tinto Limited Group means any one of them; | ||
(lviii) | "RTL Shareholder SVC" means RTL Shareholder SVC Limited, a company incorporated in England with registered number 3115178 whose registered office is at Princes House, 95 Gresham Street, London EC2V 7LY or such other company which replaces RTL Shareholder SVC Limited pursuant to the terms of the Rio Tinto Limited Shareholder Voting Agreement; | ||
(lix) | "Rio Tinto Limited Shareholder Voting Agreement" means the agreement entered into between RTL Shareholder SVC, The Law Debenture Trust Corporation p.l.c., Rio Tinto plc and the Company relating, amongst other things, to how the Rio Tinto plc Special Voting Share is to be voted (as amended from time to time); | ||
(lx) | "Rio Tinto plc" means Rio Tinto plc, a company incorporated in the United Kingdom with its registered office at 6 St James's Square, London SW1Y 4LD, England; | ||
(lxi) | "Rio Tinto plc Articles" means the Articles of Association of Rio Tinto plc as amended from time to time; | ||
(lxii) | "Rio Tinto plc Deed Poll Guarantee" means the deed executed by Rio Tinto plc for the benefit of certain present and future creditors of the Company (as amended from time to time); | ||
(lxiii) | "Rio Tinto plc Entrenched Provision" has the meaning ascribed to that term in the Rio Tinto plc Articles; | ||
(lxiv) | "Rio Tinto plc Equalisation Share" means the equalisation share of 10p in the capital of Rio Tinto plc the rights attaching to which are set out, inter alia, in Articles 3 and 60 of the Rio Tinto plc Articles; | ||
(lxv) | "Rio Tinto plc Group" means Rio Tinto plc and its Companies Act Subsidiaries from time to time and a member of the Rio Tinto plc Group means any of them; | ||
(lxvi) | "Rio Tinto plc Ordinary Shares" means the ordinary shares of 10p each in Rio Tinto plc on issue from time to time; | ||
(lxvii) | "RTP Shareholder SVC" means RTP Shareholder SVC Pty Limited (ACN 070 481 908) a company incorporated in Victoria with its registered office at 27th Floor, 530 Collins Street, Melbourne, Victoria, Australia or such other company which replaces RTP Shareholder SVC Pty Limited pursuant to the terms of the Rio Tinto plc Shareholder Voting Agreement; | ||
(lxviii) | "Rio Tinto plc Shareholder Voting Agreement" means the agreement between the RTP Shareholder SVC, The Law Debenture Trust Corporation p.l.c., the Company, RTP Australian Holdings Limited and Rio Tinto plc relating, amongst other things, to how the Special Voting Share and the Ordinary Shares held by Tinto Holdings Australia Pty Limited (ACN 004 327 922) or beneficially owned by any other member of the Rio Tinto plc Group are to be voted (as amended from time to time); |
Page 12 |
|
(lxix) | "Rio Tinto plc Special Voting Share" means the special voting share of 10p in Rio Tinto plc; | ||
(lxx) | "Rio Tinto plc Voting Shares" means Rio Tinto plc Ordinary Shares and any shares issued by Rio Tinto plc from time to time (other than the Rio Tinto plc Special Voting Share) where, in relation to any matter or at any time the holders of those shares would, if that matter were to be considered at a general meeting of Rio Tinto plc at that time, be entitled to vote on that matter; | ||
(lxxi) | "SCH" means the securities clearing house as referred to in the Corporations Act; | ||
(lxxii) | "SCH business rules" has the meaning given to that term in Section 9 of the Corporations Act; | ||
(lxxiii) | "Seal" means the common seal of the Company; | ||
(lxxiv) | "Secretary" means a person appointed as Secretary of the Company and includes any person appointed to perform the duties of Secretary; | ||
(lxxv) | "securities" includes shares, rights to shares or stock, options to acquire shares and other securities with rights of conversion to equity and debentures, debenture stock, notes and other like obligations; | ||
(lxxvi) | "Sharing Agreement" means the agreement entered into between the Company and Rio Tinto plc entitled "DLC Merger Sharing Agreement" (as amended from time to time); | ||
(lxxvii) | "special resolution" means a special resolution of the Company in accordance with the Corporations Act; | ||
(lxxviii) | "Special Voting Share" means the special voting share in the Company described in Rules 7, 8 and 74; | ||
(lxxix) | "sterling" means the lawful currency from time to time of the United Kingdom; | ||
(lxxx) | "these Rules" means these Rules as altered or added to from time to time and any reference to a Rule by number is a reference to the Rule of that number in these Rules; | ||
(lxxxi) | "Trustee" means a person or persons appointed to perform the duties of a trustee for the holders of debentures or debenture stock issued by the Company; | ||
(lxxxii) | "wholly owned subsidiary", in relation to a body corporate, means a body corporate none of whose members is a person other than the first mentioned body corporate, a wholly owned subsidiary of the first mentioned body corporate or a nominee of the first mentioned body corporate or its wholly owned subsidiary; |
Page 13 |
(lxxxiii) | "writing" and "written" includes printing, typing, lithography and other modes of reproducing words in a visible form including, without limitation, any representation of words in a physical document or in an electronic communication or form or otherwise. | ||
(b) | A reference to "Limiting Restriction" refers to the limit (if any) on offers for cash (otherwise than pro-rata by way of rights to existing holders of Ordinary Shares or holders of Rio Tinto plc Ordinary Shares) of shares or other securities existing under restrictions for the time being applicable to the Company or Rio Tinto plc under Applicable Regulation, and for the purpose of ascertaining the most Limiting Restriction at any time in any situation: | ||
(i) | a restriction applicable to the Company shall be treated as also applicable to Rio Tinto plc (converting the restrictions, expressed in terms of a number of shares in the Company, into a number of Rio Tinto plc shares by application of the Equalisation Ratio), and vice versa in relation to a restriction applicable to Rio Tinto plc; | ||
(ii) | a restriction expressed in terms of a nominal amount of Rio Tinto plc's equity share capital shall be treated as if it related to the number of Rio Tinto plc Ordinary Shares represented by that nominal amount and then converted into a number of Ordinary Shares by application of the Equalisation Ratio and any restriction in relation to the Company shall be similarly treated; | ||
(iii) | a restriction (when expressed as a number of Ordinary Shares or Rio Tinto plc Ordinary Shares) that, under Applicable Regulation, has been derived by application of a percentage to a number or nominal amount of Ordinary Shares and/or number or nominal amount of Rio Tinto plc Ordinary Shares rather than to the number of the Aggregate Publicly-held Ordinary Shares (taking into account the application of the Equalisation Ratio as described in paragraphs (i) and (ii) above) shall be adjusted to the number that would have been derived from the application of such percentage to the number of the Aggregate Publicly-held Ordinary Shares (after so taking into account the application of the Equalisation Ratio); and | ||
(iv) | any restriction under Applicable Regulation which comes into force in relation to either the Company or Rio Tinto plc after the date of the Sharing Agreement which does not fall within (i), (ii) or (iii) above shall be applied to the Aggregate Publicly-held Ordinary Shares in the way in which the Board and the Board of Rio Tinto plc agree best reflects the rationale underlying paragraphs (i), (ii) and (iii) above. | ||
(c) | Any reference to an "equivalent resolution" considered by holders of Publicly-held Rio Tinto plc Voting Shares means the resolution considered at the most nearly contemporaneous general meeting of Rio Tinto plc which bears a close relationship to the relevant resolution being considered at a general meeting of the Company. For example, but without limitation, a resolution to appoint or remove an individual as a director of Rio Tinto plc, to appoint or remove the auditors of Rio Tinto plc or to receive and adopt the accounts of Rio Tinto plc would, if no resolution considering such matters in relation to the Company were put to the Rio Tinto plc general meeting, be the "equivalent resolution" to a resolution relating to the appointment or removal of the same individual as a Director of the Company, the appointment or removal of the same international firm of auditors as the Auditors or the receipt or adoption of the Company's accounts as the case may be. |
Page 14 |
Page 15 |
Shares, in each case in the relevant period) exceeds the then most Limiting Restriction that for the time being would be applicable were shares or other securities of the relevant description proposed to be offered in fact offered for cash otherwise than pro-rata by way of rights to existing shareholders of the relevant class either by the Company or by Rio Tinto plc; or | ||||
(B) | otherwise than by way of rights, at below Market Value; | |||
(ii) | the reduction or, if permitted by law, redemption of the company's ordinary share capital by way of a capital repayment to holders of its ordinary shares or a cancellation of unpaid ordinary share capital; | |||
(iii) | the purchase by the company of its own ordinary shares (except for such a purchase at, around or below prevailing market prices for those shares where the purchase occurs in accordance with Applicable Regulation); | |||
(iv) | the voluntary liquidation of the company; | |||
(v) | an adjustment to the Equalisation Ratio otherwise than in accordance with paragraph 5 of Schedule 2 to the Sharing Agreement; | |||
(vi) | the amendment to the terms of, or termination of, the Sharing Agreement, the Rio Tinto Limited Shareholder Voting Agreement or the Rio Tinto plc Shareholder Voting Agreement other than, in the case of the Rio Tinto Limited Shareholder Voting Agreement or the Rio Tinto plc Shareholder Voting Agreement, to conform such agreement with the terms of the Sharing Agreement or in any case, by way of formal or technical amendment which is not materially prejudicial to the interests of the shareholders of the Company or Rio Tinto plc or is necessary to correct any inconsistency or manifest error or is by way of an amendment agreed between the Company and Rio Tinto plc pursuant to Clause 17.6 of the Sharing Agreement or the equivalent provision of any such document; | |||
(vii) | any amendment to, or removal of, or the alteration of the effect of (which for the avoidance of doubt shall be taken to include the ratification of any breach of), all or any of the following (each of which is a Rio Tinto Limited Entrenched Provision): | |||
(A) | any of sub-clause (2)(1), clause 5 or clause 6 of the Memorandum; | |||
(B) | the definitions in Rule 2(a) of "Aggregate Publicly-held Ordinary Shares", "Applicable Regulation", "Associate", "Australian dollars", "Board of Rio Tinto plc", "Class Rights Action", "Companies Act Subsidiary", "Corporations Act Subsidiary", "Rio Tinto Limited Entrenched Provision", "Rio Tinto Limited Group", "RTL Shareholder SVC", "Rio Tinto Limited Shareholder Voting Agreement", "Deed Poll Guarantee", "Entrenching Provision", "Equalisation Fraction", "Equalisation Ratio", "Equalisation Share", "Excluded Rio Tinto plc Holder", "Joint Decision", "Joint Decision Matter", "Limiting Restriction", "Liquidation Exchange Rate", | |||
Page 19 |
"Market Value", "Matching Offers", "Ordinary Shares", "procedural resolution", "Publicly-held Rio Tinto Limited Ordinary Shares", "Publicly-held Ordinary Shares", "Publicly-held Rio Tinto plc Ordinary Shares", "Publicly-held Rio Tinto plc Voting Shares", "Publicly-held Shares", "Rio Tinto plc", "Rio Tinto plc Articles", "Rio Tinto plc Equalisation Share", "Rio Tinto plc Deed Poll Guarantee", "Rio Tinto plc Entrenched Provision", "Rio Tinto plc Group", "Rio Tinto plc Ordinary Shares", "Rio Tinto plc Special Voting Share", "RTP Shareholder SVC", "Rio Tinto plc Shareholder Voting Agreement", "Sharing Agreement", "Special Voting Share", and "sterling"; | ||||
(C) | this Rule 7 (class rights actions); | |||
(D) | Rule 8 (dividends on Special Voting Share and Equalisation Share); | |||
(E) | Rule 16 (variation of class rights); | |||
(F) | Rule 35(c) (Refusal to register transfer of Special Voting Share and Equalisation Share); | |||
(G) | Rule 66 (amendments to resolutions); | |||
(H) | Rule 70 (demand for poll); | |||
(I) | Rule 71 (taking a poll); | |||
(J) | Rule 74 (voting rights of members); | |||
(K) | Rule 77 (appointment of proxies); | |||
(L) | Rule 85 (election or appointment of additional Director); | |||
(M) | Rule 96(a), (b), (c), the proviso in brackets in (d), (e)(ii), (g) and (h) (retirement and nomination of Directors); | |||
(N) | Rule 97, third sentence only (Alternate Directors); | |||
(O) | Rule 98(f) (vacation of office of Directors if ceasing to be a Rio Tinto plc director); | |||
(P) | Rule 108 (resolution of Directors in writing); | |||
(Q) | Rule 111 (giving effect to Sharing Agreement); | |||
(R) | Rule 143 (capital rights on a liquidation); and | |||
(S) | Rule 145 (change of control); | |||
(viii) | any amendment to, or removal of, or alteration of the effect of (which for the avoidance of doubt shall be taken to include the ratification of any breach of), any Rio Tinto plc Entrenched Provision; and | |||
(ix) | the doing of anything which the Board and the Board of Rio Tinto plc each decide (either in a particular case or generally) should be treated as a Class Rights Action. | |||
Page 20 |
(a) | a proper instrument of transfer, in writing in the usual or common form or in any form the Board may from time to time prescribe or in a particular case accept, duly stamped (if necessary), is delivered to the Company; | |
(b) | the transfer is a proper SCH transfer, which is to be in the form required or permitted by the Corporations Act or the SCH business rules; or | |
(c) | the transfer has been effected by any other electronic system established or recognised by the Listing Rules in which the Company participates in accordance with the rules of that system. | |
Page 26 |
Subject to Rule 85 the following provisions shall apply to all the Directors: | ||
96. | Retirement of Directors: | |
(a) | At each annual general meeting, | |
Page 42 |
(i) | any Director who was elected or last re-elected a Director at or before the annual general meeting held in the third calendar year before the current year shall retire by rotation; and | ||
(ii) | such further Directors (if any) shall retire by rotation as would bring the number retiring by rotation up to one-third of the number of Directors in office at the date of the notice of meeting (or, if their number is not a multiple of three, then the number nearest but not greater than one-third). | ||
A retiring Director who stands for re-election shall retain office until the announcement of the result of the poll on the resolution to reappoint that Director. | |||
Selection of Directors to retire by rotation | |||
(b) | The further Directors required to retire by rotation in accordance with Rule 96(a)(ii) shall be those of the other Directors subject to retirement by rotation who have been longest in office since their last re-election and so that as between persons who became or were last re-elected Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by the alphabetical order of their names. A retiring Director shall be eligible for re-election. | ||
Who must retire: | |||
(c) | The length of time a Director has been in office shall be computed from the Director's last election or appointment. A retiring Director who was previously elected shall be eligible for re-election. A retiring Director who was previously appointed under Rule 85 or Rule 86 shall be eligible for election. Notwithstanding anything contained elsewhere in these Rules, a Director shall retire from office at the conclusion of the third annual general meeting after which the Director was elected or re-elected except that where a Director stands for re-election, that Director shall retain office until the announcement of the poll on the resolution to reappoint that Director. | ||
Removal of Director whilst in office | |||
(d) | The Company in general meeting may at any time by resolution remove any appointed or elected Director before the expiration of that Director's period of office and, if desired, elect another person by way of replacement (provided that such person is also elected as a director of Rio Tinto plc at the same time). | ||
Nomination of Directors: | |||
(e) | No person other than a Director retiring at the meeting shall, unless recommended by the Directors for election, be eligible for election as a Director at any general meeting unless within the period referred to in paragraph (f) of this Rule 96 there has been lodged at the Office, notices in writing: | ||
(i) | signed by a member, other than the person to be proposed, duly qualified to attend and vote at the relevant meeting of that member's intention to propose a person for election; and | ||
Page 43 |
(ii) | signed by the person to be proposed of that person's willingness to be elected as a Director of the Company and as a director of Rio Tinto plc. | ||
(f) | The period within which the notices referred to in paragraph (e) of this Rule 96 must be lodged at the Office is not less than 35 Business Days nor more than 55 Business Days (inclusive of the date on which the notice is given) before the earlier of the dates appointed for: | ||
(i) | the general meeting of the Company; and | ||
(ii) | the nearly contemporaneous general meeting of Rio Tinto plc, | ||
provided that, if this would result in the latest date for lodgement of the notices being later than the latest date (the "ASX Date") on which, in accordance with the Listing Rules, the Company must accept a nomination for election as a director at that general meeting of the Company, the latest time for lodgement of the notices shall be the ASX Date. | |||
(g) | The Directors shall nominate for election as a Director at a general meeting of the Company any person duly nominated for election at the nearly contemporaneous general meeting of Rio Tinto plc. | ||
(h) | The Company at the meeting at which a Director retires under any provision of these Rules may by ordinary resolution fill the office being vacated by electing the retiring Director or some other person eligible for election. In default the retiring Director shall be deemed to have been re-elected except in any of the following cases: | ||
A | where at such meeting it is expressly resolved not to fill such office or a resolution for the re-election of such Director is put to the meeting and lost; | ||
B | where such Director has given notice in writing to the Company that such Director is unwilling to be re-elected; | ||
C | where the default is due to the moving of a resolution in contravention of the next following Rule; | ||
D | where such Director has attained the retiring age specified in section 201C of the Corporations Act; | ||
E | where such Director has not been, or is not deemed to have been, re-elected as a director of Rio Tinto plc. |
(a) | the Alternate Director may be removed or suspended from office upon receipt at the Office of a notice in writing (including, without limitation, a letter, telegram, telex, facsimile transmission or other form of visible communication) from the Director by whom the Alternate Director was appointed to the Company; | |
(b) | the Alternate Director shall be entitled to receive notice of meetings of the Board and to attend and vote at the meetings if the Director by whom the Alternate Director was appointed is not present; | |
(c) | the Alternate Director shall be entitled to exercise all the powers (except the power to appoint an Alternate Director) and perform all the duties of a Director, in so far as the Director by whom the Alternate Director was appointed had not exercised or performed them; | |
(d) | the Alternate Director shall not be required to hold any share qualification in the Company; | |
(e) | the Alternate Director shall not, unless the Board otherwise determines, (without prejudice to the right to reimbursement for expenses pursuant to Rule 92) be entitled to receive any remuneration as a Director from the Company, and any remuneration (not including remuneration authorised by the Board or reimbursement for expenses) paid to the Alternate Director by the Company shall be deducted from the remuneration of the Director by whom the Alternate Director was appointed; | |
(f) | the office of the Alternate Director shall be vacated if the Director by whom the Alternate Director was appointed vacates office or dies; | |
(g) | the Alternate Director shall not be taken into account in determining the number of Directors or rotation of Directors; and | |
(h) | the Alternate Director shall, while acting as a Director, be responsible to the Company for the Alternate Director's own acts and defaults and shall not be deemed to be the agent of the Director by whom the Alternate Director was appointed. |
VACATION OF OFFICE OF DIRECTOR
(c) | if the Director resigns office by notice in writing to the Company addressed to it at the Office; | |
(d) | if the Director is removed from office pursuant to paragraph (d) of Rule 96; | |
(e) | if the Director is removed from office pursuant to the Corporations Act; | |
(f) | if the Director ceases to be a director of Rio Tinto plc; | |
(g) | if Director is prohibited from being a Director by reason of the operation of the Corporations Act; or | |
(h) | if without the approval of the Board, neither the Director nor any Alternate Director appointed by that Director is present at meetings of the Board for six consecutive months and the remaining Directors for the time being in Australia have not within seven days of having been personally served by the Secretary with a notice giving particulars of the absence resolved that special leave of absence be granted. |
(a) | the death of that member; | ||
(b) | the non-payment of any income tax or other tax by that member; | ||
(c) | the non-payment of any estate, probate, succession, death, stamp or other duty by the member or the trustee, executor or administrator of that member or by or out of the member's estate; | ||
(d) | any assessment of income tax against the Company in respect of interest or dividends paid or payable to that member; | ||
(e) | or any other act or thing, the Company in every case: | ||
(i) | shall be fully indemnified from all liability by that member or that member's trustee, executor or administrator and by any person who becomes registered as the holder of the shares on the distribution of the deceased member's estate; | ||
(ii) | shall have a lien or charge upon the shares for all moneys paid by the Company in respect of the shares under or in consequence of any law; | ||
(iii) | shall have a lien upon all dividends, bonuses and other moneys payable in respect of the shares registered in the Register or a Branch Register as held either jointly or solely by that member for all moneys paid or payable by the Company in respect of the shares under or in consequence of any law, together with interest at a rate the Board may determine from time to time from the date of payment to the date of repayment, and may deduct or set off against any dividend, bonus or other moneys payable any moneys paid or payable by the Company together with interest; | ||
(iv) | may recover as a debt due from that member or that member's trustee, executor or administrator or any person who becomes registered as the holder of the shares on the distribution of the deceased member's estate wherever constituted or situated, any moneys paid by the Company under or in consequence of any law which exceed any dividend, bonus or other money then due or payable by the Company to that member together with interest at a rate the Board may determine from time to time from the date of payment to the date of repayment; and | ||
(v) | except in the case of a proper SCH transfer, may, if any money is paid or payable by the Company under any law, refuse to register a transfer of any securities by the holder or the holder's trustee, executor or administrator until the money and interest is set off or deducted or, in case the money and interest exceeds the amount of any dividend, bonus or other money then due or payable by the Company to the holder, until the excess is paid to the Company but notwithstanding the foregoing the Company may not refuse to register any proper SCH transfer except as permitted by the Corporations Act, the Listing Rules or the SCH business rules. | ||
Page 59 |
(c) | then in paying to the holder of the Special Voting Share the nominal amount paid up on such share; and | |||
(d) | any surplus remaining after application of the assets in accordance with the preceding paragraphs shall be applied in making payments to the holder of the Equalisation Share and/or the holders of Ordinary Shares in accordance with their entitlements, which shall be determined as follows: | |||
(i) | The liquidator of the Company shall draw up accounts as at earliest date (the "Reference Date") on which the liquidator is able to make a final distribution to creditors and members of the Company to show the gross amount which would be available for distribution to the holders of Ordinary Shares on the liquidation of the Company after payment in full of any amount standing to the credit of: | |||
(A) | the holder of the Equalisation Share in any reserve set up in the books of the Company pursuant to paragraph 3.6.2(a) of Schedule 2 to the Sharing Agreement; and | |||
(B) | the holders of Ordinary Shares in any reserve set up in the books of the Company under paragraphs 3.6.2(b) or 3.6.2(c) of Schedule 2 to the Sharing Agreement | |||
and to calculate the amount thereof available for distribution to holders of Publicly-held Rio Tinto Limited Ordinary Shares or the amount (expressed as a negative sum) of the shortfall which would need to be obtained before the holders of Publicly-held Rio Tinto Limited Ordinary Shares would receive any payment by way of distribution (in either case the "Company's Own Distribution Amount"), on the assumption that distribution to the Company's creditors and members on liquidation took place on the Reference Date. The liquidator of the Company shall certify the result of such calculation to Rio Tinto plc. | ||||
(ii) | Whether or not proceedings have been commenced for the liquidation of Rio Tinto plc, Rio Tinto plc shall be required under the Sharing Agreement to instruct the Relevant Officer for the time being of Rio Tinto plc to draw up accounts as at the Reference Date of all assets (valued as if Rio Tinto plc was in liquidation and those assets were to be realised by a liquidator of Rio Tinto plc in an orderly manner) and liabilities which would be admissible to proof if Rio Tinto plc was in liquidation at the Reference Date (other than the asset or liability represented by any Equalisation Payment (as defined in paragraph 4.2 of Schedule 2 to the Sharing Agreement) to be made in accordance with the Sharing Agreement or any payment on the Rio Tinto plc Equalisation Share under Article 3(C)(e) or 3(C)(f) of the Rio Tinto plc Articles) to show the gross amount which would be available for distribution to holders of Rio Tinto plc Ordinary Shares on the liquidation of Rio Tinto plc (if it were to occur on the Reference Date) after payment in full of any amount standing to the credit of: | |||
Page 61 |
(A) | the holder of the Rio Tinto plc Equalisation Share in any reserve set up in the books of Rio Tinto plc pursuant to paragraph 3.6.2(a) of Schedule 2 to the Sharing Agreement; or | ||||
(B) | the holders of Rio Tinto plc Ordinary Shares in any reserve set up in the books of Rio Tinto plc under paragraphs 3.6.2(b) or 3.6.2(c) of Schedule 2 to the Sharing Agreement | ||||
and to calculate the amount thereof available for distribution to holders of Publicly-held Rio Tinto plc Ordinary Shares or the amount (expressed as a negative sum) of the shortfall which would need to be obtained before the holders of Publicly-held Rio Tinto plc Ordinary Shares would receive any payment by way of distribution (in either case, the "Rio Tinto plc Own Distribution Amount") on the assumption that the distribution to Rio Tinto plc's creditors and members on liquidation took place on the Reference Date. Rio Tinto plc is obliged under the Sharing Agreement to instruct the Relevant Officer of Rio Tinto plc to certify the result of such calculation to the Company. | |||||
(iii) | The liquidator of the Company shall make and certify to Rio Tinto plc the results of the following calculation as at the Reference Date and agree such calculation with the Relevant Officer of Rio Tinto plc, which calculation shall be expressed in Australian dollars, with any sterling amounts being converted to Australian dollars at the Liquidation Exchange Rate as at the Reference Date: |
(COD + Rio Tinto plcOD) x | COS |
||
(Rio Tinto plcOS ÷ EF)
+ COS |
|||
where: | |||
COD = the Company's Own Distribution Amount; | |||
COS = the number of Publicly-held Rio Tinto Limited Ordinary Shares in issue on the Reference Date; | |||
EF = the Equalisation Fraction; | |||
Rio Tinto plcOD = the Rio Tinto plc Own Distribution Amount; and | |||
Rio Tinto plcOS = the number of Publicly-held Rio Tinto plc Ordinary Shares in issue on the Reference Date. | |||
The result of such calculation is referred to below as the "Adjusted Company Distribution Amount". | |||
(iv) | If the Adjusted Company Distribution Amount is equal to or more than the Company's Own Distribution Amount then the assets remaining available for distribution (which shall include any distribution made on the Rio Tinto plc Equalisation Share pursuant to Article 3(C)(e) or 3(C)(f) of the Rio Tinto plc Articles, any amounts paid by Rio Tinto plc under paragraph 4.2.4 of Schedule 2 to the Sharing Agreement and any amounts paid by Rio Tinto plc from reserves set up in the books of Rio Tinto plc under paragraph 3.6.2(a) of Schedule 2 to the Sharing Agreement) shall belong to and be distributed among the holders of Ordinary Shares rateably according to the numbers of Ordinary Shares held by them. | ||
Page 62 |
(v) | If the Adjusted Company Distribution Amount is equal to or more than zero, but is less than the Company's Own Distribution Amount, the liquidator of the Company shall pay out of the assets available for distribution an amount by way of return of capital on the Equalisation Share in priority to any amounts payable to the holders of Ordinary Shares such that (taking account of any tax payable on the making or receipt of the distribution of that amount, after allowing for any offsetting tax credits, losses or deductions) the ratio of the amount available for distribution on each Publicly-held Rio Tinto Limited Ordinary Share: | |||
(1) | apart from in each case any undistributed amounts resulting from the payment by Rio Tinto plc to a member of the Rio Tinto Limited Group or the Company to a member of the Rio Tinto plc Group of any reserves under paragraph 3.6.2(a) of Schedule 2 to the Sharing Agreement or any amounts credited to any reserve in the books of the Company for the benefit of holders of Ordinary Shares or any amounts credited to any reserve in the books of Rio Tinto plc for the benefit of holders of Rio Tinto plc Ordinary Shares, in each case under paragraphs 3.6.2(b) and 3.6.2(c) of Schedule 2 to the Sharing Agreement; and | |||
(2) | on the assumption that distribution to the Company's members and creditors and Rio Tinto plc's members and creditors took place on the Reference Date; and | |||
(3) | after taking into account the amounts available for distribution on each Publicly-held Rio Tinto plc Ordinary Share prior to such payment | |||
to the amount available for distribution on each Publicly-held Rio Tinto plc Ordinary Share (converting sterling amounts to Australian dollar amounts by application of the Liquidation Exchange Rate as at the Reference Date) is equal to the Equalisation Ratio (and the balance of the assets of the Company available for distribution remaining after any such payment on the Equalisation Share, shall belong to and be distributed among the holders of Ordinary Shares rateably according to the numbers of Ordinary Shares held by them). | ||||
(vi) | If the Adjusted Company Distribution Amount is zero or a negative amount and the Company's Own Distribution Amount is a positive amount then the liquidator of the Company shall pay out of the assets available for distribution an amount by way of return of capital on the Equalisation Share in priority to any amounts payable to the holders of Ordinary Shares such that (taking account of any tax payable on the making or receipt of the distribution of that amount, after allowing for any offsetting tax credits, losses or deductions) the amount available for distribution to holders of Publicly-held Rio Tinto Limited Ordinary Shares on the assumption that distribution to the Company's members and creditors took place on the Reference Date, is zero. | |||
Page 63 |
(vii) | If the Company's Own Distribution Amount is zero or a negative amount and the Rio Tinto plc Own Distribution Amount is zero or a negative amount, then no distribution shall be made by the liquidator of the Company on the Equalisation Share or to holders of Ordinary Shares. | |||
(viii) | In making the calculations referred to in this paragraph (d), the Relevant Officer of Rio Tinto plc and the liquidator of the Company shall: | |||
(A) | in relation to the Company, take into account the distributions which fall to be made on Ordinary Shares which are not Publicly-held Rio Tinto Limited Ordinary Shares it being acknowledged that the per share distributions on the Publicly-held Rio Tinto Limited Ordinary Shares will be the same as the distributions on the non Publicly-held Rio Tinto Limited Ordinary Shares; | |||
(B) | in relation to Rio Tinto plc, take into account the distributions which fall to be made on Rio Tinto plc Ordinary Shares which are not Publicly-held Rio Tinto plc Ordinary Shares it being acknowledged that the per share distributions on the Publicly-held Rio Tinto plc Ordinary Shares will be the same as the distributions on the non Publicly-held Rio Tinto plc Ordinary Shares. | |||
(ix) | In this paragraph (d) "Relevant Officer" of Rio Tinto plc shall mean the auditor of Rio Tinto plc or if Rio Tinto plc is in liquidation, the liquidator of Rio Tinto plc. | |||
(x) | In this paragraph (d) "the gross amount which would be available for distribution" to shareholders means such amount ignoring any distribution on the Equalisation Share or Rio Tinto plc Equalisation Share or any Equalisation Payment (as defined in paragraph 4.2 of Schedule 2 to the Sharing Agreement) made in accordance with the Sharing Agreement and any tax payable on the making of the Equalisation Payment or distribution and both "the gross amount which would be available for distribution" and "the amount available for distribution" refer to such amount before deduction of any amount in respect of tax required to be deducted or withheld from the distribution to ordinary shareholders by or on behalf of the company paying or making the distribution but net of any tax payable by that company on the distribution to its ordinary shareholders. | |||
(xi) | The certificates which the liquidator of the Company is required to produce under this paragraph (d) and the Relevant Officer of Rio Tinto plc is required to produce under the Sharing Agreement (the "Certificates") shall be produced within 6 weeks after the Reference Date and the Company | |||
Page 64 |
The restrictions include suspension of rights to attend and vote at general meetings, and suspension of the right to receive dividends and distributions. In certain circumstances the Board can compel divestment of the shares. | ||||
B. | In this Rule: | |||
(i) | "Accepting Shareholder" means any person who has, in respect of the whole of that person's Entitlement to Ordinary Shares or Interest in Rio Tinto plc Voting Shares or both, accepted or given irrevocable undertakings to accept offers made under a takeover bid which complies with Chapter 6 of the Corporations Act or under a takeover offer which complies with the City Code on Takeovers and Mergers (or both); | |||
(ii) | "Additional Entitlement" means any Relevant Interest which would, but for sections 38, 39, 40, 41, 42 and 43 of the Law, result in a person having an Entitlement; | |||
(iii) | "ADR Depositary" means a custodian or depositary or that person's nominee, approved by the Directors, under contractual arrangements with the Company by which such person or nominee holds Ordinary Shares and such person or another person issues American Depositary Receipts evidencing rights in relation to those shares or a right to receive them; | |||
(iv) | "concert parties" means persons acting in concert within the meaning of the City Code on Takeovers and Mergers from time to time; | |||
(v) | "Entitlement" means the entitlement in respect of shares resulting through a person being entitled to those shares as that term is defined in section 609 of the Law; | |||
(vi) | "Holder" is as defined in paragraph (I) below; | |||
(vii) | "Interest" in relation to shares in Rio Tinto plc, means: | |||
(a) | any interest in Rio Tinto plc Voting Shares which would be taken into account in determining for the purposes of Part VI of the Original Act whether a person has a notifiable interest (including any interest which that person would be taken as having for those purposes); and | |||
(b) | any interest in Rio Tinto plc Voting Shares mentioned in Section 209(1)(a), (b), (c), (d), (e), (f), (g) or (h) of the Original Act (except that of a bare trustee) or mentioned in section 208(4)(b) of the Original Act (but on the basis that the entitlement there referred to could arise under an agreement within the meaning in section 204(5) and (6) of that Act), | |||
and "Interested" shall be construed accordingly; | ||||
(viii) | the "Original Act" means the Companies Act 1985 of the United Kingdom as in force at the date of adoption of this Rule and notwithstanding any repeal, modification or re-enactment thereof after that date including for the avoidance of doubt, any amendment, replacement or repeal by regulations made by the Secretary of State pursuant to section 210A of that Act to the definition of relevant share capital in section 198(2) or to the provisions as to what is taken to be an interest in shares in section 208 or as to what interests are to be disregarded in section 209 or the percentage giving rise to a notifiable interest in section 199(2); | |||
Page 67 |
(ix) | "Permitted Holding" means: | ||
(a) | any Entitlement to Ordinary Shares, arising as a result of two or more persons becoming Associates, in relation to the acquisition of which an exemption or declaration under section 655A of the Corporations Act is in force, with the effect that the acquisition of such Entitlement would not breach section 606 of the Corporations Act; | ||
(b) | any Entitlement to shares in the Company or any Interest in Rio Tinto plc Voting Shares held solely by a person as a bare trustee or by a person who, if the incidents of that person's Entitlement or Interest were governed by the laws of Australia, would in the opinion of the Directors be regarded as a bare trustee in respect of that Entitlement or Interest; | ||
(c) | any Entitlement of a person to shares in the Company or any Interest of a person in any Rio Tinto plc Voting Shares which under arrangements approved by the Directors of the Company and directors of Rio Tinto plc respectively have been allotted or issued with a view to that person (or purchasers from that person) offering the same to the public within a period not exceeding three months from the date of the relevant allotment or issue; | ||
(d) | any Entitlement of a person to shares in the Company or any Interest of a person in any Rio Tinto plc Voting Shares which the Directors are satisfied is held by virtue only of that person being entitled to exercise or control the exercise of 20% or more of the voting power at general meetings of a company which is a Permitted Person; and | ||
(e) | any Entitlement or Interest of a Permitted Person, other than RTL Shareholder SVC or RTP Shareholder SVC; | ||
(x) | "Permitted Person" means: | ||
(a) | any member of the Rio Tinto Limited Group; | ||
(b) | any member of the Rio Tinto plc Group; | ||
(c) | RTL Shareholder SVC; | ||
(d) | RTP Shareholder SVC; | ||
(e) | an ADR Depositary, acting in that capacity; | ||
(f) | The Depositary Trust Company or any successor and/or the nominee of either of them acting in the capacity of a clearing agency in respect of dealings in American Depositary Receipts; | ||
(g) | a Recognised Person; | ||
(h) | a trustee (acting in that capacity) of any employee incentive scheme of the Company or of Rio Tinto plc; | ||
Page 68 |
(i) | any person (an "Offeror") who has made an offer to acquire all the outstanding Rio Tinto plc Ordinary Shares (other than those already owned by the Offeror) which may, if the Offeror so decides, be conditional upon an offer which has been made by the Offeror or by a related entity (as defined in the Law) of the Offeror (on terms which satisfy each of sub-paragraphs (I), (II) and (III) of Article 64(B)(xii)(i) of the Rio Tinto plc Articles) to acquire all the outstanding Ordinary Shares (other than those already owned by the Offeror) becoming unconditional and shall: | ||||
(I) | be unconditional when made or contain only such conditions as are mandatory under the City Code on Takeovers and Mergers; | ||||
(II) | disclose the highest price or value of consideration given for Ordinary Shares by the Offeror or its Associates and for Rio Tinto plc Ordinary Shares by the Offeror and its concert parties since the beginning of the period commencing 12 months before the date on which the Offeror became a Relevant Person and include a cash offer (or an offer with a cash alternative) to acquire all the Rio Tinto plc Ordinary Shares (other than those already directly or indirectly owned by the Offeror) at a price per Rio Tinto plc Ordinary Share which (subject to paragraph (xviii)) is not less than the higher of: | ||||
(aa) | the highest price or value of consideration paid or given for Ordinary Shares by the Offeror or its Associates since the beginning of the period commencing 12 months before the date on which the Offeror became a Relevant Person divided by the Equalisation Fraction as at the date of the offer and converted into sterling. Such conversion shall be made at the closing mid-point spot sterling-Australian dollars exchange rate on the date on which the Offeror became a Relevant Person as published in the Financial Times; and | ||||
(bb) | the highest price or value of consideration paid or given for Rio Tinto plc Ordinary Shares by the Offeror or its concert parties in sterling (or equivalent, converted into sterling by a method comparable to that set out in sub-paragraph (aa)) since the beginning of the period commencing 12 months before the date on which the Offeror or any of its Associates or concert parties became a Relevant Person, | ||||
provided that if no such shares have been acquired by the Offeror or any of its Associates or concert parties during that period the price (subject to paragraph (xviii)) shall be not less than the higher of: | |||||
(cc) | the weighted average sale price derived from the Australian Stock Exchange in respect of Ordinary Shares on the Business Day preceding the date on which the offer is announced divided by the Equalisation Ratio as at that Business Day and converted into sterling at the closing mid-point spot sterling-Australian dollar exchange rate as at such date as published in the Financial Times; and | ||||
Page 69 |
(dd) | the middle market quotation derived from the London Stock Exchange Daily Official List in respect of an Rio Tinto plc Ordinary Share on the dealing day preceding the date on which the offer is announced; and | ||||
(III) | comply with the provisions of the City Code on Takeovers and Mergers as if it were an offer made under Rule 9 of that Code; | ||||
provided that if the terms of any such offer would, at the time it would be required to be made, be illegal or contravene any applicable law or regulatory requirements (including the Corporations Act) then the offer shall be on such terms as may be necessary to comply with such applicable law or regulatory requirement but otherwise shall approximate as far as is possible the requirements set out in (I) to (III) above and provided further that references to the price paid for an Ordinary Share or a Rio Tinto plc Ordinary Share shall be deemed to include the price paid for an interest through an American Depositary Receipt representing such a share converted into sterling or Australian dollars as appropriate at the closing mid point exchange rate of the purchase currency and sterling or Australian dollars (as appropriate) on the date of acquisition of such interest obtained from the Financial Times (in the case of Rio Tinto plc Ordinary Shares) or from the Australian Financial Review (in the case of Ordinary Shares); | |||||
(j) | any person who: | ||||
(I) | owns directly or indirectly Publicly-held Rio Tinto Limited Ordinary Shares which carry the right to cast more than 50 per cent of the total votes attaching to all Publicly-held Rio Tinto Limited Ordinary Shares capable of being cast on a poll at a General Meeting; and | ||||
(II) | owns directly or indirectly Publicly-held Rio Tinto plc Voting Shares which carry the right to cast more than 50 per cent of the total votes attaching to all Publicly-held Rio Tinto plc Voting Shares capable of being cast on a poll at a general meeting of Rio Tinto plc, | ||||
and has reached that level of ownership either by receiving acceptances under an offer to acquire all the outstanding Ordinary Shares and Rio Tinto plc Ordinary Shares (other than those already owned by that person) or as a result of a compromise or arrangement approved by the Court under Part 5.1 of the Corporations Act or a scheme of arrangement approved by the High Court of England or by any combination of these; | |||||
(k) | any concert party or Associate of an Offeror; | ||||
Page 70 |
(xi) | "Recognised Person" means a clearing house or a nominee of a recognised clearing house or of a recognised investment exchanges who is designated as mentioned in section 185(4) of the Original Act; | ||
(xii) | "Relevant Holding" means an Interest in Rio Tinto plc Voting Shares or an Entitlement to Ordinary Shares or both (disregarding any part of that Interest or Entitlement which is a Permitted Holding) which together would otherwise enable its holder to cast on a poll (either directly as a member of the Company or through any votes which may be cast by the holder of the Special Voting Share to reflect votes which such holder is entitled to cast at a general meeting of Rio Tinto plc in respect of Rio Tinto plc Voting Shares) 20 per cent or more of the total votes attaching to all share capital of the Company of all classes on a Joint Decision (assuming that all the Publicly-held Rio Tinto plc Ordinary Shares including those comprised in such Interest were voted on the equivalent resolution at the nearly contemporaneous general meeting of Rio Tinto plc and counted in calculating the votes attached to the Special Voting Share on such decision), AND IN ADDITION if the Interest or Entitlement is in one company only then | ||
(a) | if it does not include any Interest in Rio Tinto plc Voting Shares, the Entitlement to Ordinary Shares or other shares of the Company (other than the Special Voting Share) carry the right on a poll to cast 30 per cent or more of the total votes attaching to all share capital of the Company of all classes (apart from the Special Voting Share) taken as a whole and capable of being cast on a poll at a general meeting of the Company; or | ||
(b) | if it does not include any Entitlement to Ordinary Shares, the Interest in Rio Tinto plc Voting Shares (other than the Rio Tinto plc Special Voting Share) carry the right on a poll to cast 30 per cent or more of the total votes attaching to all share capital of Rio Tinto plc of all classes (apart from the Rio Tinto plc Special Voting Share) taken as a whole and capable of being cast at a general meeting of Rio Tinto plc; | ||
(xiii) | "Relevant Interest" means a relevant interest in respect of a share as that term is defined by the Law; | ||
(xiv) | "Relevant Person" means any person (whether or not identified) who has a Relevant Holding or any Excluded Rio Tinto plc Holder; | ||
(xv) | "Relevant Shares" means all the Ordinary Shares to which a Relevant Person or an Excluded Rio Tinto plc Holder has an Entitlement; | ||
(xvi) | "Required Disposal" means a disposal or disposals of such a number of Relevant Shares (or interests therein) as will cause a Relevant Person to cease to be a Relevant Person, not being a disposal to another Relevant Person (other than a Permitted Person) or a disposal which constitutes any other person (other than a Permitted Person) a Relevant Person; | ||
(xvii) | references to the Australian Financial Review include, if that newspaper ceases to be published or fails to publish the relevant information, any other daily newspaper circulating in Melbourne nominated by the Board which does publish the relevant information, and references to the Financial Times means the London Edition and includes, if that newspaper ceases to be published or fails to publish the relevant information, any other daily newspaper circulating in London nominated by the Board which does publish the relevant information; | ||
Page 71 |
(xviii) | references in paragraphs (aa), (bb), (cc) and (dd) of paragraph (B)(x)(i)(Il) to "price" or "value of consideration" mean such price or value: | ||
(a) | adjusted to reflect the effect of any share consolidation or subdivision, allotment of shares, rights issue, issue of options, issue of convertible securities or reduction of capital which occurred after that price or consideration was paid or given and before the offer to acquire all the Rio Tinto plc Ordinary Shares referred to in paragraph (B)(x)(i)(II) occurred; and | ||
(b) | adjusted to reflect the net amount of any dividend which had been declared or announced at the time the price or consideration was paid or given if the shares acquired were at that time trading cum-dividend and at the time of the offer the shares are trading ex-dividend or vice versa, | ||
and the certificate of the Auditor stating the appropriate amount of an adjustment required by (a) or (b) shall be conclusive. | |||
C. | Subject to paragraphs (I) and (J) below, the provisions of Part 6.7 of Chapter 6 of the Law other than section 716 shall apply in relation to the Company as if those provisions extended to Additional Entitlements and accordingly the rights and obligations arising under that Part shall apply in relation to the Company, its members and all persons having an Entitlement, as extended by this paragraph; but so that Additional Entitlements shall, when disclosed to the Company, be entered in a separate register kept by the Company for that purpose. The rights and obligations created by this paragraph in respect of any Entitlement (including, but not limited to, Additional Entitlements) are in addition to and separate from those arising under Chapter 6C of the Corporations Act. | ||
D. | If, to the knowledge of the Directors, any person other than a Permitted Person is or becomes a Relevant Person (including, without limitation, by virtue of being deemed to be one), the Directors shall give notice to that Relevant Person (other than a person referred to in paragraph (G) below) and to any other person who appears to the Directors to have Entitlements to the Relevant Shares and, if different, to the registered holders of those shares. The notice shall set out the restrictions referred to in paragraph (E) below and state that within a time specified in the notice the Relevant Person shall either take such action as may be required to enable the Relevant Person to become a Permitted Person or otherwise cease to be a Relevant Person. If the Relevant Shares are held by an ADR Depositary, the notice shall also state that: | ||
(a) | a specified purchaser or purchasers (the "Relevant Purchaser(s)") (excluding the ADR Depositary itself) or Holder or Holders (the "Relevant Holder(s)"), as the case may be, is or are believed or deemed to be Relevant Persons or is or are believed or deemed to be purchasers or Holders through which a Relevant Person or Relevant Persons has or have an Entitlement in either case as specified in the notice; and | ||
Page 72 |
(b) | the Directors believe that each Relevant Purchaser or Relevant Holder or the Relevant Person or Relevant Persons believed or deemed to have an Entitlement through such Relevant Purchaser or Relevant Holder, as the case may be, is or are deemed to have an Entitlement in a specific number of Relevant Shares. | ||
The Directors may extend the period in which any such notice is required to be complied with and may withdraw any such. notice (whether before or after the expiration of the period referred to) if it appears to them that there is no Relevant Person in relation to the shares concerned. | |||
E. | A holder of a Relevant Share on whom a notice has been served in accordance with paragraph (D) above shall not in respect of that share be entitled, until such time as the Directors are satisfied that no Relevant Person has an Entitlement to that share or the notice has been withdrawn: | ||
(a) | to attend or vote at any general meeting of the Company or meeting of any class of shares of the Company, or to exercise any other right conferred by membership in relation to any such meeting (this restriction being in addition to the provisions of Rule 74(b)); | ||
(b) | to receive any dividend or other distribution which would otherwise be payable in respect of a Relevant Share, which shall be retained by the Company without any liability to pay interest when the money or distribution is finally paid or given to the member; or | ||
(c) | to elect to receive shares in lieu of any dividend or distribution referred to in (b) above. | ||
If a Relevant Person continues to have an Entitlement to Relevant Shares after the time limit specified in a notice served under paragraph (D), the Directors may appoint a person to execute any documents and implement any procedures as may be required to procure a Required Disposal on behalf of the Relevant Person and to receive and give a good discharge for the purchase price. Brokerage, stamp duty and any other costs of the transfer shall be paid out of the sale proceeds. The net proceeds of any sale under this paragraph shall be paid to the shareholder who held the Relevant Shares sold under this paragraph provided that the shareholder has delivered to the Company such documents or information as may be reasonably required by the Directors. Upon the name of the purchaser being entered in the Register in purported exercise of the powers under this paragraph, the validity of the sale by way of a Required Disposal shall not be challenged by any person. The Directors may not authorise a Required Disposal of any Ordinary Shares held by an Accepting Shareholder during a period in which offers for both Ordinary Shares and Rio Tinto plc Voting Shares remain open for acceptance. | |||
F. | Without prejudice to the provisions of the Law or the Corporations Act, the Directors may assume without enquiry that a person is not a Relevant Person unless the information contained in the registers kept by the Company under the Corporations Act or under the Law (as applied and extended by this Rule), including the separate register to be kept under paragraph (C) above, appear to the Directors to indicate to the contrary or the Directors have reason to believe otherwise, in which circumstances the Directors shall make reasonable enquiries to discover whether any person is a Relevant Person. | ||
Page 73 |
Exhibit 3.2
CONFORMED COPY
Dated 21 December 1995
As amended by an Agreement dated 2 April1998 pursuant to Special Resolutions passed on 13 February 1998 and 16 February 1998
As amended pursuant to Special Resolutions dated 14 April 2005 and 29 April 2005
RIO TINTO LIMITED
and
RIO TINTO PLC
DLC MERGER SHARING AGREEMENT
One Silk Street
London EC2Y 8HQ
Telephone (44-20) 7456 2000
Facsimile (44-20) 7456 2222
Ref
This Agreement is made on 21 December 1995 between:
(1) | Rio Tinto Limited (ACN 004 458 404), formerly CRA Limited1, a company incorporated in Victoria, Australia whose registered office is at 55 Collins Street, Melbourne, 3000, Victoria, Australia (“RTL”); and |
(2) | Rio Tinto plc, formerly The RTZ Corporation plc1, a company incorporated in England with registered number 719885 whose registered office is at 6 St James’s Square, London SW1Y 4LD, England (“RTP”). |
Whereas:
(A) | Following announcements made on 9 October 1995, RTL and RTP entered into an Implementation Agreement on 3 November 1995 pursuant to which RTL and RTP have agreed to do certain acts and things to implement the DLC Merger of RTL and RTP. |
(B) | RTL Shareholder SVC has agreed to exercise the voting rights attached to the RTP Special Voting Share in accordance with the RTL Shareholder Voting Agreement and RTP Shareholder SVC and RTAH have agreed that RTAH shall procure that Tinto Holdings Australia Pty Limited shall vote its RTL Ordinary Shares and that RTP Shareholder SVC shall vote the RTL Special Voting Share in accordance with the RTP Shareholder Voting Agreement. |
(C) | RTL and RTP wish to agree upon the terms of the ongoing relationship between them following the DLC Merger, including the implementation of the principles relating to distributions to be made by RTL and RTP in accordance with Schedules 1 and 2 to this Agreement. |
1 | Interpretation |
The headings shall not affect the interpretation of this Agreement, and in this Agreement, unless the context otherwise requires:
1.1 | Definitions |
“Aggregate Publicly-held Ordinary Shares” means all of the Publicly-held RTL Ordinary Shares and all of the Publicly-held RTP Ordinary Shares from time to time;
“Applicable Exchange Rate” means, in relation to any proposed dividend or other distribution by RTL or RTP, the closing mid-point spot Australian dollar-sterling exchange rate on the Business Day before the Dividend Determination Date relating to the dividends or other distributions to be paid or made by RTL and RTP (as shown in the London Edition of the Financial Times, or such other point of reference as the parties shall agree), or such other spot Australian dollar-sterling exchange rate or average Australian dollar-sterling exchange rate as at such other date (or over such period) before a Dividend Determination Date as the Board of RTL and the Board of RTP shall agree;
“Applicable Regulation” means, in the case of RTL, applicable Australian law and regulations (including listing rules) and, in the case of RTP, applicable English law and regulations (including listing rules and guidelines with which companies listed on the London Stock Exchange customarily comply), in each case for the time being in force and taking account of all waivers or variations from time to time applicable (in particular situations or generally) to RTL or, as the case may be, RTP;
1 |
The RTZ Corporation PLC changed its name to Rio Tinto plc and CRA Limited changed its name to Rio Tinto Limited in each case with effect from 2 June 1997. |
1 |
“Associate” has the meaning given to it in Section 9 of the Corporations Law (as amended from time to time);
“Associated Tax Credit” means, in relation to any dividend or other distribution payable or proposed to be paid by either RTL or RTP, the amount of any imputed or associated tax credit or rebate or exemption (or the value of any other similar associated tax benefit including but not limited to Australian Franking Credits) which would be available to a shareholder receiving or entitled to receive the dividend together with the amount of any credit or benefit in respect of any tax required to be deducted or withheld from the dividend or other distribution by or on behalf of the paying company;
“Australian dollars” means the lawful currency from time to time of Australia;
“Australian Franking Credits” means the franking rebate which certain non-corporate Australian resident recipients of franked dividends or other distributions paid by RTL may be entitled to claim pursuant to Part IIIAA of the Income Tax Assessment Act 1936 of Australia, as amended or re-enacted from time to time;
“Australian Stock Exchange” means the Australian Stock Exchange Limited (ACN 008 624 691) or any successor to that body;
“Board” means the Board of RTL or the Board of RTP as the case may require;
“Board of RTL” means the board of directors of RTL (or a duly appointed committee of that board) from time to time;
“Board of RTP” means the board of directors of RTP (or a duly appointed committee of that board) from time to time;
“Business Day” means a day on which banks are ordinarily open for business in both London and Melbourne, excluding Saturdays and Sundays;
“Class Rights Action” means any of the actions listed in Clause 5.1;
“Companies Act Subsidiary” has the meaning ascribed to the term “subsidiary” in Section 736 of the Companies Act 1985 and shall mean when used in reference to a company any subsidiary of that company from time to time;
“Completion” means the time at which the steps set out in Clause 5 of the Implementation Agreement have been completed;
“Corporations Law” has the meaning given to it by Section 13(2) of the Corporations (Victoria) Act 1990 of Victoria, Australia and includes a reference to the Corporations Regulations referred to in that section;
“Corporations Law Subsidiary” has the meaning given to “subsidiary” in Section 9 of the Corporations Law and when used in relation to a body corporate means any subsidiary of that body corporate from time to time;
“Current Market Price” has the meaning given to it in paragraph 5.1.6 of Schedule 2;
“Dividend Determination Date” means the date on which the Board of RTL and the Board of RTP resolve to pay any dividend or to make any other distribution (or if they resolve on different dates to pay or make parallel dividends or other distributions, the later of those dates);
2 |
“DLC Merger” means the merger of RTL and RTP so that, inter alia, RTL and RTP have a unified management structure and so that the businesses of both the RTL Group and the RTP Group are run on a unified basis;
“Equalisation Fraction” means the Equalisation Ratio expressed as a fraction with the numerator being the number relating to the RTL Ordinary Shares and the denominator being the number relating to the RTP Ordinary Shares;
“Equalisation Ratio” means the ratio of the dividend, capital and voting rights per RTL Ordinary Share to the dividend, capital and voting rights per RTP Ordinary Share (which shall be 1:1 immediately following the RTL Bonus Issue), which shall be subject to adjustment in accordance with Clause 5.1.2(d) and paragraph 5 of Schedule 2;
“Equalisation Share” means, in relation to RTL, the RTL Equalisation Share and, in relation to RTP, the RTP Equalisation Share;
“Financial Period” means a financial year of either RTL or RTP or any other period for which both of their accounts may by mutual agreement be made up;
“Group” means, in relation to RTL, the RTL Group and, in relation to RTP, the RTP Group as the context requires;
“Implementation Agreement” means the Agreement headed “DLC Merger Implementation Agreement” entered into between RTL and RTP on 3 November 1995;
“Intellectual Property” means trade marks, service marks, trade names, business names, logos, get-up, patents, inventions, registered and unregistered design rights, copyrights, rights of extraction relating to databases, and all other similar proprietary rights which may subsist in any part of the world, including, where such rights are obtained or enhanced by registration, any registration of such rights and applications and rights to apply for such registrations;
“Joint Decision” means the approval of any Joint Decision Matter in accordance with Clause 6;
“Joint Decision Matter” means any of the matters listed in Clause 6.1;
“Limiting Restriction” has the meaning given to it in Clause 5.1.1;
“Liquidation Exchange Rate” means, as at any date, the closing mid-point spot Australian dollar-sterling exchange rate on the Business Day before such date (as shown in the London Edition of the Financial Times, or such other point of reference as the auditors of RTL and the liquidators of RTP or the auditors of RTP and the liquidators of RTL or the liquidators of both RTL and RTP, as the case may be, may determine or, where Clause 11 applies, as the merchant banks agree or the third party merchant bank determines);
“London Stock Exchange” means London Stock Exchange Ltd. or any successor to that body;
“Market Value” means, in respect of an issue of a relevant share or security, the weighted average sale price derived from the Australian Stock Exchange (in the case of RTL) and the middle market quotation derived from the London Stock Exchange Daily Official List (in the case of RTP) in each case on the dealing day immediately preceding the date on which any such issue is publicly announced except that in the case of an allotment of RTP Ordinary Shares pursuant to Article 127 of the RTP Memorandum and Articles it shall mean the value of an RTP Ordinary Share as defined in paragraph (D) of that Article and in the case of an allotment of RTL Ordinary Shares by way of dividend it shall mean the weighted average sale price of an RTL Ordinary Share derived from the Australian Stock Exchange over the five business days (being trading days of the Australian Stock Exchange) prior to the books closing date in respect of that dividend;
3 |
“Matching Offers” means offers by way of rights either by both RTL and RTP to their respective holders of Ordinary Shares or by RTL on its own or by RTP on its own to both the holders of RTL Ordinary Shares and the holders of RTP Ordinary Shares which, so far as is practicable, take place contemporaneously and which the auditors of RTL have certified do not materially disadvantage a holder of a RTL Ordinary Share in comparison with a holder of a RTP Ordinary Share and which the auditors of RTP have certified do not materially disadvantage a holder of a RTP Ordinary Share in comparison with a holder of an RTL Ordinary Share;
“Net Dividend Amount” means, in relation to either RTL or RTP, the amount of the dividend or other distribution payable or proposed to be paid or made by the relevant company at any particular time on its Ordinary Shares, before deduction of any amount in respect of tax required to be deducted or withheld from the dividend or other distribution by or on behalf of the company paying or making the same and excluding the amount of any Associated Tax Credit, all such amounts being expressed in the currency of payment and on a per share basis;
“Ordinary Shares” means, in relation to RTL, the RTL Ordinary Shares and, in relation to RTP, the RTP Ordinary Shares;
“Publicly-held RTL Ordinary Shares” means RTL Ordinary Shares the beneficial owners of which are not members of the RTP Group;
“Publicly-held Ordinary Shares” means, in relation to RTL, Publicly-held RTL Ordinary Shares and, in relation to RTP, Publicly-held RTP Ordinary Shares;
“Publicly-held RTP Ordinary Shares” means RTP Ordinary Shares the beneficial owners of which are not members of the RTL Group;
“Publicly-held RTP Voting Shares” means RTP Ordinary Shares and RTP Voting Preference Shares, the beneficial owners of which in each case are not members of the RTL Group;
“Publicly-held Shares” means, in relation to RTL, Publicly-held RTL Ordinary Shares and, in relation to RTP, Publicly-held RTP Voting Shares;
“RTAH” means Rio Tinto Australian Holdings Limited, formerly RTZ Australian Holdings Limited, a company incorporated in England with registered number 464176, whose registered office is at 6 St James’s Square, London SW1Y 4LD;
“RTL Bonus Issue” means the bonus issue of 7.5 RTL Ordinary Shares for each 100 RTL Ordinary Shares to take place following Completion;
“RTL Deed Poll Guarantee” means the deed of even date herewith whereby RTL guarantees the obligations of RTP for the benefit of certain present and future creditors of RTP, as amended from time to time;
“RTL Entrenched Provision” has the meaning given to it in the RTL Memorandum and Articles;
“RTL Equalisation Share” means the equalisation share of A$2 in RTL;
“RTL Group” means RTL and its Subsidiaries from time to time and a member of the RTL Group means any one of them;
“RTL Memorandum and Articles” means the Memorandum and Articles of Association of RTL which will be in effect immediately following Completion, as amended from time to time;
“RTL Ordinary Shares” means the issued ordinary shares of A$2 each in RTL from time to time;
4 |
“RTL Shareholder SVC” means RTL Shareholder SVC Limited, a company incorporated in England with registered number 3115178 whose registered office is at Princes House, 95 Gresham Street, London EC2V 7LY or such other company as replaces RTL Shareholder SVC Limited pursuant to the terms of the RTL Shareholder Voting Agreement;
“RTL Shareholder Voting Agreement” means the agreement of even date herewith entered into between RTL Shareholder SVC, The Law Debenture Trust Corporation p.l.c., RTL and RTP relating, inter alia, to how the RTP Special Voting Share is to be voted, as amended from time to time;
“RTL Special Voting Share” means the special voting share of A$2 in RTL;
“RTP Deed Poll Guarantee” means the deed of even date herewith whereby RTP guarantees the obligations of RTL for the benefit of certain present and future creditors of RTL, as amended from time to time;
“RTP Entrenched Provision” has the meaning given to it in the RTP Memorandum and Articles;
“RTP Equalisation Share” means the equalisation share of 10p in RTP;
“RTP Group” means RTP and its Subsidiaries from time to time and a member of the RTP Group means any one of them;
“RTP Memorandum and Articles” means the Memorandum and Articles of Association of RTP which will be in effect immediately following Completion, as amended from time to time;
“RTP Ordinary Shares” means the issued ordinary shares of 10p each in RTP from time to time;
“RTP Shareholder SVC” means RTP Shareholder SVC Pty Limited (ACN 070 481 908), a company incorporated in Victoria, Australia, whose registered office is at 27th Floor, 530 Collins Street, Melbourne, 3000, Victoria, Australia or such other company as replaces RTP Shareholder SVC Pty Limited pursuant to the terms of the RTP Shareholder Voting Agreement;
“RTP Shareholder Voting Agreement” means the Agreement of even date herewith entered into between RTP Shareholder SVC, The Law Debenture Trust Corporation p.l.c., RTP, RTAH and RTL relating, inter alia, to how the RTL Special Voting Share and the RTL Ordinary Shares held at the date of this Agreement by Tinto Holdings Australia Pty Limited are to be voted, as amended from time to time;
“RTP Special Voting Share” means the special voting share of 10p in RTP;
“RTP Voting Preference Shares” means, in relation to any matter at any time, the Preference Shares (as defined in the RTP Memorandum and Articles) the holders of which would, if that matter were being considered at a general meeting of the shareholders of RTP at that time, be entitled to vote thereon;
“Special Voting Share” means, in relation to RTP, the RTP Special Voting Share and, in relation to RTL, the RTL Special Voting Share;
“sterling” means the lawful currency from time to time of the United Kingdom;
“Subsidiary” means, in the case of RTL, a Corporations Law Subsidiary and, in the case of RTP, a Companies Act Subsidiary.
5 |
1.2 | This Agreement |
References to this Agreement are to this Agreement as amended from time to time and shall include its Schedules; references to Clauses and Schedules are to Clauses of, and Schedules to, this Agreement.
1.3 | Currencies |
References in this Agreement to “A$” and “cents” are to Australian dollars and cents and to “£” and “p” are to pounds sterling and to pence sterling or to such other currencies for the time being of Australia and the United Kingdom respectively.
1.4 | Genders etc. |
Words denoting the singular number only shall include the plural number also and vice versa; words denoting one gender shall include the other genders; and words denoting individuals only shall include firms and corporations and vice versa.
1.5 | Statutory References |
References in this Agreement to any statute are, except where otherwise expressly provided and without prejudice to Clause 17.5 or the definition of “Applicable Regulation”, to that statute as in force at the date of this Agreement (and not to that statute as amended from time to time).
1.6 | Resolutions |
References to resolutions of the holders of Publicly-held Shares of either party shall be deemed to include resolutions of the members or the relevant class of members of the party concerned on which only holders of Publicly-held Shares have cast their votes or resolutions which would have been duly passed (or not passed as the case may be) if the votes attaching to the non Publicly-held Shares had not been cast, and references to votes being disregarded shall be construed accordingly. References to procedural resolutions comprise all resolutions put to a general meeting of shareholders which were not included in the notice of such meeting but nevertheless fall to be considered by that meeting. References to an “equivalent resolution” mean a resolution considered at the most nearly contemporaneous general meeting of the shareholders of the other company which bears a close relationship to the relevant resolution being considered at a general meeting of the shareholders of the first company, so that for example (but without limitation) a resolution to appoint or remove an individual as a director of RTP, to appoint or remove the auditors of RTP or to receive and adopt the accounts of RTP would, if no resolution considering such matters in relation to RTL were put to the RTL general meeting, be the “equivalent resolution” to a resolution relating to the appointment or removal of the same individual as a director of RTL, the appointment or removal of the same international firm of auditors as RTL’s auditors or the receipt or adoption of RTL’s accounts as the case may be and vice versa.
1.7 | Rights Issues |
References to offers by way of rights include offers which are subject to such exclusions or other arrangements as the Board of RTL or the Board of RTP, as the case may be, may deem necessary or expedient in relation to fractional entitlements or legal or practical problems under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory.
2 | Management of the Businesses |
Each party will do, and agrees to procure that each of its Subsidiaries will do, all acts and things which may be necessary or desirable to ensure that the businesses of the RTL Group and the RTP Group are managed on a unified basis for the benefit of the shareholders of RTL and RTP as a combined group and that full effect is given to this Agreement.
6 |
3 | Boards of RTL and RTP |
Each party will do all acts and things necessary and within their respective powers to ensure that the board of directors of RTL and the board of directors of RTP comprise the same individuals.
4 | Equalisation of Distributions |
The parties will give effect to the provisions of Schedules 1 and 2.
5 | Separate Approvals of Class Rights Actions |
5.1 | Restriction on certain actions |
5.1.1 | If either RTL or RTP proposes to take any of the following actions: | |
(a) | to offer to the holders of its existing Ordinary Shares generally shares or other securities for subscription or purchase: | ||
(i) | by way of rights (otherwise than by Matching Offers), where the proposed offer (when aggregated with (A) any previous offers by either company of shares or other securities for cash by way of rights or otherwise, but not under Matching Offers, (B) any sales, other than intra RTP Group sales, by a member of the RTP Group of RTL Ordinary Shares, and (C) any sales, other than intra RTL Group sales, by a member of the RTL Group of RTP Ordinary Shares, in each case in the relevant period) exceeds the then most Limiting Restriction that for the time being would be applicable were shares or other securities of the relevant description proposed to be offered in fact offered for cash otherwise than pro-rata by way of rights to existing shareholders of the relevant class either by RTL or by RTP; or | |||
(ii) | otherwise than by way of rights, at below Market Value; or | |||
(b) | to do anything, other than actions listed in Clause 5.1.2, 5.1.3 or 5.1.4, which the Board of RTL and the Board of RTP agree (either in a particular case or generally) should be treated as a Class Rights Action under this Clause 5.1.1, | ||
each of them agrees with the other that it shall only take such action after it has been approved by: | |||
(i) | the consent in writing of the holder of the Special Voting Share in the company proposing the action, which consent shall only be given following the passing of an ordinary resolution approving the action by the holders of Publicly-held Shares of the other company; and | |||
(ii) | such ordinary or special resolutions (if any) as are required by Applicable Regulation of the company proposing to take such action on which only holders of Publicly-held Shares in that company have voted. | |||
7 |
In this Clause 5.1.1 the term “Limiting Restriction” refers to the limit (if any) on offers for cash (otherwise than pro-rata by way of rights to existing holders of Ordinary Shares) of shares or other securities existing under restrictions for the time being applicable to RTL or RTP under Applicable Regulation, and for the purpose of ascertaining the most Limiting Restriction at any time in any situation: | ||
(a) | a restriction applicable to RTL shall be treated as also applicable to RTP (converting the restrictions, expressed in terms of a number of RTL shares, into a number of RTP shares by application of the Equalisation Ratio), and vice versa in relation to a restriction applicable to RTP; | ||
(b) | a restriction expressed in terms of a nominal amount of RTP’s equity share capital shall be treated as if it related to the number of RTP Ordinary Shares represented by that nominal amount and then converted into a number of RTL Ordinary Shares by application of the Equalisation Ratio and any restriction in relation to RTL shall be similarly treated; | ||
(c) | a restriction (when expressed as a number of RTL Ordinary Shares or RTP Ordinary Shares) that, under Applicable Regulation, has been derived by application of a percentage to a number or nominal amount of RTL Ordinary Shares and/or number or nominal amount of RTP Ordinary Shares rather than to the number of the Aggregate Publicly-held Ordinary Shares (taking into account the application of the Equalisation Ratio as described in paragraphs (a) and (b) above) shall be adjusted to the number that would have been derived from the application of such percentage to the number of the Aggregate Publicly-held Ordinary Shares (after so taking into account the application of the Equalisation Ratio); and | ||
(d) | any restriction under Applicable Regulation which comes into force in relation to either RTL or RTP after the date hereof which does not fall within (a), (b) or (c) above shall be applied to the Aggregate Publicly-held Ordinary Shares in the way in which the Board of RTL and the Board of RTP agree best reflects the rationale underlying paragraphs (a), (b) and (c) above, | ||
and the term “relevant period” refers to the period by reference to which any limitation imposed by Applicable Regulation applies. | ||
5.1.2 | If either RTL or RTP proposes to take any of the following actions: | |
(a) | to reduce or redeem its own Ordinary Share capital by way of a capital repayment to the holders of its Ordinary Shares or a cancellation of unpaid Ordinary Share capital; | ||
(b) | to purchase its own Ordinary Shares (except for such a purchase at, around or below prevailing market prices for those shares where the purchase occurs in accordance with Applicable Regulation);2 | ||
(c) | to go into voluntary liquidation; |
2 | At the Annual General Meetings of RTP and RTL held on 13 May and 27 May 1998 respectively special resolutions were passed providing that any future purchases of shares in either company by itself and any purchases of shares in RTP by RTL (or any of its subsidiaries) will require no future renewal of shareholder approval (for the purposes of the Sharing Agreement and the Articles of Association of RTP and RTL) except to the extent required by relevant UK or Australian law and Stock Exchange Rules and provided that such purchases are made at or around the prevailing market price. |
8 |
(d) | to adjust the Equalisation Ratio otherwise than in accordance with paragraph 5 of Schedule 2; | ||
(e) | to amend the terms of, or terminate, this Agreement, the RTL Shareholder Voting Agreement or the RTP Shareholder Voting Agreement other than, in the case of the RTL Shareholder Voting Agreement or the RTP Shareholder Voting Agreement an amendment to conform such agreement with the terms of this Agreement or, in any case, by way of formal or technical amendment which is not materially prejudicial to the interests of the shareholders of either party or is necessary to correct any inconsistency or manifest error or is by way of an amendment agreed between the parties pursuant to Clause 17.6 or the equivalent provision of any other such document; | ||
(f) | to do anything, other than actions listed in Clause 5.1.3 or 5.1.4, which the Board of RTL and the Board of RTP agree (either in a particular case or generally) should be treated as a Class Rights Action under this Clause 5.1.2 | ||
each of them agrees with the other that it shall only take such action after it has been approved by: | ||
1. | the consent in writing of the holder of the Special Voting Share in the company proposing the action, which consent shall only be given following the passing of a special resolution approving the action by the holders of Publicly-held Shares of the other company; and | ||
2. | a special resolution of the holders of Publicly-held Shares in the company proposing the action. | ||
5.1.3 | If it is proposed to amend, remove or alter the effect of (which for the avoidance of doubt shall be taken to include the ratification of any breach of) any RTP Entrenched Provision or to amend, remove or alter the effect of any other provision of the RTP Memorandum and Articles which amendment, removal or alteration the Board of RTL and the Board of RTP agree should be treated as subject to this Clause 5.1.3, then such action shall require approval by a special resolution of the shareholders of RTP (on which no member of the RTL Group has cast a vote or on which any votes cast by a member of the RTL Group have been disregarded) on which, if the proposed amendment, removal or alteration has not, by the time of the closing of the poll on such resolution, been approved by a special resolution of the holders of Publicly-held RTL Ordinary Shares, the voting rights of the RTP Special Voting Share shall be increased to such extent as is necessary to defeat the resolution (and in that event the holder of the RTP Special Voting Share shall be bound to vote such Share to defeat the resolution). The holder of the RTP Special Voting Share shall otherwise not be entitled to vote on such a resolution. | |
5.1.4 | If it is proposed to amend, remove or alter the effect of (which for the avoidance of doubt shall be taken to include the ratification of any breach of) any RTL Entrenched Provision or to amend, remove or alter the effect of any other provision of the RTL Memorandum and Articles which amendment, removal or alteration the Board of RTL and the Board of RTP agree should be treated as subject to this Clause 5.1.4, then such action shall require: | |
9 |
(a) | the consent in writing of the holder of the RTL Special Voting Share (which shall be given if the proposed amendment, removal or alteration has been approved by a special resolution of the holders of Publicly-held RTP Voting Shares, and otherwise shall be withheld); and | ||
(b) | approval by a special resolution of the shareholders of RTL (on which no member of the RTP Group has cast a vote or on which any votes cast by a member of the RTP Group have been disregarded) on which, if the proposed amendment, removal or alteration has not, by the time of the closing of the poll on such resolution, been approved by a special resolution of the holders of Publicly-held RTP Voting Shares, the voting rights of the RTL Special Voting Share shall be increased to such extent as is necessary to defeat the resolution (and in that event the holder of the RTL Special Voting Share shall be bound to vote such share to defeat the resolution). The holder of the RTL Special Voting Share shall otherwise not be entitled to vote on such a resolution. | ||
5.2 | Obligations to convene meetings |
Each party agrees that, if the other so requests, in relation to a proposal by the other to effect a Class Rights Action, its Board will as soon as practicable convene a general meeting of shareholders to consider and, if thought fit, pass the necessary resolutions approving such matter. | |
6 | Joint Decisions, Polls and Discretionary Matters |
6.1 | Submission of Joint Decisions to meetings of both companies |
Each of the following matters shall be submitted for approval by a resolution of the company affected by the matter and by an equivalent resolution in the other company, each by the same majority (i.e. both by ordinary or both by special resolution) to separate meetings of the shareholders of both RTL and RTP (including, for the avoidance of doubt, the holders of the Special Voting Shares), whether or not such approval is required by Applicable Regulation or otherwise: | |
(a) | the appointment or removal of a director of RTL and/or RTP; | |
(b) | the receipt or adoption of the annual accounts of RTL and/or RTP (if shareholders are to be asked to vote on the receipt or adoption of such accounts); | |
(c) | a change of name by RTL and/or RTP; | |
(d) | any proposed acquisition or disposal and any proposed transaction with a substantial shareholder, director or other related party which (in any case) is required under Applicable Regulation to be authorised by shareholders; | |
(e) | the appointment or removal of the auditors of RTL and/or RTP; | |
(f) | the creation of a new class of shares (or securities convertible into, exchangeable for or granting rights to subscribe for or purchase shares of a new class) in RTL or RTP; | |
(g) | a change of the corporate status or reregistration of RTL or RTP; | |
(h) |
a matter referred to in Clause 9.2; and |
|
10 |
(i) | any other matter which both the Board of RTL and the Board of RTP decide (either in a particular case or generally) should be decided upon by Joint Decision. | |
If a particular matter would otherwise fall both within Clause 5.1 and within Clause 6.1, then it shall be treated as falling within Clause 5.1. | |
6.2 | Timing of meetings |
If a matter requires a Joint Decision, each party shall do all such acts and things as may be necessary to ensure that the relevant annual or extraordinary general meetings, as appropriate, are held on the same day, or as closely in time to each other as practicable (taking into account the fact that some or all of the directors of RTL and RTP may wish to attend both meetings). | |
6.3 | Poll |
Each of RTL and RTP agrees with the other that any resolution put to its general meeting in relation to which the RTL Special Voting Share or the RTP Special Voting Share is or may be entitled to vote pursuant to Clause 5.1 or Clause 6.1 shall be decided on by a poll. | |
6.4 | Timing of Poll |
6.4.1 | RTL agrees with RTP that any poll on which the RTL Special Voting Share is or may be entitled to vote shall (as regards the RTL Special Voting Share and the RTL Ordinary Shares held by any member of the RTP Group) be kept open for such time as to allow a general meeting of RTP to be held and for the votes attaching to the RTL Ordinary Shares held by any member of the RTP Group and the RTL Special Voting Share to be calculated and cast on such poll, although such poll may be closed earlier in respect of shares of other classes and/or RTL Ordinary Shares held by persons other than any member of the RTP Group. | |
6.4.2 | RTP agrees with RTL that any poll on which the RTP Special Voting Share is entitled to vote shall (as regards the RTP Special Voting Share) be kept open for such time as to allow a general meeting of RTL to be held and for the votes attaching to the RTP Special Voting Share to be cast on such poll, although such poll may be closed earlier in respect of shares of other classes. | |
6.5 | Discretionary Matters |
The parties agree that: | |
(a) | the Board of RTL and the Board of RTP may by agreement decide to seek the approval of such majority of the shareholders (or any class of shareholders) of either or both of RTL and RTP on any matter which would not otherwise require such an approval (or such a high approval threshold); and | |
(b) | on any matter which by Applicable Regulation or by virtue of the provisions of the RTL Memorandum and Articles or the RTP Memorandum and Articles requires approval of the shareholders of either or both of RTL and RTP (apart from those matters for which express provision is made in this Agreement), the Board of RTL and the Board of RTP may by agreement decide that such matter shall be deemed to be a Class Rights Action requiring approval in accordance with Clause 5.1.1 or Clause 5.1.2 or a Joint Decision Matter requiring approval as a Joint Decision or whether the matter requires only the approval of the holders of Publicly-held RTL Ordinary Shares or of the holders of Publicly-held RTP Voting Shares provided | |
11 |
that, on any procedural resolution to be voted on at a meeting of shareholders of RTL at which a Joint Decision Matter is to be considered, such procedural resolution may be voted on by the holder of the RTL Special Voting Share and by any member of the RTP Group that holds beneficially any RTL Ordinary Shares and on any procedural resolution to be voted on at a meeting of shareholders of RTP at which a Joint Decision Matter is to be considered, such procedural resolution may be voted on by the holder of the RTP Special Voting Share. | ||
7 | Voting Restrictions |
7.1 | RTL |
RTL shall procure that no voting rights for the time being attaching to any RTP Ordinary Shares or RTP Voting Preference Shares beneficially owned by any member of the RTL Group are exercised on any resolution put to a shareholders meeting of RTP. | |
7.2 | RTP |
RTP shall procure that no voting rights for the time being attaching to any RTL Ordinary Shares beneficially owned by any member of the RTP Group are exercised on any resolution put to a shareholders meeting of RTL except a resolution approving a Joint Decision or a procedural resolution at a meeting at which a Joint Decision Matter is considered. | |
8 | Information and Intellectual Property |
8.1 | Disclosure |
Subject to any relevant obligation owed to a third party and to Clause 8.4, each party shall disclose, and agrees to procure that each of its Subsidiaries shall disclose, to the other all information (including Intellectual Property rights) from time to time relating to their respective businesses and agrees to use, and to procure that its Subsidiaries shall use, all reasonable endeavours either: | |
(a) | to obtain a waiver of any relevant obligation owed to a third party to the extent that such obligation would prevent disclosure to the other of any information; or | |
(b) | to obtain the third party’s acceptance that members of the RTL Group or members of the RTP Group, as the case may be, are to be treated as permitted recipients under the terms of the relevant confidentiality agreement. | |
8.2 | Confidentiality |
Each party undertakes to treat as confidential in accordance with the terms of any relevant confidentiality agreement, and procure that each of its Subsidiaries shall so treat as confidential, any confidential information disclosed to it or to its Subsidiaries pursuant to Clause 8.1. | |
8.3 | Intellectual Property |
To the extent to which it has the right to do so and subject to Clause 8.4, each party (the “first party”) shall permit members of the Group of the other to use, in the course of their respective businesses, the Intellectual Property which the first party or its Subsidiaries is entitled to use in the course of its or their respective businesses. Any such permission shall be on such terms as may reasonably be required to protect the rights subsisting in such | |
12 |
Intellectual Property. To the extent that RTL and RTP and their respective Subsidiaries do not have the right to permit members of the Group of the other to use their Intellectual Property, each of RTL and RTP shall use, and procure that its Subsidiaries shall use, all reasonable endeavours to obtain such permission whenever requested by the other to do so. | |
8.4 | Payment of Fees |
Each party acknowledges that it may be necessary or desirable for fees to be charged in respect of the supply or provision of information or Intellectual Property or other services or benefits pursuant to this Agreement, including without limit in circumstances where relevant tax laws in force from time to time require determination of an arm’s length consideration in respect of transactions between associated enterprises. If either or both of the parties determine it is necessary or desirable that a fee should be charged in respect of a transaction, the parties shall as soon as practicable negotiate in good faith and agree a reasonable arm’s length fee appropriate for the transaction concerned provided that this Clause shall not apply to the parties’ obligations to make any equalisation payments, including without limitation any obligation under Clause 4, Clause 11, Schedule 1 or Schedule 2. | |
9 | Change of Control of Either RTL or RTP |
9.1 | Enforcement of Articles |
RTP and RTL shall co-operate with each other in the enforcement of the provisions of Article 64 of the RTP Memorandum and Articles and Article 145 of the RTL Memorandum and Articles. | |
9.2 | Acceptance of a takeover offer for RTL |
RTP agrees with RTL that if a third party (either alone or with its Associates) has made an offer to shareholders generally to acquire RTL Ordinary Shares, RTP shall procure that while such offer remains open for acceptance no member of the RTP Group which holds RTL Ordinary Shares beneficially or on behalf of another member of the RTP Group shall accept such offer in respect of, or otherwise dispose of, any RTL Ordinary Shares or any interest therein without the approval of an ordinary resolution by Joint Decision on which any votes of the offeror or its Associates (apart from persons who are Associates by virtue of having accepted, or submitted forms of acceptance or irrevocable undertakings to accept, an offer for their RTL Ordinary Shares or RTP Ordinary Shares) shall be disregarded. | |
10 | Accounting Matters |
The parties agree: | |
(a) | so far as may be permitted by law, to adopt the same accounting policies and apply the same accounting practices; | |
(b) | to ensure that each of their Financial Periods ends on the same date; and | |
(c) | unless and until the shareholders decide otherwise by Joint Decision, that each of their auditors shall be part of the same international accounting firm. | |
13 |
11 | Equalisation of Assets on Termination |
11.1 | On the termination of this Agreement howsoever arising (otherwise than on the final winding up of RTL or RTP), each party will instruct a merchant bank of international repute to certify, within 6 weeks after being instructed to do so, the value of the net assets of such party as at the date of termination, and within a further 4 weeks thereafter to approve the value of the net assets of the other party as so certified. The Board of RTL and the Board of RTP shall ensure that the same principles of valuation are adopted in respect of the valuation of each company by such merchant banks. If within such 4 week period such merchant banks are unable to agree the value of the net assets of either or both parties, then the dispute shall be referred to a third merchant bank of international repute (which shall act as expert and not as arbitrator) appointed by agreement between the parties, or failing such agreement within 7 days of the end of that 4 week period by the President for the time being of the Law Society in England and Wales, and such third merchant bank will be instructed by the parties to finish its determination within a further 4 weeks of being appointed (or such longer period as the parties may agree). The agreement of the merchant banks appointed by the parties, or as the case may be the decision of the third merchant bank, shall be final and binding on the parties. |
11.2 | If the ratio of the values determined in accordance with Clause 11.1 (applying the Liquidation Exchange Rate or such other rate as such merchant bank or banks shall determine or agree) of the net assets per Publicly-held RTL Ordinary Share to the net assets per Publicly-held RTP Ordinary Share does not equal the Equalisation Ratio at the date of termination of this Agreement, then a payment will be made by one party to the other of such amount as will result in that ratio after such payment (and after making provision for any tax in respect of the receipt or making of such payment and after taking account of any offsetting tax credits or losses having regard to the proposed method of making the payment) being equal to the Equalisation Ratio at such date. |
11.3 | Termination of this Agreement shall be without prejudice to the rights and obligations of the parties under this Clause 11. |
11.4 | The costs of any third merchant bank appointed pursuant to Clause 11.1 are to be borne as it decides. |
12 | Stock Exchange Obligations |
Each of RTL and RTP will, and so far as it is able will ensure that each of its Subsidiaries will, ensure that it is in a position to comply with obligations imposed on it by all stock exchanges on which either or both of their shares are from time to time listed, quoted or traded. In particular, each party will provide to the other party all information reasonably required by the other party for the purpose of making announcements to any such stock exchange and will use all reasonable endeavours to ensure, as far as practicable, that they co-ordinate the content and timing of release of announcements required by each such stock exchange. | |
13 | Issue of Equalisation Shares |
The parties agree that the Board of RTL and the Board of RTP may agree to the simultaneous issue of the RTL Equalisation Share to a member of the RTP Group and of the RTP Equalisation Share to a member of the RTL Group in each case against payment of the nominal value thereof and that neither RTP nor RTL shall issue its Equalisation Share unless the Board of RTP and the Board of RTL shall have agreed to such issue and to the simultaneous issue of the Equalisation Share in the other company. | |
14 |
14 | Relationship with other Documents |
In the event of any conflict between this Agreement on the one hand and on the other hand either of the RTL Memorandum and Articles or the RTP Memorandum and Articles the parties shall use all reasonable endeavours to ensure that any required amendment to the RTL Memorandum and Articles or the RTP Memorandum and Articles, as is appropriate, is proposed at general meetings of RTL and/or as the case may be RTP in order to conform it or them with the provisions of this Agreement. | |
15 | Restrictions on Share Dealing |
15.1 | Limits on dealings |
Subject to Clause 15.2, each party (the “first party”) agrees that it will not, and agrees to procure that its Subsidiaries will not: | |
(a) | sell, dispose, purchase or otherwise deal in shares or other equity securities of the other party; or | |
(b) | take any action which will result in a change to the number of shares or other equity securities of the other party held by the first party’s Group, | |
unless and until the Board of the other company has resolved to consent to such sale, disposal, purchase, dealing or other action. | |
15.2 | Exceptions |
The restrictions in Clause 15.1 shall not apply to: | |
(a) | any sale or disposal by either party to its Subsidiary or by a Subsidiary of either party to that party or to another Subsidiary of that party, to any disposal permitted by Clause 9.2 or to any purchase or other dealing between either party and its Subsidiary or between Subsidiaries of a party; | |
(b) | taking up all or any part of an entitlement on a rights issue by the other party, receiving any bonus issue by the other party or taking up shares under a dividend re-investment plan of the other party; and | |
(c) | the purchase by either party and/or any of its Subsidiaries of any Ordinary Shares in the other party which would have been permitted under this Agreement if such purchase had been made by the other party itself. | |
15.3 | RTP Shareholder Voting Agreement |
RTP shall procure that, if any member of the RTP Group including Tinto Holdings Australia Pty Limited at any time owns any RTL Ordinary Shares, either such member, or a parent company of such member, enters into an agreement having the like effect in respect of such shares as does the RTP Shareholder Voting Agreement in respect of the RTL Ordinary Shares owned by Tinto Holdings Australia Pty Limited. | |
15.4 | Disposals treated as issues |
Each party will, in observing any limitation placed on it under Applicable Regulation on offers of Ordinary Shares for cash (otherwise than pro-rata by way of rights to existing | |
15 |
holders of Ordinary Shares) and in applying Clause 5.1.1(a)(i) and paragraph 5 of Schedule 2, treat sales of Ordinary Shares owned in it by the other or any of the other’s Subsidiaries (except sales to another member of the other’s Group) as though such sales were issues of unissued Ordinary Shares in its capital. | |
16 | Other Transactions |
Subject to Clause 2 and Clause 8.4, each party will enter into such further transactions or arrangements, and do such acts and things, as the other may require from time to time in the furtherance of the common interests of the shareholders of RTL and RTP as a combined group. | |
17 | Miscellaneous |
17.1 | Regulatory |
The parties will co-operate with each other from time to time to ensure that all information necessary or desirable for the making of (or responding to any requests for further information consequent upon) any notifications or filings made in respect of this Agreement, or the transactions contemplated hereunder, is supplied to the party dealing with such notification and filings and that they are properly, accurately and promptly made. | |
17.2 | No assignment |
Neither of the parties may assign any of its rights or obligations under this Agreement in whole or in part without the approval of the other party. | |
17.3 | No waiver |
No waiver by a party of a failure or failures by the other party to perform any provision of this Agreement shall operate or be construed as a waiver in respect of any other or further failure whether of a like or different character. | |
17.4 | No partnership or agency |
Nothing in this Agreement (or in any of the arrangements contemplated hereby) shall be deemed to constitute a partnership between RTL and RTP, nor constitute either party as agent of the other party for any purpose. | |
17.5 | Applicable Laws |
Each of the obligations of the parties hereto shall be subject to any applicable law and regulation of any relevant regulatory body as in force from time to time. | |
17.6 | Severance |
If any of the provisions of this Agreement is or becomes invalid, illegal or unenforceable under any relevant law, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired. Notwithstanding the foregoing, the parties shall thereupon negotiate in good faith in order to agree the terms of a mutually satisfactory provision, achieving as nearly as possible the same commercial effect, to be substituted for the provision found to be invalid, illegal or unenforceable. | |
16 |
17.7 | Amendment |
Any amendment to or termination of this Agreement shall be made in writing signed by duly authorised representatives of RTL and RTP. Any amendments to this Agreement which are formal or technical in nature and which are not materially prejudicial to the interests of the shareholders of either party or are necessary to correct any inconsistency or manifest error may be agreed between the Board of RTL and the Board of RTP. | |
18 | Notices |
Any notice, demand, consent or other communication to the parties hereto required to be given, made or served for any purposes under this Agreement shall be given to, made to or served on a party by hand or by facsimile transmission as follows: | |
to RTL: 33rd Floor | 55 Collins Street |
Melbourne 3000 |
Victoria, Australia |
Tel: (613) 9283 3288 | ||
Fax: (613) 9283 3151 | ||
Attention: The Company Secretary |
to RTP: | 6 St James’s Square | |
London SWIY 4LD |
England |
Tel: (44) 171 930 2399 | ||
Fax: (44) 171 930 3249 |
Attention: The Company Secretary | ||
or to such other address or facsimile number as shall have been notified (in accordance with this Clause) to the other party hereto and if sent by facsimile transmission as aforesaid shall be deemed to have been given, made or served on receipt of a transmission record indicating successful transmission provided that the same shall forthwith be confirmed by post and if delivered by hand shall be deemed to have been given, made or served at the time of delivery. The failure of the addressee to receive such confirmation shall not invalidate the relevant notice, demand, consent or other communication given by facsimile transmission. | |
19 | Counterparts |
This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Either party may enter into this Agreement by signing any such counterpart. | |
20 | Process Agent |
RTL irrevocably appoints Trusec Limited of 35 Basinghall Street, London EC2V 5DB as its agent to accept service of process in England in any legal action or proceedings arising out of or in connection with this Agreement, service upon whom shall be deemed complete whether or not forwarded to or received by RTL. RTP irrevocably appoints AA&H Enterprises Pty Limited (ACN 001 314 512) of 17th Floor, The Chifley Tower, 2 Chifley Square, Sydney, NSW 2000, Australia as its agent to accept service of process in Australia in any legal action or proceedings arising out of or in connection with this Agreement, | |
17 |
service upon whom shall be deemed completed whether or not forwarded to or received by RTP. Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law. Each party agrees that should its process agent cease to act or cease to have an address in the relevant jurisdiction it shall immediately appoint a new process agent in the relevant jurisdiction and notify the other party of such appointment within 14 days of such appointment. | |
21 | Governing Law |
This Agreement shall be governed by and construed in accordance with English law. | |
22 | Jurisdiction |
RTL irrevocably agrees that the courts of England are to have non-exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement. RTP irrevocably agrees that the courts of Australia are to have non-exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement. Each party irrevocably submits to the jurisdiction of such courts and waives any objection to proceedings in any such court on the ground of venue or on the ground that the proceedings have been brought in an inappropriate forum. | |
In witness whereof this Agreement has been executed on the date first written above. | |
THE COMMON SEAL
of CRA LIMITED3 (CAN 004 458 404 was hereunto affixed in the presence of: | ![]() |
|
Leon A Davis Director |
||
IAN LESLIE FALCONER
Secretary
3 |
Now called Rio Tinto Limited |
18 |
SIGNED by CRH
Bull for and on behalf of THE RTZ CORPORATION PLC4 in the presence of: | ![]() |
PDS KING Solicitor |
|
4 |
Now called Rio Tinto Limited |
19 |
Schedule 1
Principles of Equalisation
1 | Dividends |
1.1 | Except in relation to dividends in respect of 1995 and except in the circumstances set out in paragraphs 3.3 and 3.4 of Schedule 2, dividends and other distributions will be paid or made on the Ordinary Shares of RTL and RTP on the basis that the ratio of the Net Dividend Amount on one RTL Ordinary Share, to the Net Dividend Amount on one RTP Ordinary Share converted using the Applicable Exchange Rate, will be the Equalisation Ratio or as close to the Equalisation Ratio as is reasonably practicable. In this regard, a Net Dividend Amount may be rounded provided the Net Dividend Amount as rounded is within a 2% tolerance of the exact Net Dividend Amount that would result from the ratio of the Net Dividend Amount on one RTL Ordinary Share to the Net Dividend Amount on one RTP Ordinary Share converted using the Applicable Exchange Rate being exactly equal to the Equalisation Ratio. For the avoidance of any doubt and by way of example using a notional exchange rate of A$2:£1 and an Equalisation Ratio of 1:1 (and, with the exception of (g) below, under Applicable Regulations as in force at the date of this Agreement), it is agreed that: |
(a) | where RTP pays a dividend of 15 pence per share, whether this is a dividend in respect of which advance corporation tax of 3.75 pence is due under the Income and Corporation Taxes Act 1988 of the United Kingdom (“ICTA”) or the dividend is a “foreign income dividend”, as defined in ICTA or a combination of the two, then the Net Dividend Amount is 15 pence per share; and | |
(b) | where RTL pays a franked dividend of 30 cents per share carrying under Australian law an Australian Franking Credit of 16.875 cents per share, then the Net Dividend Amount is 30 cents per share; or | |
(c) | where RTL pays an unfranked dividend of 30 cents per share carrying no Australian Franking Credit, then the Net Dividend Amount is 30 cents per share; or | |
(d) | where RTL pays an unfranked dividend of 30 cents per share to a non-resident and dividend withholding tax is deducted at 15 per cent (that is, 4.5 cents is deducted from the 30 cents so that the shareholder receives a cash amount of 25.5 cents per share), then the Net Dividend Amount is 30 cents per share; or | |
(e) | where RTL pays an unfranked dividend of 30 cents per share to a non-resident which is exempt from dividend withholding tax, because the foreign dividend declaration amount in respect of the dividend is 30 cents per share under Section 128TC of the Income Tax Assessment Act, then the Net Dividend Amount is 30 cents per share; or | |
(f) | where RTL pays a dividend (franked or unfranked) of 30 cents per share to another Australian company which is eligible for a rebate of tax under Section 46 of the Income Tax Assessment Act, then the Net Dividend Amount is 30 cents per share; or | |
(g) | where RTL pays a dividend to an Australian resident of 30 cents per share and, because of a change in Australian law subsequent to the date of this Agreement, the dividend does not carry any Australian Franking Credit but RTL is required by law to withhold 10 per cent of the amount of the dividend (so that the shareholder | |
20 |
receives a cash amount of 27 cents per share) then, whether or not the shareholder is entitled to recover or obtain credit for the amount withheld, the Net Dividend Amount is 30 cents per share. | ||
1.2 | If either party (the “first party”) does not have sufficient distributable reserves to pay or make any dividend or other distribution as resolved by its directors, the other party (to the extent that it has sufficient distributable reserves after making allowance for the dividend or other distribution to be made to its own shareholders and after making provision for any tax in respect of the making of such payment or distribution (taking into account any offsetting tax credits, losses or deductions)) will make a payment to the first party or a distribution on its Equalisation Share (if it has been issued and if its Board so decides), so far as it is practicable to do so, in order to ensure that the first party’s distributable reserves are sufficient to pay or make such dividend or other distribution (and account for any tax payable, after taking into account any offsetting tax credits, losses or deductions with respect to the receipt of the payment or distribution or the payment of such dividend or the making of such other distribution) as will satisfy the provisions of paragraph 1.1. |
2 | Distributions of Capital |
On the bases and assumptions and subject to the exceptions set out or referred to in Schedule 2, distributions of capital by each party will be made on the principle that the ratio of the interests of the holders of Publicly-held RTL Ordinary Shares on a per share basis in the aggregate underlying capital of RTL and RTP taken as a whole (the “Aggregate Capital”) to the interests of the holders of the Publicly-held RTP Ordinary Shares on a per share basis in the Aggregate Capital will equal the Equalisation Ratio. | |
3 | Purchases of Ordinary Shares |
For the avoidance of doubt, but without prejudice to Clauses 5 and 15 of this Agreement, nothing in this Agreement shall operate: | |
(a) | to require that any purchase by either party (the “first party”) of Ordinary Shares or other shares in itself shall be accompanied by or imply any obligation to make a purchase of Ordinary Shares or other shares in the other party either by the first party or by the other party or any of its Subsidiaries; | |
(b) | to require that any purchase by either party (the “first party”) and/or any of its Subsidiaries of Ordinary Shares or other shares in the other party shall be accompanied by or imply any obligation to make a purchase of Ordinary Shares or other shares in the first party by the first party or by the other party or any of its Subsidiaries; | |
(c) | to restrict in any way the purchase by either party or any of its Subsidiaries of Ordinary Shares or other shares in itself or in the other party | |
and no purchase made in accordance with this paragraph 3 at around or below prevailing market prices for the shares being purchased shall require any adjustment to the | ||
21 |
Equalisation Ratio providing that the price paid shall not exceed the maximum from time to time specified by Applicable Regulation.5 | |
5 |
At the Annual General Meetings of RTP and RTL held on 13 May and 27 May 1998 respectively special resolutions were passed providing that any future purchases of shares in either company by itself and any purchases of shares in RTP by RTL (or any of its subsidiaries) will require no future renewal of shareholder approval (for the purposes of the Sharing Agreement and the Articles of Association of RTP and RTL) except to the extent required by relevant UK or Australian law and Stock Exchange Rules and provided that such purchases are made at or around the prevailing market price. |
22 |
Schedule 2
Operation of Principles
1 | General |
The parties will keep under review (and amend, or propose to amend, where necessary) the detailed arrangements for equalisation embodied in this Schedule 2 and the RTL Memorandum and Articles and the RTP Memorandum and Articles with a view to ensuring that such arrangements work in conformity with the principles stated in Schedule 1. | |
2 | Timing of Distributions |
The parties agree: | |
2.1 | that the Boards of RTL and RTP shall resolve to pay dividends or make other distributions at Board meetings, summoned so that they are held as close in time to each other as is practicable; |
2.2 | to co-operate with a view to announcing their dividends and any other distributions, as far as practicable, simultaneously; and |
2.3 | to co-operate so far as practicable in co-ordinating the timing of all other aspects of dividend payment or the making of other distributions. |
3 | Equalisation of Net Distributions |
The parties agree to procure that their respective Boards observe the following provisions: | |
3.1 | In relation to each proposed dividend payment or other distribution the Board of RTL and the Board of RTP shall agree at the Board meetings referred to in paragraph 2.1 the Net Dividend Amount in respect of the dividends or other distributions to be paid or made by them respectively. |
3.2 | Subject (in the case of dividends) to paragraphs 3.3 and 3.4, the Board of RTL and the Board of RTP shall resolve to pay dividends or make distributions of such an amount that, in relation to any proposed dividend payment or the making of any distribution, the ratio of the Net Dividend Amount in respect of one RTL Ordinary Share to the Net Dividend Amount in respect of one RTP Ordinary Share, calculated using the Applicable Exchange Rate, is the Equalisation Ratio. |
3.3 | Notwithstanding paragraph 3.2, either the Board of RTL or the Board of RTP may, after consulting the other Board, resolve to pay a dividend which is lower than the amount that would be implied by the Equalisation Ratio if it considers that payment of a dividend by RTL or RTP, as appropriate, according to the Equalisation Ratio would result in the payment of a dividend which it would be contrary to Applicable Regulation to pay. |
3.4 | In addition, RTL and RTP acknowledge that, in relation to any proposed dividend payment, the amounts resolved to be paid by the Board of RTL or the Board of RTP may not reflect the Equalisation Ratio where, following the reduction by one party of its dividend payment to shareholders in accordance with paragraph 3.3, subsequent compensatory payments are to be made to the relevant shareholders in respect of the relevant shares as contemplated in paragraph 3.6. |
3.5 | Where, for any of the reasons stated in paragraphs 3.3 or 3.4, either the Board of RTL or the Board of RTP decides not to pay a dividend according to the Equalisation Ratio, RTL |
23 |
and RTP shall make available to their shareholders, together with and in the same manner as the announcement of the dividend, a statement explaining why dividends have been or will be paid which are not in accordance with the Equalisation Ratio and the implications of that fact for future dividends (in so far as they are known). | |
3.6 | RTL and RTP agree that: |
3.6.1 | Where, in accordance with paragraph 3.3, the Board of RTL or the Board of RTP has resolved to pay a dividend lower than the amount that would be implied by the Equalisation Ratio, any future compensatory dividends may be paid at the same time as routine dividend payments by RTL and RTP. | |
3.6.2 | In the following circumstances, the following reserves shall be established: | |
(a) | Inability to equalise in whole or in part | ||
If the whole or any part of the amount that would otherwise be payable to one party in accordance with paragraph 1.2 of Schedule 1 or distributable in accordance with that paragraph on the RTL Equalisation Share or the RTP Equalisation Share held by the party entitled to the relevant dividend payment (in either case the “affected party”) cannot be paid for any reason, then an amount equal to the difference between (i) the amount which should have been paid in accordance with paragraph 1.2 of Schedule 1 and (ii) the amount actually paid shall be credited to a separate reserve in the books of the other party (in sterling if the other party is RTP or in Australian dollars if the other party is RTL) and shall be preserved by such party so as to be available for payment to the affected party when circumstances permit such payment to be made and RTL and RTP shall agree arrangements to protect their respective shareholders against significant prejudice caused by currency fluctuations affecting the value of the separate reserve measured in terms of the currency in which payment of the compensatory payment or dividend will be made or paid. This reserve will be recorded in the books of the relevant company as a reserve for the benefit of the holder of the Equalisation Share (if it has been issued) and shall otherwise be recorded as a debt due to the party entitled to the payment under paragraph 1.2 of Schedule 1; | |||
(b) | Cap on own distributions notwithstanding equalisation | ||
If the whole or any part of the relevant amount payable in accordance with paragraph 1.2 of Schedule 1 or distributable in accordance with that paragraph on either the RTP Equalisation Share or the RTL Equalisation Share to the affected party is paid or distributed notwithstanding the fact that the affected party (or if the affected party is not RTP or RTL, whichever of RTP or RTL is the ultimate parent of the affected party) will (for any of the reasons specified in sub-paragraph (c) below) pay a lesser Net Dividend Amount to its shareholders than the amount which will be paid by the other party (taking into account the Equalisation Ratio), the affected party (or if the affected party is not RTP or RTL, whichever of RTP or RTL is the ultimate parent of the affected party) shall, for the benefit of the holders from time to time of its Ordinary Shares (the “Reserve Shares”) in issue at the time that the inability to pay occurs, establish a reserve in its own books of the amount so received which it is unable to distribute to its shareholders (which, in the case of RTL, will be in Australian dollars and, in the case of RTP, will be in sterling); and | |||
24 |
(c) | Cap on own distributions when no equalisation required | ||
A reserve shall be established for the benefit of the holders of the Reserve Shares of either party in the books of that party representing any amounts which, although available to that party (out of the accumulated distributable reserves of that party), are by reason of Applicable Regulation not permitted to be paid to the holders of Reserve Shares of that party and which should have been paid to the holders of Reserve Shares of that party in order to satisfy the requirements of paragraph 1.2 of Schedule 1. | |||
3.6.3 | The reserves established pursuant to paragraph 3.6.2 shall be: | |
(a) | reduced proportionately to any decrease in the issued share capital of the affected party (or if the affected party is not RTP or RTL, whichever of RTP or RTL is the ultimate parent of the affected party); and | ||
(b) | adjusted to compensate for changes in the taxation regime applicable to the affected party or the party establishing the relevant reserve in either case under paragraph 3.6.2(a) so as to ensure that the same net amount is received by the affected party which would have been received had the circumstances in paragraph 3.3 not arisen. | ||
3.6.4 |
There shall be added to the reserves established pursuant to paragraph 3.6.2 such amount of notional interest or other compensation to reflect the delay in receipt as RTL and RTP may agree. |
|||
3.6.5 | Any amounts standing to the credit of any reserve established pursuant to paragraph 3.6.2 shall be paid to the persons entitled to them as soon as Applicable Regulation so permits. | |||
3.7 | For the purposes of Article 3(B) of the RTP Memorandum and Articles, Article 8 of the RTL Memorandum and Articles and paragraph 1.2 of Schedule 1 the dividends to be paid or distributions made to shareholders and the payments to be made under paragraph 1.2 of Schedule 1 or distributions to be made on the RTL Equalisation Share or on the RTP Equalisation Share under that paragraph shall be calculated ignoring the possibility of any requirement or decision to pay a different amount by reason of any of the circumstances described in paragraph 3.3. | ||
4 | Capital | ||
4.1 | Liquidation of RTP | |||
The parties agree that, if RTP shall go into liquidation whether compulsory or voluntary and whether or not proceedings have been commenced for the liquidation of RTL, then, unless the relevant party has issued an Equalisation Share and pursuant to the terms of issue thereof is required or elects to make a distribution on its Equalisation Share of an equivalent amount, a payment (the “Equalisation Payment”) shall be made by RTL to RTP or, as the case may be, by RTP to RTL if either party would have surplus assets available for distribution to the holders of its Ordinary Shares after the payment to all creditors and holders of prior ranking classes of share of the amounts due to them and the ratio of the surplus (if any) attributable to each Publicly-held RTL Ordinary Share to the surplus (if any) attributable to each Publicly-held RTP Ordinary Share would otherwise not equal the | |
25 |
Equalisation Ratio. The amount of the Equalisation Payment shall be calculated as set out in paragraphs 4.1.1 to 4.1.10. In making such calculation a reserve shall be made for the following amounts due in respect of shares in or reserves of the relevant party, so that the Equalisation Payment shall not be made by the party from which it would otherwise be due unless after making such payment there will remain available to such party sufficient funds to pay the following amounts due on a return of assets on a liquidation: | |
I. | In the case of RTP: |
(a) | in respect of any statutory entitlements ranking ahead of the entitlements of the shareholders on a liquidation of RTP, the amounts due in accordance with the relevant statute; | |
(b) | to the holders of the Preference Shares (as defined in the RTP Memorandum and Articles) and to the holders of all other classes of share (apart from those listed below) having rights to participate on a return of capital in priority to the RTP Ordinary Shares, the amount payable on a return of capital on such shares; | |
(c) | to the holder of the RTP Special Voting Share, the nominal amount paid up on such Share; | |
(d) | to: | |
(i) | the holder of the RTP Equalisation Share (if any), the nominal amount paid up thereon and any amounts standing to the credit of the holder of that share; and | ||
(ii) | RTL, any amount standing to the credit of RTL, | ||
in either case in any reserve set up in the books of RTP pursuant to paragraph 3.6.2(a); and | |
(e) | to holders of RTP Ordinary Shares any amounts standing to the credit of any reserve for their benefit set up in the books of RTP pursuant to paragraph 3.6.2(b) or 3.6.2(c). | |
II. | In the case of RTL: | |
(a) | In respect of any statutory entitlements ranking ahead of the entitlements of the shareholders of RTL on a liquidation of RTL, the amounts due in accordance with the relevant statute; | |
(b) | to the holders of all classes of share (apart from those listed below) having rights to participate on a return of capital in priority to the RTL Ordinary Shares, the amount payable on a return of capital on such shares; | |
(c) | to: | |
(i) | the holder of the RTL Equalisation Share (if any), the nominal amount paid up thereon and any amounts standing to the credit of the holder of that share; and | |||
(ii) | RTP, any amount standing to the credit of RTP, | |||
in either case in any reserve in the books of RTL pursuant to paragraph 3.6.2(a); | |
26 |
(d) | to holders of RTL Ordinary Shares any amounts standing to the credit of any reserve for their benefit set up in the books of RTL pursuant to paragraph 3.6.2(b) or 3.6.2(c); and | |
(e) | to the holder of the RTL Special Voting Share, the nominal amount paid up on such share. | |
4.1.1 | For the purpose of calculating the Equalisation Payment, the liquidator of RTP shall draw up accounts as at the earliest date (the “Reference Date”) on which the liquidator is able to make a final distribution to creditors and members of RTP to show the gross amount which would be available for distribution to the holders of RTP Ordinary Shares on the liquidation of RTP after payment in full of any amount standing to the credit of: | |||
(a) | any member of the RTL Group in any reserve set up in the books of RTP pursuant to paragraph 3.6.2(a); and | |
(b) | the holders of RTP Ordinary Shares in any reserve set up in the books of RTP under paragraph 3.6.2(b) or 3.6.2(c) | |
and to calculate the amount thereof available for distribution to holders of Publicly-held RTP Ordinary Shares or the amount (expressed as a negative sum) of the shortfall which would need to be obtained before the holders of Publicly-held RTP Ordinary Shares would receive any payment by way of distribution (in either case, the “RTP Own Distribution Amount”), on the assumption that distribution to RTP’s creditors and members took place on the Reference Date. The liquidator of RTP shall certify the result of such calculation to RTL. | ||
4.1.2 | Unless RTL is in liquidation at the Reference Date (in which case paragraph 4.2.1 shall apply instead of this paragraph 4.1.2), for the purpose of calculating the Equalisation Payment, the Relevant Officer (as defined in paragraph 4.5) for the time being of RTL shall draw up accounts as at the Reference Date of all assets (valued as if RTL was in liquidation and those assets were to be realised by a liquidator of RTL in an orderly manner) and liabilities which would be admissible to proof if RTL was in liquidation at the Reference Date (other than the asset or liability represented by the Equalisation Payment) to show the gross amount which would be available for distribution to holders of RTL Ordinary Shares on the liquidation of RTL (if it were to occur on the Reference Date) after payment in full of any amount standing to the credit of: | |
(a) | any member of the RTP Group in any reserve set up in the books of RTL pursuant to paragraph 3.6.2 (a); and | ||
(b) | the holders of RTL Ordinary Shares in any reserve set up in the books of RTL under paragraph 3.6.2(b) or 3.6.2(c) | ||
and to calculate the amount thereof available for distribution to holders of Publicly-held RTL Ordinary Shares or the amount (expressed as a negative sum) of the shortfall which would need to be obtained before the holders of the Publicly-held RTL Ordinary Shares would receive any payment by way of distribution (in either case, the “RTL Own Distribution Amount”), on the assumption that the distribution to RTL’s creditors and members on liquidation took place on the Reference Date. The Relevant Officer of RTL shall certify the result of such calculation to RTP. | ||
27 |
4.1.3 | The liquidator of RTP for the time being shall make, and certify to RTL, the results of the following calculation as at the Reference Date and agree such calculation with the Relevant Officer of RTL, which calculation will be expressed in sterling, with any Australian dollar amounts being converted to sterling at the Liquidation Exchange Rate as at the Reference Date: | |
(RTPOD + RTLOD) x RTPOS |
(RTLOS x EF) + RTPOS | |||||
where: | |||||
RTPOD = the RTP Own Distribution Amount; | |||||
RTLOD = the RTL Own Distribution Amount; |
RTPOS = the number of Publicly-held RTP Ordinary Shares in issue on the Reference Date; | ||
RTLOS = the number of Publicly-held RTL Ordinary Shares in issue on the Reference Date; and | ||
EF = the Equalisation Fraction on the Reference Date. | ||
The result of such calculation is referred to below as the “Adjusted RTP Distribution Amount”. | ||
4.1.4 | If the Adjusted RTP Distribution Amount is equal to or more than the RTP Own Distribution Amount, then (a) if the RTL Own Distribution Amount is a positive amount, RTL shall pay, out of the assets otherwise available to holders of RTL Ordinary Shares, an amount to RTP being the lesser of an amount equal to the value of those assets and an amount such that (taking account of any tax payable on the making or receipt of that payment, after allowing for any offsetting tax credits, losses or deductions) the ratio of the amount available for distribution on each Publicly-held RTL Ordinary Share to the amount available for distribution on each Publicly-held RTP Ordinary Share: | |
(i) | apart from any undistributed amounts resulting from the payment by RTL to a member of the RTP Group, or by RTP to a member of the RTL Group of any reserves under paragraph 3.6.2(a) or any amounts credited to any reserve in the books of RTP for the benefit of holders of RTP Ordinary Shares or any amounts credited to any reserve in the books of RTL for the benefit of holders of RTL Ordinary Shares, in either case under paragraphs 3.6.2(b) or 3.6.2(c); and | ||
(ii) | on the assumption that such distribution to RTP’s members and creditors and RTL’s members and creditors took place on the Reference Date; and | ||
(iii) | after taking into account the amount available for distribution on each Publicly-held RTP Ordinary Share prior to such payment, | ||
is equal to the Equalisation Ratio, converting Australian dollar amounts to sterling by application of the Liquidiation Exhange Rate at the Reference Date and (b) in any case, the assets of RTP available for distribution, which shall include any distribution made on the RTL Equalisation Share or any other payment pursuant to this Agreement or the RTL Memorandum and Articles, shall belong to and be distributed among the holders of RTP Ordinary Shares rateably according to the numbers of RTP Ordinary Shares held by them. | ||
28 |
4.1.5 | If the Adjusted RTP Distribution Amount is equal to or more than zero, but is less than the RTP Own Distribution Amount, the liquidator of RTP shall pay out of the assets otherwise available for distribution to holders of RTP Ordinary Shares an amount to RTL such that (taking account of any tax payable on the making or receipt of that payment, after allowing for any offsetting tax credits, losses or deductions) the ratio of the amount available for distribution on each Publicly-held RTL Ordinary Share: | |
(i) | apart from any undistributed amounts resulting from the payment by RTP to a member of the RTL Group or by RTL to a member of the RTP Group of any reserves under paragraph 3.6.2(a) or any amounts credited to any reserve in the books of RTL for the benefit of holders of RTL Ordinary Shares or any amounts credited to any reserve in the books of RTP for the benefit of holders of RTP Ordinary Shares, in either case under paragraphs 3.6.2 (b) or 3.6.2(c); and | ||
(ii) | on the assumption that such distribution to RTP’s members and creditors and RTL’s members and creditors took place on the Reference Date; and | ||
(iii) | after taking into account the amount available for distribution on each Publicly-held RTL Ordinary Share prior to such payment | ||
to the amount available for distribution on each Publicly-held RTP Ordinary Share converting sterling amounts to Australian dollars by application of the Liquidation Exchange Rate on the Reference Date is equal to the Equalisation Ratio (and the balance of the assets (if any) of RTP available for distribution to the holders of RTP Ordinary Shares remaining after any such payment to RTL shall belong to and be distributed among the holders of RTP Ordinary Shares rateably according to the numbers of RTP Ordinary Shares held by them). | ||
4.1.6 | If the Adjusted RTP Distribution Amount is zero or a negative amount and the RTP Own Distribution Amount is a positive amount then the liquidator of RTP shall pay out of the assets otherwise available for distribution to the holders of RTP Ordinary Shares an amount to RTL such that (taking account of any tax payable on the making of that payment, after allowing for any offsetting tax credits, losses or deductions) the amount available for distribution to holders of Publicly-held RTP Ordinary Shares on the assumption that distribution to RTP’s members and creditors took place on the Reference Date is zero. | |
4.1.7 | If the RTP Own Distribution Amount is zero or a negative amount and the RTL Own Distribution Amount is zero or a negative amount, then no payment is required to be made by the liquidator of RTP to RTL or by RTL to RTP and the amount available for distribution to holders of Publicly-held RTP Ordinary Shares is zero. | |
4.1.8 | In making the calculations referred to in this paragraph 4.1, the Relevant Officer of RTL and the liquidator of RTP shall take into account the distributions which fall to be made on those RTP Ordinary Shares which are not Publicly-held RTP Ordinary Shares and those RTL Ordinary Shares which are not Publicly-held RTL Ordinary Shares, it being acknowledged that for each company the per share distributions on its Publicly-held Ordinary Shares and its non Publicly-held Ordinary Shares will be the same. | |
29 |
4.1.9 | The certificates which the Relevant Officers of RTL and RTP are required to produce under paragraphs 4.1.1, 4.1.2 and 4.1.3 (the “Certificates”) shall be produced within 6 weeks after the Reference Date and the parties shall procure that all necessary instructions are given to the Relevant Officers of each company to ensure that such certificates are produced within that time. The Relevant Officers of each company shall then agree the calculations in such Certificates within 4 weeks of the date on which all such Certificates are produced. If they are unable to agree the calculations in the Certificates within such time, then the dispute shall be referred to an independent firm of accountants agreed by the parties (or failing agreement within 7 days of the end of that 4 week period, appointed, on the application of either party, by the President for the time being of the Institute of Chartered Accountants in England). The firm so appointed shall act as experts and not as arbitrators and shall be instructed to make its determination within 4 weeks of its appointment. The costs of such firm are to be borne as such firm decides. Once the calculations in the Certificates have been agreed by the Relevant Officers of the parties or determined by the independent accountants, they shall be conclusive and binding on the parties. | |
4.1.10 | The parties shall jointly give such instructions as may be necessary to procure the making of any calculations or certifications required by this Clause 4.1. | |
4.2 | Liquidation of RTL |
The parties agree that, if RTL shall go into liquidation whether compulsory or voluntary and whether or not proceedings have been commenced for the liquidation of RTP, then, unless the relevant party has issued an Equalisation Share and pursuant to the terms of issue thereof is required or elects to make a distribution on its Equalisation Share of an equivalent amount, a payment (the “Equalisation Payment”) shall be made by RTP to RTL or, as the case may be, by RTL to RTP if either party would have surplus assets available for distribution to the holders of its Ordinary Shares after the payment to all creditors and holders of prior ranking classes of share of the amounts due to them and the ratio of the surplus (if any) attributable to each Publicly-held RTL Ordinary Share to the surplus (if any) attributable to each Publicly-held RTP Ordinary Share would otherwise not equal the Equalisation Ratio. The amount of the Equalisation Payment shall be calculated as set out in paragraphs 4.2.1 to 4.2.10. In making such calculation a reserve shall be made for the following amounts due in respect of shares in or reserves of the relevant party, so that the Equalisation Payment shall not be made by the party from which it would otherwise be due unless after making such payment there will remain available to such party sufficient funds to pay the following amounts due on a return of assets on a liquidation: | |
I. | In the case of RTL: |
(a) | In respect of any statutory entitlements ranking ahead of the entitlements of the shareholders of RTL on a liquidation of RTL, the amounts due in accordance with the relevant statute; | |
(b) | to the holders of all classes of shares (apart from those listed below) having rights to participate on a return of capital in priority to the RTL Ordinary Shares, the amount payable on a return of capital on such shares; | |
30 |
(c) | to: | |
(i) | the holder of the RTL Equalisation Share (if any), the nominal amount paid up thereon and any amounts standing to the credit of the holder of that share; and | |||
(ii) | RTP, any amount standing to the credit of RTP, | |||
in either case in any reserve in the books of RTL pursuant to paragraph 3.6.2(a); | |
(d) | to holders of RTL Ordinary Shares any amounts standing to the credit of any reserve for their benefit set up in the books of RTL pursuant to paragraph 3.6.2(b) or 3.6.2(c); and | |
(e) | to the holder of the RTL Special Voting Share, the nominal amount paid up on such share. | |
II. | In the case of RTP: | |
(a) | In respect of any statutory entitlements ranking ahead of the entitlements of the shareholders of RTP on a liquidation of RTP, the amounts due in accordance with the relevant statute; | |
(b) | to the holders of the Preference Shares (as defined in the RTP Memorandum and Articles) and to the holders of all other classes of share (apart from those listed below) having rights to participate on a return of capital in priority to the RTP Ordinary Shares, the amount payable on a return of capital on such shares; | |
(c) | to the holder of the RTP Special Voting Share, the nominal amount paid up on such share; | |
(d) | to: | |
(i) | the holder of the RTP Equalisation Share (if any), the nominal amount paid up thereon and any amounts standing to the credit of the holder of that share; and | |||
(ii) | RTL, any amount standing to the credit of RTL, | |||
in either case in any reserve set up in the books of RTP pursuant to paragraph 3.6.2(a); and | |
(e) | to holders of RTP Ordinary Shares any amounts standing to the credit of any reserve for their benefit set up in the books of RTP pursuant to paragraph 3.6.2(b) or 3.6.2(c). | |
4.2.1 | For the purpose of calculating the Equalisation Payment, the liquidator of RTL shall draw up accounts as at the earliest date (the “Reference Date”) on which the liquidator is able to make a final distribution to creditors and members of RTL to show the gross amount which would be available for distribution to the holders of RTL Ordinary Shares on the liquidation of RTL after payment in full of any amount standing to the credit of: | |||
(a) | any member of the RTP Group in any reserve set up in the books of RTL pursuant to paragraph 3.6.2(a); and | |||
(b) | the holders of RTL Ordinary Shares in any reserve set up in the books of RTL under paragraph 3.6.2(b) or 3.6.2(c) | |||
31 |
and to calculate the amount thereof available for distribution to holders of Publicly-held RTL Ordinary Shares or the amount (expressed as a negative sum) of the shortfall which would need to be obtained before the holders of the Publicly-held RTL Ordinary Shares would receive any payment by way of distribution (in either case, the “RTL Own Distribution Amount”), on the assumption that distribution to RTL’s creditors and members took place on the Reference Date. The liquidator of RTL shall certify the result of such calculation to RTP. | ||
4.2.2 | Unless RTP is in liquidation at the Reference Date (in which case paragraph 4.1.1 shall apply instead of this paragraph 4.2.2), for the purpose of calculating the Equalisation Payment, the Relevant Officer (as defined in paragraph 4.5) for the time being of RTP shall draw up accounts as at the Reference Date of all assets (valued as if RTP was in liquidation and those assets were to be realised by a liquidator of RTP in an orderly manner) and liabilities which would be admissible to proof if RTP was in liquidation at the Reference Date (other than the asset or liability represented by the Equalisation Payment) to show the gross amount which would be available for distribution to holders of RTP Ordinary Shares on the liquidation of RTP (if it were to occur on the Reference Date) after payment in full of any amount standing to the credit of: | |
(a) | any member of the RTL Group in any reserve set up in the books of RTP pursuant to paragraph 3.6.2 (a); and | ||
(b) | the holders of RTP Ordinary Shares in any reserve set up in the books of RTP under paragraph 3.6.2(b) or 3.6.2(c) | ||
and to calculate the amount thereof available for distribution to holders of Publicly-held RTP Ordinary Shares or the amount (expressed as a negative sum) of the shortfall which would need to be obtained before the holders of the Publicly-held RTP Ordinary Shares would receive any payment by way of distribution (in either case, the “RTP Own Distribution Amount”), on the assumption that the distribution to RTP’s creditors and members on liquidation took place on the Reference Date. The Relevant Officer of RTP shall certify the result of such calculation to RTL. | ||
4.2.3 | The liquidator of RTL for the time being shall make, and certify, the results of the following calculation as at the Reference Date and agree such calculation with the Relevant Officer of RTP, which calculation will be expressed in Australian dollars, with any sterling amounts being converted to Australian dollars at the Liquidation Exchange Rate as at the Reference Date: | |
(RTLOD + RTPOD) | x | RTLOS | ||||
(RTPOS 3 EF) + RTLOS |
where:
RTLOD = the RTL Own Distribution Amount; | ||
RTPOD = the RTP Own Distribution Amount; | ||
RTLOS = the number of Publicly-held RTL Ordinary Shares in issue on the Reference Date; | ||
RTPOS = the number of Publicly-held RTP Ordinary Shares in issue on the Reference Date; and | ||
EF = the Equalisation Fraction on the Reference Date. | ||
32 |
The result of such calculation is referred to below as the “Adjusted RTL Distribution Amount”. | |
4.2.4 | If the Adjusted RTL Distribution Amount is equal to or more than the RTL Own Distribution Amount, then (a) if the RTP Own Distribution Amount is a positive amount, RTP shall pay, out of the assets otherwise available to holders of RTP Ordinary Shares, an amount to RTL being the lesser of an amount equal to the value of those assets and an amount such that (taking account of any tax payable on the making or receipt of that payment, after allowing for any offsetting tax credits, losses or deductions) the ratio of the amount available for distribution on each Publicly-held RTL Ordinary Share to the amount available for distribution on each Publicly-held RTP Ordinary Share: | |
(i) | apart from any undistributed amounts resulting from the payment by RTP to a member of the RTL Group, or from RTL to a member of the RTP Group of any reserves under paragraph 3.6.2(a) or any amounts credited to any reserve in the books of RTL for the benefit of holders of RTL Ordinary Shares or any amounts credited to any reserve in the books of RTP for the benefit of holders of RTP Ordinary Shares, in either case under paragraphs 3.6.2(b) or 3.6.2(c); and | ||
(ii) | on the assumption that distribution to RTL’s members and creditors and RTP’s members and creditors took place on the Reference Date; and | ||
(iii) | after taking into account the amount available for distribution on each Publicly-held RTL Ordinary Share prior to such payment, | ||
is equal to the Equalisation Ratio, converting Australian dollar amounts to sterling by application of the Liquidiation Exhange Rate at the Reference Date and (b) in any case, the assets of RTP available for distribution, which shall include any distribution made on the RTL Equalisation Share or any other payment pursuant to this Agreement or the RTL Memorandum and Articles, shall belong to and be distributed among the holders of RTP Ordinary Shares rateably according to the numbers of RTP Ordinary Shares held by them. | ||
4.2.5 | If the Adjusted RTL Distribution Amount is equal to or more than zero, but is less than the RTL Own Distribution Amount, the liquidator of RTL shall pay out of the assets otherwise available for distribution to holders of RTL Ordinary Shares an amount to RTP such that (taking account of any tax payable on the making or receipt of that payment, after allowing for any offsetting tax credits, losses or deductions) the ratio of the amount available for distribution on each Publicly-held RTL Ordinary Share, | |
(i) | apart from any undistributed amounts resulting from the payment by RTL to a member of the RTP Group or RTP to a member of the RTL Group of any reserves under paragraph 3.6.2(a) or any amounts credited to any reserve in the books of RTP for the benefit of holders of RTP Ordinary Shares or any amounts credited to any reserves in the books of RTL for the benefit of holders of RTL Ordinary Shares, in either case under paragraphs 3.6.2(b) or 3.6.2(c); and | ||
(ii) | on the assumption that such distribution to RTL’s members and creditors and RTP’s members and creditors took place on the Reference Date; and | ||
33 |
(iii) | after taking into account the amount available for distribution on each Publicly-held RTP Ordinary Share prior to such payment, | ||
to the amount available for distribution on each Publicly-held RTP Ordinary Share, converting Australian dollar amounts to sterling by application of the Liquidation Exchange Rate on the Reference Date, is the Equalisation Ratio (and the balance of the assets (if any) of RTL available for distribution to the holders of RTL Ordinary Shares remaining after any such payment to RTP shall belong to and be distributed among the holders of RTL Ordinary Shares rateably according to the numbers of RTL Ordinary Shares held by them). | ||
4.2.6 | If the Adjusted RTL Distribution Amount is zero or a negative amount and the RTL Own Distribution Amount is a positive amount then the liquidator of RTL shall pay out of the assets otherwise available for distribution to the holders of RTL Ordinary Shares an amount to RTP such that (taking account of any tax payable on the making of that payment, after allowing for any offsetting tax credits, losses or deductions) the amount available for distribution to holders of Publicly-held RTL Ordinary Shares on the assumption that distribution to RTL’s members and creditors took place on the Reference Date is zero. | |
4.2.7 | If the RTL Own Distribution Amount is zero or a negative amount and the RTP Own Distribution Amount is zero or a negative amount, then no payment is required to be made by the liquidator of RTL to RTP or by RTP to RTL and the amount available for distribution to holders of Publicly-held RTL Ordinary Shares is zero. | |
4.2.8 | In making the calculations referred to in this paragraph 4.2, the Relevant Officer of RTP and the liquidator of RTL shall take into account the distributions which fall to be made on those RTL Ordinary Shares which are not Publicly-held RTL Ordinary Shares and those RTP Ordinary Shares which are not Publicly-held RTP Ordinary Shares it being acknowledged that for each company the per share distributions on the Publicly-held Ordinary Shares and the non Publicly-held Ordinary Shares will be the same. | |
4.2.9 | The certificates which the Relevant Officers of RTL and RTP are required to produce under paragraphs 4.2.1, 4.2.2 and 4.2.3 (the “Certificates”) shall be produced within 6 weeks after the Reference Date and the parties shall procure that all necessary instructions are given to the Relevant Officers of each company to ensure that such certificates are produced within that time. The Relevant Officers of each company shall then agree the calculations in such Certificates within 4 weeks of the date on which the Certificates are produced. If they are unable to agree the calculations in the Certificates within such time, then the dispute shall be referred to an independent firm of accountants agreed by the parties (or failing agreement within 7 days of the end of that 4 week period, appointed, on the application of either party, by the President for the time being of the Institute of Chartered Accountants in England). The firm so appointed shall act as experts and not as arbitrators and shall be instructed to make its determination within 4 weeks of its appointment. The costs of such firm shall be borne by the parties as such firm decides. Once the calculations in the Certificates have been agreed by the Relevant Officers of the parties or determined by the independent accountants, they shall be conclusive and binding on the parties. | |
34 |
4.2.10 | The parties shall jointly give such instructions as may be necessary to procure the making of any calculations or certifications required by this paragraph 4.2. | |
4.3 | To the extent that the provisions of this Schedule constitute either party (the “first party”) a creditor of the other party (where the other party is in liquidation), the first party will be fully subordinated to all other creditors of the other party and to the holders of shares in the other party which rank in priority to the Ordinary Shares in the other party. |
4.4 | In this Schedule, “the gross amount which would be available for distribution” to shareholders means such amount ignoring any Equalisation Payment or distribution on the Equalisation Share and any tax payable on the making of the Equalisation Payment or distribution, and both “the gross amount which would be available for distribution” and “the amount available for distribution” refer to such amount before deduction of any amount in respect of tax required to be deducted or withheld from the distribution to holders of Ordinary Shares by or on behalf of the company paying or making the distribution but net of any tax payable by that company on the distribution to holders of its Ordinary Shares. |
4.5 | In this Schedule, “Relevant Officer” of a company shall mean the auditor of that company or, if that company is in liquidation, the liquidator of that company. |
4.6 | The parties will co-operate to ensure that any calculation or certificate required under the Articles of Association of either party in connection with a distribution on the Equalisation Share shall promptly be produced and agreed in accordance with the relevant article. |
4.7 | If either party (the “second liquidating party”) shall go into liquidation during the period between the other party (the “first liquidating party”) going into liquidation and the making of the Equalisation Payment pursuant to paragraph 4.1 (if the first liquidating party is RTP) or paragraph 4.2 (if the first liquidating party is RTL) then the Reference Date for both parties shall be delayed until the later of the Reference Date of the first liquidating party and the Reference Date of the second liquidating party and the Relevant Officer of the second liquidating party shall be that party’s liquidator (and not its auditor). |
5 | Adjustments to the Equalisation Ratio |
5.1 | Agreed Adjustments | |
RTL and RTP agree with each other as follows: | |
5.1.1 | Rights Issues of Ordinary Shares | |
If either RTL or RTP shall offer its Ordinary Shares to the holders of its Ordinary Shares as a class by way of rights or to the holders of its Publicly-held Ordinary Shares by way of rights (whether or not in any of such cases by way of Matching Offers), the Equalisation Ratio shall be adjusted by multiplying the element of the Equalisation Ratio relating to the Ordinary Shares of the issuing company by the following fraction: | ||
X + Z | ||
X + Y | ||
where: | ||
X is the number of Ordinary Shares of the issuing company which rank for the relevant offer; | ||
35 |
Y is the number of Ordinary Shares being offered to the holders of Ordinary Shares or the holders of Publicly-held Ordinary Shares (as the case may be) of the issuing company; and | ||
Z is the number of Ordinary Shares of the issuing company which the aggregate amount (if any) payable for the Ordinary Shares offered by way of rights would purchase at the Current Market Price per Ordinary Share determined on the dealing day last preceding the date on which such shares are first traded ex-rights. | ||
Such adjustment shall become effective from the time at which the Ordinary Shares of the issuing company are first traded ex-rights. | ||
For the purpose of this paragraph an offer by a member of the RTP Group of RTL Ordinary Shares owned by it to holders of Publicly-held RTL Ordinary Shares by way of rights shall be treated as an offer and issue by RTL of such shares. | ||
5.1.2 | Rights Issues of other securities | |
If either RTL or RTP shall offer any securities (other than an offer falling within paragraph 5.1.1) to the holders of its Ordinary Shares, or to the holders of the Ordinary Shares of the other, as a class by way of rights, or to the holders of its Publicly-held Ordinary Shares, or those of the other, by way of rights (whether or not in any of such cases by way of Matching Offers), or grant to such holders of Ordinary Shares, or to such holders of Publicly-held Ordinary Shares, as a class by way of rights (whether or not in any of such cases by way of Matching Offers) any options, warrants or other rights to subscribe for or purchase any securities, the Equalisation Ratio shall be adjusted by multiplying the element of the Equalisation Ratio relating to the Ordinary Shares of the company the shareholders of which are to receive such offer or grant (the “Relevant Company”) by the following fraction: | ||
X Y | ||
X | ||
where: | ||
X is the Current Market Price of one Ordinary Share of the Relevant Company determined on the dealing day last preceding the date such shares are first traded ex-rights; and | ||
Y is the average fair market value of the portion of the rights attributable to one Ordinary Share of the Relevant Company over the five dealing days last preceding the date on which such shares are first traded ex-rights as determined by a merchant bank of international repute appointed by agreement between the Board of RTP and the Board of RTL, acting as expert and not as arbitrator and whose determination shall be final and binding on the parties and on all others affected thereby. | ||
Such adjustment shall become effective from the time at which the Ordinary Shares of the Relevant Company are first traded ex-rights, ex-options or ex-warrants. | ||
5.1.3 | Alternative adjustment | |
If the Board of RTL and the Board of RTP agree that an adjustment in accordance with paragraph 5.1.1 or 5.1.2 would be inequitable as between the holders of RTL | ||
36 |
Ordinary Shares and the holders of RTP Ordinary Shares, then they may calculate the adjustment on some other basis which they agree to be appropriate. In these circumstances the calculation shall be referred to the auditors of RTL and the auditors of RTP for them jointly to certify that the adjustment so calculated means that the relevant offer does not materially disadvantage a holder of a RTL Ordinary Share in comparison with a holder of an RTP Ordinary Share and vice versa. In making such certification the auditors of RTL and the auditors of RTP shall act as experts and not as arbitrators and their certificate shall be final and binding on the parties and on all others affected thereby. | ||
5.1.4 | Subdivisions and Consolidations of Shares | |
If there shall be an alteration to the nominal value of the Ordinary Shares of either RTL or RTP as a result of a consolidation or subdivision, the Equalisation Ratio shall be adjusted by multiplying the element of the Equalisation Ratio relating to the Ordinary Shares of the company the nominal value of the Ordinary Shares of which has altered by the following fraction (or number): | ||
X | ||
Y | ||
where: | ||
X is the nominal amount of one Ordinary Share of such company immediately after such alteration; and | ||
Y is the nominal amount of one Ordinary Share of such company immediately before such alteration. | ||
Such adjustment shall become effective immediately after the alteration takes effect. | ||
5.1.5 | Bonus Issues | |
If either RTL or RTP shall issue any Ordinary Shares credited as fully paid to ordinary shareholders by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve) other than by way of a scrip dividend, the Equalisation Ratio shall be adjusted by multiplying the element of the Equalisation Ratio relating to the Ordinary Shares of the issuing company by the following fraction: | ||
X | ||
Y | ||
where: | ||
X is the aggregate nominal amount of the issued Ordinary Shares of the issuing company immediately before the issue; and | ||
Y is the aggregate nominal amount of the issued Ordinary Shares of the issuing company immediately after such issue. | ||
Such adjustment shall become effective from the time of issue of such Ordinary Shares. | ||
37 |
5.1.6 | Definition | |
(a) | For the purposes of this paragraph 5.1 “Current Market Price” means, in respect of an Ordinary Share in RTL or RTP at a particular date, the average value of one such Ordinary Share (being an Ordinary Share carrying full entitlement to dividend) for or by reference to the period of 5 consecutive dealing days ending on such date determined on such basis as the Board of RTP and the Board of RTL agree to be appropriate. | ||
(b) | For the purposes of the definition of “Y” in paragraph 5.1.2 the fair market value of the portion of the rights attributable to one Ordinary Share shall be calculated on a basis consistent with the calculation of the Current Market Price in the definition of “X” in the same paragraph. | ||
5.2 | Certification | ||
The auditors for the time being of RTL and RTP shall jointly certify the arithmetical adjustment to be made to the Equalisation Ratio in the circumstances set out in this paragraph 5.1 and in any other circumstances where an adjustment is made to such Equalisation Ratio and any adjustments so certified shall, in the absence of manifest error, be final and binding on the parties and on all others affected thereby. RTL and RTP agree with each other to make and co-ordinate such public announcements as are appropriate in relation to any such adjustments, subject to any regulatory requirements. | ||
38 |
Exhibit 4.07
THIS AGREEMENT is made on 30 March 2004
BETWEEN
(1) | Rio Tinto Limited (ACN 004 458 404) of 55 Collins Street, Melbourne, Victoria 3000 (the Company); and |
(2) | Richard Leigh Clifford of 43 Markham Square, Chelsea, London SW3 4XA (the Director") |
WHEREBY IT IS AGREED as follows:-
INTERPRETATION
1. | In this Agreement:- | ||
(A) | the headings are for ease of reference only and should be ignored when construing the terms of this Agreement; | ||
(B) | the following words have the respective meanings set alongside them:- | ||
"Board of Directors" | means the Boards of Directors of the Company and Rio Tinto plc as the same may be constituted from time to time or such other person or persons as such Boards of Directors may nominate as its representative for the purpose of this Agreement; | ||
"Employment" | means the employment established by this Agreement; | ||
"Rio Tinto" | means the Company and Rio Tinto plc or either of them as the context permits; | ||
"Group" | means Rio Tinto and all their subsidiaries from time to time, together with all other companies in which from time to time Rio Tinto owns directly or indirectly at least 20% of the equity share capital; | ||
"holding company" | has the meaning given in Section 736 of the Companies Act 1985; | ||
"subsidiary" | has the meaning given in Section 736 of the Companies Act 1985; | ||
confidential information | means any manufacturing process, formula, design, programme, calculation, method, specification or any other trade secret of the Company or any associated company either during or at any time after the Employment; and any other confidential information not comprising a trade secret but relating to the business of the Company or any associated company including but not limited to their plans, procedures, products, equipment, sales, prices, contractual terms, trade connections, transactions, accounts, finances, reports, papers, data and other information prepared for the Company or acquired by the Company, and affairs of the Company (except where necessary for carrying out your duties as a Director) either during or at any time after the Employment; and | ||
associated company | is defined as any company in which Rio Tinto has an interest. | ||
(C) | reference to an Act shall be deemed to include any statutory modification or re-enactment whenever made; and | ||
(D) | where the context so admits the masculine shall include the feminine and the singular shall include the plural and vice versa. |
THE EMPLOYMENT
2. | The Company agrees to employ the Director and the Director agrees to serve as Chief Executive and an Executive Director of Rio Tinto (or in such other capacity as the parties may agree from time to time) subject to and in accordance with the terms of this Agreement. This Agreement is in substitution for all (if any) previous contracts of service between the parties. |
DURATION OF EMPLOYMENT
3. | (A) | This Agreement and the Employment shall continue subject as hereinafter mentioned until terminated by either party giving to the other not less than one years previous notice. |
(B) | The Company may at its sole discretion pay salary at the rate set out in Clause 6A (or such other rate as has been agreed between the parties) in lieu of any required period of notice (less any deductions the Company is required by law to make). | |
- 2 -
(C) | Unless otherwise expressly agreed in writing, this Agreement and the Employment shall, notwithstanding sub-clause (A) above, automatically terminate (if not already terminated) on 30 September 2007. |
DUTIES OF THE DIRECTOR
4. | (A) | The Director shall during the Employment:- | |
(i) | unless prevented by ill health or accident and except during holidays permitted by this Agreement devote the whole of his time, attention and skill to the duties of his Employment; | ||
(ii) | faithfully and diligently perform such duties and exercise such powers as may from time to time be assigned to or vested in him; | ||
(iii) | comply with all rules and regulations from time to time issued by the Company to its employees; | ||
(iv) | obey all reasonable and lawful directions given to him by or under the authority of the Board of Directors provided that such rules, regulations and directions are compatible with the Director's status as an Executive Director of Rio Tinto; | ||
(v) | conform to such hours of work as may from time to time reasonably be required of him to carry out his duties to the satisfaction of the Boards of Directors and shall not be entitled to receive any additional remuneration for work outside normal business hours; | ||
(vi) | use his best endeavours to promote the interests and reputation of the Group; and | ||
(vii) | not do anything which is harmful to the Group. | ||
(B) | The Director shall disclose promptly in writing to the Board of Directors all his interests in any business other than that of any other member of the Group. The Director shall not during the continuance of the Employment (except as a representative of Rio Tinto or with the prior consent in writing of the Boards of Directors) be directly or indirectly engaged or concerned in the conduct of any business, trade, profession or other occupation (whether as an employee, consultant, agent, director or otherwise) nor shall the Director be directly or indirectly financially interested in any such business save through his holding or being interested in investments not representing more than five per cent of the issued investments of any class of any one company which are listed on any recognised Stock Exchange. | ||
- 3 -
(C) | The Director shall be required to work at the Headquarters of the Group in London, United Kingdom or, subject to consultation with the Director, at such other location in the UK or elsewhere as the Board of Directors shall from time to time direct and he shall be required to travel outside the United Kingdom as directed by the Board of Directors from time to time. | |
(D) | While the director is based in London, the Company agrees to provide to the Director rent free residential accommodation to enable him more effectively to perform his duties under this Agreement. The quality and location of the accommodation shall be determined by the Company in its absolute discretion. | |
(E) | The Director shall (and shall procure that his wife and dependent children) comply with Part V of the Criminal Justice Act 1993 and he shall not (and shall procure that his spouse and dependent children do not) deal or become or cease to be interested (within the meaning of Part I of Schedule 13 of the Companies Act 1985) in any shares or debentures of Rio Tinto or any other member of the Group except in accordance with and rules or policies issued by the Company from time to time in relation to the holding or trading of securities. |
CONFIDENTIALITY
5. | (A) | Without prejudice to any other duty owed to the Company or any other member of the Group under which the Director has to keep secret information received or obtained by him in confidence, the Director agrees that he shall not use, divulge or communicate to any person, firm or organisation (other than in the course of properly performing his duties or with the consent of the Board of Directors or as required by law) any Confidential Information which he may have received or obtained while in the services of the Company. This restriction shall continue to apply after the termination of the Employment without limit in point of time but will not apply to Confidential Information which becomes public other than through unauthorized disclosure by the Director. The Director shall also use his best endeavours to prevent the unauthorized use, publication or disclosure of any such Confidential Information. |
(B) | Since the Director is likely to obtain in the course of the Employment information disclosed in confidence from other members of the Group and other persons, firms or organisations, the provisions of sub-Clause (A) of this Clause shall apply mutatis mutandis to such information. The Director shall, at the request of the Company, enter into an agreement or undertaking with other members of the Group and such other persons, firms or organisations in the same terms mutatis mutandis as sub-Clause (A). | |
- 4 -
REMUNERATION OF THE DIRECTOR, BENEFITS, HOLIDAYS AND EXPENSES
6. | (A) | The Company shall pay to the Director during the continuance of the Employment a salary at the rate of £780,000 per annum. The salary less deductions shall be payable by equal monthly payments in arrears by bank credit transfer on or before the twenty-fifth day of each month. Salary shall be reviewed from time to time at the discretion of the Company. |
(B) | To the extent that the Director is entitled to receive any Director's fees or other remuneration in respect of services performed for other companies in the Group he shall account for the same to the Company. However, the Director may, at his request, be permitted by the Company to receive and retain such fees or other remuneration, in which event his basic remuneration from the Company shall be reduced pro tanto. For such purpose, sums paid in a foreign currency shall be converted into pounds sterling at the rate prevailing on the first day of the month in which the fees or other remuneration were paid to the Director unless otherwise agreed between the Company and the Director. | |
Except to the extent agreed by the Remuneration Committee of the Directors of Rio Tinto, the Director shall make over to the Company any fees, salary or emoluments paid to him for performing services other than to the Company or other members of the Group. | ||
The Company shall provide a motor car for the use of the Director which, unless otherwise agreed, shall be in accordance with the Company's car scheme. | ||
(C) | The Director shall be entitled to participate in such Long Term Incentive Plans as the Company may from time to time have in place, subject to approval by the Remuneration Committee of any awards and grants made under any of these Plans. | |
(D) | There shall be refunded to the Director all reasonable out-of-pocket expenses properly incurred and defrayed by him in the performance of his duties in the course of his Employment including expenses of entertainment, subsistence and travelling. The Director shall produce to the Company at its request all supporting vouchers and documents in respect of such expenses. | |
(E) | The Director shall be entitled without loss of remuneration to 28 days holiday in each year in addition to public holidays to be taken at such time or times as are convenient to the Company but so that up to four of such days holiday shall be on days specified by the Company. Annual holiday should be taken by 30 April of the following year. For part years, the Directors holiday entitlement for the year will be pro rated to the length of his service in that year. The Director is entitled to long service leave in accordance with State of Victoria law and Company practice from time to time. | |
- 5 -
(F) | Subject to the terms of Clause 8(B) below, during any period of absence from work due to sickness, injury or otherwise salary payable to the Director under the terms of this Agreement will continue to be payable for a period of up to six months and thereafter at the discretion of the Board of Directors. | ||
(G) | Without prejudice to the Companys right to terminate the Employment at any time in accordance with clause 3 or clause 8: | ||
(i) | the amount of any benefit which the Director is entitled to claim during that period of absence under any Social Security or National Insurance Scheme and/or any scheme of which the Director is a non-contributory member by virtue of the Employment will be deducted from any salary paid to him. The Company will pay the Director statutory sick pay under the Social Security Contributions and Benefits Act 1992 (as amended) and any salary paid to him will be deemed to include statutory sick pay. The Company reserves the right to offset the amount of these benefits against salary paid to the Director even if the Director has not recovered them. | ||
(ii) | If the Director is absent from work due to sickness or injury which is caused by the fault of another person, and as a consequence recovers from that person or another person any sum representing compensation for loss of salary under this agreement, the Director will repay to the Company any money it has paid to him as salary in respect of the same period of absence. | ||
(H) | The Director shall be a member of the Rio Tinto Staff Superannuation Fund during the Employment. | ||
PATENTS AND INVENTIONS | |||
7. | (A) | If the Director (whether alone or with others) shall at any time during the period of the Employment make an invention (whether or not patentable) within the meaning of the Patents Act 1977 (hereinafter called an "Invention") relating to or capable of being used in the business of the Company or any other member of the Group he shall promptly disclose to the Company full details thereof to enable the Company to assess the Invention and to determine whether under the applicable law the Invention is the property of the Company. | |
(B) | If any Invention belongs to the Company the Director shall consider himself as a trustee for the Company in relation to each such Invention and shall, at the request and expense of the Company, do all things necessary to vest all right, title and interest in any such Invention in the Company or its nominee absolutely as legal and beneficial owner and to secure and preserve full patent or other appropriate forms of |
- 6 -
protection therefor in any part of the world. | |||
(C) | If an Invention does not belong to the Company, the Company shall have the right to acquire for itself or its nominee the Director's rights therein within three months after disclosure pursuant to sub-Clause (A) of this Clause on fair and reasonable terms to be agreed or in default of agreement within one month to be acquired at a price to be determined by a single expert to be nominated in default of agreement, at the request of either the Company or the Director, by the President for the time being of the Chartered Institute of Patent Agents or in default by the Courts. | ||
(D) | If the Director (whether alone or with others) shall at any time during the period of the Employment create or make any discovery, design or other work (whether registerable or not and whether or not a copyright work), (hereinafter called "Works"), the Director shall forthwith disclose to the Company full details thereof and shall consider himself as a trustee for the Company in relation to all such Works. The Director shall at the request and expense of the Company execute and do all instruments and things necessary to vest all right, title and interest in and to any such Works in the Company or its nominee absolutely as legal and beneficial owner. The definition of Works shall specifically exclude Invention as defined in 7(A) above and anything which was made or created by the Director and which is wholly unconnected with the Employment. | ||
(E) | In consideration of the Company entering into this Agreement the Director hereby assigns to the Company by way of assignment of future copyright the copyright, design and other proprietary rights if any for the full term thereof throughout the world in respect of all copyright works created or made by the Director during the period of the Employment (except only those copyright works created or made by the Director and wholly unconnected with the Employment). | ||
(F) | The copyright in all articles, designs, drawings, programs, calculations, specifications, photographs and other similar documents and written material produced by the Director in the course of his duties with the Company shall belong to the Company and all such matters (including but not limited to customer lists, correspondence and any other records) and copies thereof in his possession shall be returned to the Company on termination of employment. | ||
(G) | If the Director generates any Information or is involved in generating any Information during the Employment he will promptly give to the Company full details of it and he acknowledges that such Information belongs to the Company. | ||
Information means any idea, method or information, which is not Invention or Work, generated by the Director either: | |||
(i) | in the course of his Employment; or |
- 7 -
(ii) | outside the course of his Employment but relating to the business, finance or affairs of any Group Company. | ||
(H) | If the Director becomes aware of any infringement or suspected infringement of any intellectual property right in any Invention, Work or Information he will promptly notify the Company in writing. | ||
(I) | The Director will not disclose or make use of any Invention, Work or Information without the Companys prior written consent unless the disclosure is necessary for the proper performance of his duties. | ||
(J) | So far as permitted by law the Director irrevocably waives any rights he may have under Chapter IV (moral rights) of Part 1 of the Copyright, Designs and Patents Act 1988 and any foreign corresponding rights in respect of all Works. | ||
(K) | The Director agrees that he will not by his acts or omissions do anything which would or might prejudice the rights of the Company under clause 7. | ||
(L) | The Director will not make copies of any computer programs belonging to any Group Company or their service providers and will not introduce any of his own computer programs or personal files into any computer used by any Group Company in breach of any Group Company policy, unless he has obtained the consent of the Boards of Directors. | ||
(M) | By entering into this agreement the Director irrevocably appoints the Company to act on his behalf to execute any document and do anything in his name for the purpose of giving the Company (or its nominee) the full benefit of the provision of clause 7 or the Companys entitlement under statute. If there is any doubt as to whether such a document (or other thing) has been carried out within the authority conferred by clause 7, a certificate in writing (signed by any director or the secretary of the Company) will be sufficient to prove that the act or thing falls within that authority. | ||
Rights and obligations under this Clause shall continue in force after the termination of this Agreement in respect of each Invention and Works and shall be binding upon the representatives of the Director. | |||
TERMINATION | |||
8. | (A) | If the Director (owing to sickness, injury or otherwise) does not perform his duties hereunder for a period of at least 180 days (whether or not consecutive) in any period of 365 days the Company shall (without prejudice to any other provision hereof) be entitled by written notice to the Director (given at the expiry of such period or at any time thereafter while the Director continues not to perform his duties hereunder) to terminate this Agreement and the Employment forthwith. For the |
- 8 -
purposes of this sub-Clause (A) "days" means days of the week, whether or not normal working days. | |||
(B) | Notwithstanding any other provision of this Agreement, the Company shall (without prejudice to the other rights and remedies of the Company) be entitled to terminate this Agreement and the Employment forthwith if the Director:- | ||
(i) | commits any serious or persistent breach of his obligations under this Agreement, refuses or neglects to comply with any lawful order or direction given to him by or under the authority of the Board of Directors, or is guilty of any gross default or misconduct in connection with or affecting the business of the Company or any other member of the Group or conducts himself in a manner prejudicial to the Company or is guilty of conduct tending to bring himself or the Company into disrepute; or | ||
(ii) | is guilty of dishonesty or is convicted of an criminal offence (other than a motoring offence which does not result in imprisonment) in all cases whether or not in connection with the Employment; or | ||
(iii) | commits (or is reasonably believed by the Boards of Directors to have committed) a breach of any legislation in force from time to time which may affect or relate to the business of the Company; or | ||
(iv) | becomes of unsound mind, is bankrupted or has a receiving order made against him or makes any general composition with his creditors or takes advantage of any statute for the time being in force affording relief for insolvent debtors; or | ||
(v) | becomes prohibited by law from being a director of a company. | ||
whereupon the Director shall have no claim against the Company for damages or otherwise by reason of such termination. | |||
GARDEN LEAVE | |||
9. | (A) | At any time after notice to terminate the Employment is given by either party under clause 3 above, or if the Director resigns without giving due notice and the Company does not accept his resignation, the Company may require the Director to comply with any or all of the provisions in clause 9(B) and 9(C) for a maximum period of 12 months (the Garden Leave Period). | |
(B) | The Company may require that the Director does not: | ||
(i) | enter or attend the premises of the Company or any other |
- 9 -
Group Company; or | |||
(ii) | contact or have any communication with any customer or client of the Company or any other Group Company in relation to the business of the Company or any other Group Company; or | ||
(iii) | contact or have any communication with any employee, officer, director, agent or consultant of the Company or any other Group Company in relation to the business of the Company or any other Group Company; or | ||
(iv) | remain or become involved in any aspect of the business of the Company or any other Group Company except as required by such companies. | ||
(C) | The Company may require the Director: | ||
(i) | to comply with the provisions of clause 10 - Provisions upon termination; and | ||
(ii) | to immediately resign from any directorship which he holds in the Company, any other Group Company or any other company where such directorship is held as a consequence or requirement of the Employment, unless he is required to perform duties to which any such directorship relates in which case he may retain such directorships while those duties are ongoing. The Director hereby irrevocably appoints the Company to be his attorney to execute any instrument and do anything in his name and on his behalf to effect his resignation if he fails to do so in accordance with this clause 9C. | ||
(D) | During the Garden Leave Period, the Director will be entitled to receive his salary and all contractual benefits in accordance with the terms of this agreement. | ||
At the end of the Garden Leave Period, the Company retains the right to pay the Director salary in lieu of the balance of any notice period as set out in paragraph 3(B) above. If the Garden Leave Period lasts less than the full 12 months notice period, the Company shall not request that the Director return to the Company for the balance of the notice period. | |||
PROVISIONS UPON TERMINATION | |||
10. | Upon the termination of this Agreement or the Employment howsoever occasioned the Director shall:- | ||
(A) | forthwith (i) deliver to the Company all films, photographs, tapes, models, equipment, documents (including correspondence, lists, notes, memoranda, plans, reports, papers, drawings and charts) and other |
- 10 -
materials of whatsoever nature whether originals or copies made or compiled by or delivered to the Director during the period of the Employment and concerning the business, organisation, transactions, accounts, finances or affairs of the Company and the Director shall not retain any copies; and (ii) return to the Company all other property of the Company or (as the case may be) of any other member of the Group (including any motor car made available to the Director which shall be returned in good condition (fair wear and tear excepted)) in the possession or under the control of the Director; and | ||
(B) | forthwith at any time or from time to time thereafter upon the request of the Company, resign without claim for compensation from office as a director of the Company and all other offices held by him in any other member of the Group and should he fail to do so the Company is hereby irrevocably authorised to appoint some person in his name and on his behalf to sign any documents and do anything necessary or requisite to give effect thereto; | |
(C) | forthwith the Company shall be entitled to deduct from any monies due to the Director any sums due from the Director to the Company or any other member of the Group; | |
(D) | not for the period of 12 months thereafter either on his own behalf or for any other person, firm or organisation, entice or endeavour to entice away from the Company or any other Group Company any person who was to his knowledge at any time during the last 12 months of his service with the Company an employee director, officer, agent, consultant or associate of such company. | |
DIRECTORSHIPS | ||
11. | (A) | Notwithstanding any other provisions in this Agreement the Director's appointment as a director of Rio Tinto or any other member of the Group shall be subject to the Articles of Association and Constitution from time to time of the relevant company. |
(B) | If the Director shall cease to be a Director of Rio Tinto this Agreement shall thereby automatically determine but if such cessation shall be caused by any act or omission of either Rio Tinto or the Director without the consent, concurrence or complicity of the other such act or omission shall be deemed a breach of this Agreement and determination hereunder shall be without prejudice to any claim for damages in respect of such breach. | |
(C) | The Director must resign from any office held in any Group Company if he is asked to do so by the Company. | |
(D) | If the Director does not resign as an officer of a Group Company, having been requested to do so in accordance with clause C, the Company will be appointed as his attorney to effect his resignation. By |
- 11 -
entering into this agreement the Director irrevocably appoints the Company as his attorney to act on his behalf to execute any document or do anything in his name necessary to effect his resignation in accordance with clause C. If there is any doubt as to whether such a document (or other thing) has been carried out within the authority conferred by this clause C, a certificate in writing (signed by any director or the secretary of the Company) will be sufficient to prove that the act or thing falls within that authority. | ||
(E) | The termination of any directorship or other office held by the Director will not terminate the Directors employment or amount to a breach of terms of this agreement by the Company. | |
(F) | During the Employment the Director will use his best endeavours not to do anything which could cause him to be disqualified from continuing to act as a director of any Group Company. | |
(G) | The Director must not resign his office as a director of any Group Company without the agreement of the Company. | |
OFFERS ON LIQUIDATION | ||
12. | The Director will have no claim against the Company if the Employment is terminated by reason of liquidation in order to reconstruct or amalgamate the Company or by reason of any reorganisation of the Company; provided that | |
(i) | the Director is offered employment with the company succeeding to the Company upon such liquidation or reorganisation; and | |
(ii) | the new terms of employment offered to the Director are no less favourable to him than the terms of this agreement. | |
NOTICES | ||
13. | Notices by either party must be given by letter or facsimile transmission ("fax") addressed to the other party at (in the case of the Company) its registered office for the time being (with a copy to the Chief Executive Rio Tinto plc at its registered office in London) and (in the case of the Director) his last known address and any such notice given by letter (unless delivered by hand) or fax shall be deemed to have been given at the time at which the letter or fax would be delivered in the ordinary course of post or transmission as the case may be. | |
STATUTORY PARTICULARS | ||
14. | The written particulars of employment required to be given to the Director under the provisions of Part I of the Employment Rights Act 1996, as amended, are, unless otherwise previously set out above, stated in the Schedule attached. |
- 12 -
MISCELLANEOUS | |||
15. | (A) | This agreement may only be modified by the written agreement of the parties. | |
(B) | Neither the Director or the Company can assign this agreement to anyone else. | ||
(C) | References in this agreement to rules, regulations, policies, handbooks or other similar documents which supplement it, are referred to in it or describe any pensions or other benefits arrangement are references to the versions or forms of the relevant documents as amended or updated from time to time. | ||
(D) | This agreement supersedes any previous written or oral agreement between the parties in relation to the matters dealt with in it. It contains the whole agreement between the parties relating to the Employment at the date the agreement was entered into (except for those terms implied by law which cannot be excluded by the agreement of the parties). The Director acknowledges that he has not been induced to enter into this agreement by any representation, warranty or undertaking not expressly incorporated into it. The Director agrees and acknowledges that his only rights and remedies in relation to any representation, warranty or undertaking made or given in connection with this agreement (unless such representation, warranty or undertaking was made fraudulently) will be for breach of the terms of this agreement, to the exclusion of all other rights and remedies (including those in tort or arising under statute). | ||
(E) | Neither partys rights or powers under this agreement will be affected if: | ||
(i) | one party delays in enforcing any provision of this agreement; or | ||
(ii) | one party grants time to the other party. | ||
(F) | If either party agrees to waive his rights under a provision of this agreement, that waiver will only be effective if it is in writing and it is signed by him. A partys agreement to waive any breach of any term or condition of this agreement will not be regarded as a waiver of any subsequent breach of the same term or condition or a different term or condition. | ||
GOVERNING LAW | |||
16. | This Agreement shall be governed by and construed according to the laws of the State of Victoria, Australia. |
- 13 -
IN WITNESS whereof this Agreement has been executed as a Deed the day and year first before written.
/s/ R Leigh Clifford | ||
Signed by: | ||
In the presence of:- | ||
Name | ||
Address | ||
Occupation | ||
/s/ Paul D Skinner | ||
Signed by: | ||
for an on behalf of Rio Tinto Limited | ||
In the presence of:- | ||
Name | ||
Address | ||
Occupation |
SCHEDULE | |
Continuous Employment |
|
1. | The Director's
period of continuous employment with the Company began on 7 July 1970. This takes into account all (if any) previous employments with the Group which count as part of the Director's continuous period of employment in accordance with the Employment Rights Act 1996 as amended. |
Grievance and Disciplinary Procedure | |
2. | If at any time the Director considers that he has a grievance arising out of his employment or if he is dissatisfied with any disciplinary decision affecting him, he should first attempt to resolve this by discussion with the Chairman or, if appropriate, the Chairman of the Remuneration Committee. Subject thereto the matter may be referred for determination to the Boards of Rio Tinto either through the non-executive directors of Rio Tinto or direct. |
Health and Safety at Work | |
3. | It is a condition of the Director's Employment that he will comply with the Company's health and safety policy, which has been prepared in accordance with the Health and Safety at Work Etc Act 1974. |
Other Terms | |
4. | Except as otherwise stated in the Agreement (including this Schedule) there are no other terms or conditions of employment relating to remuneration, hours of work, normal working hours, entitlement to holidays (including public holidays and holiday pay), incapacity for work due to sickness or injury or to pensions or pension schemes. |
15
Exhibit 4.08
30 March 2004
Mr R L Clifford
Rio Tinto Limited
Dear Mr Clifford,
This letter supplements your Contract with Rio Tinto Ltd dated 30 March 2004 with immediate effect.
1. | With your consent, your contractual retirement age has been brought forward from the end of the month in which you attain age 62 to the end of the month in which you attain age 60. |
2. | The Company will arrange to provide you with an additional benefit on your retirement. This additional benefit will be a lump sum calculated as the difference between the following multiples of Final Average Salary (as defined in the Rules of the Rio Tinto Staff Superannuation Fund). The multiples will be interpolated if you retire between these ages: |
Age at retirement | Previous multiple | New multiple | ||||
57 | 6.11 | 6.47 | ||||
58 | 6.29 | 6.65 | ||||
59 | 6.47 | 6.83 | ||||
60 | 6.65 | 7.00 |
If you die in service before retirement, an additional benefit will also be payable calculated as above, but replacing the age at retirement with the age of death.
The method of provision of the lump sum payable on retirement or on death in service will be determined by the Company in consultation with you or, in the case of death, your dependents.
This arrangement forms part of the your contractual conditions of employment. I would be grateful if you would sign a copy of this letter and return to Anette Lawless.
Yours sincerely
/s/ Paul D Skinner
Paul D Skinner
Chairman
Exhibit 4.09
MEMORANDUM RELATING TO AGREEMENT DATED 30 MARCH 2004 BETWEEN RIO TINTO LIMITED AND MR RICHARD LEIGH CLIFFORD (THE DIRECTOR) AND TO BE ANNEXED HERETO
With effect from 1 March 2005 the remuneration specified in Clause 6(A) of the above-mentioned Agreement is £827,000 (A$2,028,270) per annum.
The Remuneration Committee of the Board, consisting solely of non-executive directors, is responsible for the introduction and operation of executive directors bonus arrangements.
With effect from 27 May 1998, executive directors have been eligible to participate in two bonus schemes, the Mining Companies Comparative Plan and the Share Option Plan. Details of which are set out in appendix I and appendix II respectively.
Executive directors are also eligible to receive a cash bonus under the companys Short Term Incentive Scheme, with a target bonus of 60% of basic salary and with bonus potential capped at 120% of salary. The award depends on performance against financial and strategic criteria determined by the Remuneration Committee.
for and on behalf of RIO TINTO LIMITED
/s/ Anette V Lawless | |
Assistant Secretary |
Exhibit 4.13
MEMORANDUM RELATING TO AGREEMENT DATED 19 JUNE 2002 BETWEEN RIO TINTO LONDON LIMITED AND MR GUY ROBERT ELLIOTT (THE DIRECTOR) AND TO BE ANNEXED HERETO
With effect from 1 March 2005 the remuneration specified in Clause 6(A) of the above-mentioned Agreement is £513,000 per annum.
The Remuneration Committee of the Board, consisting solely of non-executive directors, is responsible for the introduction and operation of executive directors bonus arrangements.
With effect from 27 May 1998, executive directors have been eligible to participate in two bonus schemes, the Mining Companies Comparative Plan and the Share Option Plan. Details of which are set out in appendix I and appendix II respectively.
Executive directors are also eligible to receive a cash bonus under the companys Short Term Incentive Scheme, with a target bonus of 60% of basic salary and with bonus potential capped at 120% of salary. The award depends on performance against financial and strategic criteria determined by the Remuneration Committee.
for and on behalf of RIO TINTO LONDON LIMITED
/s/ Anette V Lawless | |
Director |
Exhibit 8.1
List of subsidiary companies
At 31 December 2004
The principal operating subsidiary companies of the Rio Tinto Group are listed in Note 31 on pages A-52 of the 2004 consolidated financial statements. The principal intermediate holding companies and group finance companies are as follows:
Company and country of incorporation |
Principal activities |
Class of shares held |
Proportion of class held % |
Group interest % |
||
Australia | ||||||
Australian Coal Holdings Pty Limited | Holding company | 'A' Class Ordinary shares | 100 | 100 | ||
Ordinary shares | 100 | 100 | ||||
Argyle Diamonds Limited | Holding company | Class A shares | 100 | 100 | ||
Class B shares | 100 | 100 | ||||
Comalco Aluminium Limited | Holding company | Ordinary shares | 100 | 100 | ||
Hamersley Holdings Limited | Holding company | Ordinary shares | 100 | 100 | ||
Kelian Pty Limited | Holding company | Ordinary shares | 100 | 100 | ||
B Class shares | 100 | 100 | ||||
North IOC Holdings Pty Limited | Holding company | Ordinary shares | 100 | 100 | ||
North Limited | Holding company | Ordinary shares | 100 | 100 | ||
Pacific Aluminium Pty Limited | Holding company | Ordinary shares | 100 | 100 | ||
Peko-Wallsend Pty Limited | Holding company | Ordinary shares | 100 | 100 | ||
Rio Tinto (Commercial Paper) Limited | Finance company | Ordinary shares | 100 | 100 | ||
Rio Tinto Finance Limited | Finance company | Ordinary shares | 100 | 100 | ||
Rio Tinto Finance (USA) Limited | Finance company | Ordinary shares | 100 | 100 | ||
Rio Tinto Investments One Pty Limited | Holding company | Ordinary shares | 100 | 100 | ||
Rio Tinto Investments Two Pty Limited | Holding company | Ordinary shares | 100 | 100 | ||
Tinto Holdings Australia Pty Limited | Holding company | Ordinary shares | 100 | 100 | ||
A Class shares | 100 | 100 | ||||
Bermuda | ||||||
North Finance (Bermuda) Limited | Finance company | Ordinary shares of USD 1.00 each | 100 | 100 | ||
Canada | ||||||
Rio Tinto Canada Inc | Holding company | Class B shares no par value | 100 | 100 | ||
Class C shares no par value | 100 | 100 | ||||
Class D shares no par value | 100 | 100 | ||||
Namibia | ||||||
Skeleton Coast Diamonds Limited | Holding company | Shares of NAD 2.00 each | 100 | 100 | ||
Netherlands | ||||||
Rio Tinto Eastern Investments BV | Holding company | Shares of EUR 454.00 each | 100 | 100 | ||
Rio Tinto Holdings BV | Holding company | Shares of EUR 454.00 each | 100 | 100 | ||
South Africa | ||||||
Palabora Holdings Limited | Holding company | Shares of ZAR 1.00 each | 57.73 | 57.73 | ||
United Kingdom | ||||||
Rio Tinto Aluminium Holdings Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Rio Tinto Australian Holdings Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Rio Tinto Finance Holdings Limited | Finance company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Preference shares of AUD 100.00 each | 100 | 100 | ||||
Rio Tinto European Holdings Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Rio Tinto Finance plc | Finance company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Ordinary shares of USD 1.00 each | 100 | 100 | ||||
Rio Tinto International Holdings Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Rio Tinto Investments Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Rio Tinto Metals Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Rio Tinto Minerals Development Limited | Holding company | Ordinary shares of GBP 0.25 each | 100 | 100 | ||
Rio Tinto Namibian Holdings Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Rio Tinto Overseas Holdings Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Rio Tinto South East Asia Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Rio Tinto Talc Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Rio Tinto Western Holdings Limited | Holding company | Ordinary shares of GBP 1.00 each | 100 | 100 | ||
Tinto Channel Islands Limited | Holding company | Ordinary shares of USD 1.00 each | 100 | 100 | ||
Tinto Jersey Limited | Holding company | Ordinary shares of USD 1.00 each | 100 | 100 | ||
United States of America | ||||||
Kennecott Energy and Coal Company | Holding company | Common shares of USD 0.01 | 100 | 100 | ||
Kennecott Holdings Corporation | Holding company | Common shares of USD 0.01 | 100 | 100 | ||
Kennecott Land Company | Holding company | Common shares of USD 0.01 | 100 | 100 | ||
Kennecott Minerals Holdings Company | Holding company | Common shares of USD 0.01 | 100 | 100 | ||
Kennecott Utah Copper Corporation | Holding company | Common shares of USD 0.01 | 100 | 100 | ||
Rio Tinto America Holdings Inc | Holding company | Common shares of USD 0.01 | 100 | 100 | ||
Rio Tinto America Inc | Holding company | Common shares of USD 100.00 | 100 | 100 |
Exhibit 12.1
CERTIFICATION
I, Leigh Clifford, certify that:
1. | I have reviewed this annual report on Form 20-F of Rio Tinto plc (the Company); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; | |
4. | The Companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) | - |
|
(c) | Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) | Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and | |
5. | The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarise and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
/s/ Leigh Clifford
Chief executive
Date: 27 June 2005
CERTIFICATION
I, Guy Elliott, certify that:
1. | I have reviewed this annual report on Form 20-F of Rio Tinto plc (the Company); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; | |
4. | The Companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) | - | |
(c) | Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) | Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and | |
5. | The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarise and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
/s/ Guy Elliott
Financial director
Date: 27 June 2005
CERTIFICATION
I, Leigh Clifford, certify that:
1. | I have reviewed this annual report on Form 20-F of Rio Tinto Limited (the Company); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; | |
4. | The Companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) | - | |
(c) | Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) | Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and | |
5. | The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarise and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
/s/ Leigh Clifford
Chief executive
Date: 27 June 2005
CERTIFICATION
I, Guy Elliott, certify that:
1. | I have reviewed this annual report on Form 20-F of Rio Tinto Limited (the Company); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; | |
4. | The Companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) | - | |
(c) | Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) | Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and | |
5. | The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarise and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
/s/ Guy Elliott
Financial director
Date: 27 June 2005
Exhibit 13.1
Certification
Pursuant to Rule 13a-14(b) of the Exchange Act
Pursuant to Rule 13a-14(b) of the Exchange Act, each of the undersigned officers of Rio Tinto plc, registered in England and Wales (the Company), hereby certifies, to such officers knowledge, that:
The Annual Report on Form 20-F for the year ended 31 December 2004 (the Report) of the Company fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of the operations of the Company.
/s/ | Leigh Clifford | /s/ | Guy Elliot | ||
Name: | Leigh Clifford | Name: | Guy Elliott | ||
Title: | Chief executive | Title: | Finance director | ||
Dated: 27 June 2005 | Dated: 27 June 2005 |
The foregoing certification is not deemed filed for purpose of Section 18 of the Exchange Act and not incorporated by reference with any filing under the Securities Act.
Certification
Pursuant to Rule 13a-14(b) of the Exchange Act
Pursuant to Rule 13a-14(b) of the Exchange Act, each of the undersigned officers of Rio Tinto Limited, registered in Victoria, Australia, (the Company), hereby certifies, to such officers knowledge, that:
The Annual Report on Form 20-F for the year ended 31 December 2004 (the Report) of the Company fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of the operations of the Company.
/s/ | Leigh Clifford | /s/ | Guy Elliot | ||
Name: | Leigh Clifford | Name: | Guy Elliott | ||
Title: | Chief executive | Title: | Finance director | ||
Dated: 27 June 2005 | Dated: 27 June 2005 |
The foregoing certification is not deemed filed for purpose of Section 18 of the Exchange Act and not incorporated by reference with any filing under the Securities Act.
Exhibit 15.1
Consent of Independent Registered Public Accounting Firm | |
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 of Rio Tinto plc (File numbers 333-13988, 333-10156, 333-8270 and 333-7328) of our report dated 24 June 2005 relating to the financial statements of Rio Tinto plc and Rio Tinto Limited which appear in this Form 20-F. | |
/s/ PricewaterhouseCoopers LLP | /s/ PricewaterhouseCoopers |
PricewaterhouseCoopers LLP | PricewaterhouseCoopers |
Chartered Accountants and Registered Auditors | Chartered Accountants |
London | Perth |
United Kingdom | Australia |
27 June 2005 | 27 June 2005 |