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Rio Tinto (London) Limited
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Rio Tinto impairments and management changesRio Tinto (London) Limited @ Thu Jan 17 09:52:00 +0000 2013
Rio Tinto expects to recognise a non-cash impairment charge of approximately US$14 billion (post tax) in its 2012 full year results. These impairments include an amount of approximately US$3 billion relating to Rio Tinto Coal Mozambique (RTCM), as well as reductions in the carrying values of Rio Tinto’s aluminium assets (mostly Rio Tinto Alcan (RTA) but also Pacific Aluminium) in the range of US$10-11 billion. The Group also expects to report a number of smaller asset write-downs in the order of US$500 million. The final figures will be included in Rio Tinto’s full year results on 14 February 2013.
Tom Albanese has stepped down as chief executive by mutual agreement with the Rio Tinto Board, and Iron Ore chief executive Sam Walsh has been appointed as his successor with effect from today. Doug Ritchie, who led the acquisition and integration of the Mozambique coal assets in his previous role as Energy chief executive, has also stepped down by mutual agreement.
Rio Tinto chairman Jan du Plessis said “The Rio Tinto Board fully acknowledges that a write-down of this scale in relation to the relatively recent Mozambique acquisition is unacceptable. We are also deeply disappointed to have to take a further substantial write-down in our aluminium businesses, albeit in an industry that continues to experience significant adverse changes globally.
”I would like to pay tribute to Tom for his considerable contribution to Rio Tinto over more than 30 years of service and for his integrity and dedication to the company. I would also like to thank Doug for his 27 years of service to the Group and particularly for his invaluable work in developing our relationships in China. I wish them both well for the future.
“We are fortunate to have such a capable and highly experienced executive as Sam to take over and to ensure there will be a rapid and seamless transition. He is ideally placed to cast a fresh eye over how we address the challenges and opportunities in the business, and derive greater value from it.
”Rio Tinto’s underlying business and balance sheet remain in good health, and we are taking decisive action to improve our competitive position further with an aggressive cost reduction plan. As announced on 15 January, we had a strong production year in 2012, particularly in our low-cost iron ore business where we produced a record 253 million tonnes. Since the price of iron ore dropped to a low of less than $US90 a tonne last September, prices rebounded strongly reaching a level of around $US150 a tonne earlier this week, albeit in an environment of continuing volatility."
The new chief executive Sam Walsh said “I am honoured to be given the opportunity to lead this wonderful business. I have great respect for Tom and the many positive attributes he brought to the role and I am grateful for the experience of working closely with him over many years. I will be working flat out to build an even stronger, more valuable Rio Tinto business for shareholders and for our many other stakeholders.”
Tom Albanese said “While I leave the business in good shape in many respects, I fully recognise that accountability for all aspects of the business rests with the CEO. I am pleased that someone of Sam’s calibre and values has been chosen to succeed me as chief executive. This is a great company and Sam will do an outstanding job.”
At its investor seminar in Sydney on 29 November 2012, Rio Tinto said that the annual year-end review of asset carrying values would most likely result in further revisions to the value of assets, notably aluminium.
The further deterioration in aluminium market conditions in 2012, together with strong currencies in certain regions and high energy and raw material costs, has had a negative impact on the current market values in the aluminium industry.
In Mozambique, the development of infrastructure to support the coal assets is more challenging than Rio Tinto originally anticipated. Rio Tinto sought to transport coal by barge along the Zambezi River, but this option did not receive formal approvals.
These infrastructure constraints, combined with a downward revision to estimates of recoverable coking coal volumes on the RTCM tenements, have led to a reassessment of the overall scale and ramp up schedule of RTCM, and consequently to the impairment announced today.
Rio Tinto continues to engage with the Government of Mozambique on all transport infrastructure options.
Tom Albanese and Doug Ritchie
Tom Albanese and Doug Ritchie step down with effect from today but, in order to ensure the effective transition of multiple global stakeholder relationships, will leave the company on 16 July 2013. During this period they will receive base pay, benefits and pension contributions.
In respect of both individuals there will be:
• No lump sum payment
• No annual short-term performance bonus for 2012 or 2013
• No long-term share award for 2013
In addition, when they leave the company, all outstanding entitlements under Rio Tinto’s long-term incentive plans will lapse and their outstanding deferred bonus share entitlements earned in previous years will be forfeited.
The 2009 performance share plan award made to Tom Albanese, which related to the four-year period 2009 to 2012, may vest in February 2013. This award comprised 48,019 shares, the current indicative value of which is £1.6 million. In addition, he received a 2010 share option plan award, which related to the three-year period 2010 to 2012. This may vest in March 2013. This award comprised 119,230 options. The grant price was £37.05 compared with a closing share price of £34.61 on 16 January 2013.
Tom Albanese has 525,508 vested but unexercised share options which were granted between 2003 and 2009 at a range of exercise prices. Based on the closing share price on 16 January 2013 of £34.61, those options are currently valued at £10.7 million.
The 2010 share option plan award made to Doug Ritchie, which related to the three-year period 2010 to 2012, may vest in March 2013. This award comprised 48,270 options. The grant price was A$76.15 compared with a closing share price of A$65.55 on 16 January 2013.
Doug Ritchie has 15,538 vested but unexercised share options which were granted between 2006 and 2009 at a range of exercise prices. Based on the closing share price on 16 January 2013 of A$65.55, those options are currently valued at A$242,000.
As chief executive, Sam Walsh is on a standard Rio Tinto Ltd contract, which includes a standard 12-month notice period. He will receive a remuneration package comprising:
• A base salary of A$1.9 million, which is an increase over his previous base pay of 15 per cent
• Target annual bonus opportunity at 120 per cent of base salary (unchanged)
• Expected value of long-term share incentive plan opportunity at 190 per cent of base salary (unchanged)
• Relocation costs from Perth to London
• London housing costs
Sam’s total target remuneration (salary + target bonus + expected value of long-term share incentives) will therefore rise by 15 per cent to A$7.8 million. There will be no change to other benefits.
Rio Tinto doubles stake in Richards Bay Minerals through acquisition of BHP Billiton’s interestRio Tinto (London) Limited @ Wed Feb 01 07:26:00 +0000 2012
Rio Tinto will increase its stake in Richards Bay Minerals (RBM) to 74 per cent through the acquisition of BHP Billiton’s 37 per cent interest.
The acquisition has been triggered by BHP Billiton’s decision to exercise a put option agreed between Rio Tinto and BHP Billiton as part of RBM’s restructuring in 2009. The final consideration for the acquisition will be determined through a previously agreed valuation process. Completion is subject to regulatory approvals.
RBM is a South African mineral sands mining and processing operation that was established in 1976. Rio Tinto manages RBM and markets its products, including titanium dioxide feedstocks, high purity iron, zircon and rutile. In line with South Africa’s Broad-Based Black Economic Empowerment legislation, the remaining 26 per cent of RBM is owned by a consortium of local communities and businesses (24 per cent) and RBM employees (two per cent).
Rio Tinto Diamonds & Minerals chief executive Harry Kenyon-Slaney said “RBM is an important part of Rio Tinto’s world-class titanium dioxide portfolio. Doubling our stake in the business solidifies our position at a time when the long-term outlook is strong and demand for higher grade titanium dioxide is growing, driven by urbanisation and rising environmental standards.”
Rio Tinto’s global titanium dioxide business, Rio Tinto Iron & Titanium, includes RBM, its wholly-owned Rio Tinto Fer et Titane operation in Quebec; and its QIT Madagascar Minerals (QMM) operation (80 per cent interest).
Fourth quarter 2011 operations reviewRio Tinto (London) Limited @ Tue Jan 17 08:17:00 +0000 2012
Chief executive Tom Albanese said “This was another record-breaking year in the Pilbara with both quarterly and full year iron ore production and shipments beating previous achievements, as our expansion programme continues apace. Across the Group, production has bounced back from the severe weather conditions experienced in the first half which had the biggest impact on Australian iron ore, coal and uranium.”
• Record global iron ore shipments of 239 million tonnes in 2011 were below production due to extreme weather conditions experienced in the first half of the year. Despite this, Rio Tinto’s Pilbara ports operated at above annualised capacity rates and shipped record volumes of 61 million tonnes in the fourth quarter and 225 million tonnes for the full year.
• Record global iron ore production of 65 million tonnes was achieved in the quarter (51 million tonnes attributable) and 245 million tonnes for the full year (192 million tonnes attributable).
• Lower grades at Escondida and Kennecott Utah Copper impacted mined copper throughout most of 2011, driving production down 23 per cent year on year, in line with guidance.
• Full year bauxite production was seven per cent higher than 2010. Aluminium was one per cent higher whilst alumina was one per cent lower. The Group’s annual aluminium capacity has been reduced by 462,000 tonnes across the entire portfolio, due to the orderly shutdown of two thirds of Alma and power issues at Lynemouth and Shawinigan.
• Australian hard coking coal production was 16 per cent higher than fourth quarter of 2010 and two per cent lower year on year. Australian thermal coal was three per cent lower year on year whilst semi-soft coal production slipped seven per cent compared with 2010.
• On 19 October 2011, Rio Tinto made a recommended all-cash offer for Hathor Exploration and successfully completed the acquisition on 12 January 2012.
• Following the approval of an additional $2.7 billion capital investment to modernise the Kitimat aluminium smelter, total capital expenditure for 2012, on approved projects and sustaining capital, is expected to be $15 billion. Further project approvals are likely to increase this level of investment.
• On 13 December 2011, Rio Tinto announced that an independent arbitrator upheld Rio Tinto’s claim in respect of Ivanhoe Mines’ Shareholder Rights Plan. After the standstill agreement expires on 18 January 2012, Rio Tinto will have the ability to purchase additional shares in Ivanhoe beyond its current holding of 49 per cent without being diluted.
• At 31 December 2011, Rio Tinto had bought back $5.5 billion or 91 million of its plc shares under its $7 billion buy-back programme to be completed by the end of the first quarter of 2012.
All currency figures in this report are US dollars, and comments refer to Rio Tinto’s share of production, unless otherwise stated
See attachment for full fourth quarter 2011 operations review.
About Rio Tinto
Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and New York Stock Exchange listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.
Rio Tinto’s business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, thermal and metallurgical coal, uranium, gold, industrial minerals (borax, titanium dioxide and salt) and iron ore. Activities span the world and are strongly represented in Australia and North America with significant businesses in Asia, Europe, Africa and South America.