2016 Strategic report - Rio Tinto · PDF fileContents Navigating through Rio Tinto’s...

2016 Strategic report

riotinto.com/ar2016

Contents

Navigating through Rio Tinto’s Annual and Strategic reportThe UK’s regulatory reporting framework requires companies to produce a strategic report. The intention is to provide investors with the option of receiving a document which is more concise than the full annual report, and which is strategic in its focus.

The first 42 pages of Rio Tinto’s 2016 Annual report constitute its 2016 Strategic report. References to page numbers beyond 42 are references to pages in the full 2016 Annual report. This is available online at riotinto.com/ar2016 or shareholders may obtain a hard copy free of charge by contacting Rio Tinto’s registrars, whose details are set out at the back of this document.

Please visit Rio Tinto’s website to learn more about the Group’s performance in 2016.

The Group’s 2016 Strategic report complies with Australian and UK reporting requirements.

Copies of Rio Tinto’s shareholder documents – the 2016 Annual report and 2016 Strategic report, along with the 2017 Notices of annual general meeting – are available to view on the Group’s website at: riotinto.com/ar2016 and riotinto.com/agm2017

Strategic reportPerformance highlights 1Group overview 2Chairman’s letter 4Chief executive’s statement 5Market environment 7Group strategy 8Business model 10Key performance indicators 12Risk management 14Principal risks and uncertainties 16Portfolio management 22Sustainable development 24Independent limited assurance report 31Product groups Iron Ore 32 Aluminium 34 Copper & Diamonds 36 Energy & Minerals 38Growth & Innovation 40Five year review 42Summary Remuneration Report iRemuneration Summary Single total figure of remuneration ivSummary shareholder information Contact details viFinancial calender ibc

Directors’ approval statementThis Strategic report is delivered in accordance with a resolution of the board, and has been signed on behalf of the board by:

Jan du PlessisChairman

1 March 2017

The auditors’ report on the Group’s 2016 annual accounts was unqualified. Within that report, the auditors’ statements under section 496 Companies Act 2016, confirming that the Strategic report and Directors’ report are consistent with the accounts, was also unqualified.

A copy of the auditors’ report on the Group’s 2016 Annual report is contained on pages 207 to 214 of that document, which is available to shareholders free of charge on request, or to view online on our website, riotinto.com/ar2016

Page reference for more information within this report

Denotes key performance indicatorsKPI

Key

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. These statements are forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, and Section 21E of the US Securities Exchange Act of 1934. The words “intend”, “aim”, “project”, “anticipate”, “estimate”, “plan”, “believes”, “expects”, “may”, “should”, “will”, “target”, “set to” or similar expressions, commonly identify such forward-looking statements.

Examples of forward-looking statements in this Annual report include those regarding estimated ore reserves, anticipated production or construction 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 Group’s control. For example, future ore 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, demand for our products, changes to the assumptions regarding the recoverable value of our tangible and intangible assets, 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 projected future results expressed or implied by these forward-looking statements which speak only as to the date of this Annual 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.

Performance highlights

Cash generation of US$8.5 billion and US$3.6 billion of shareholder returns

Rio Tinto’s 2016 results show that it has keptits commitment to deliver superior shareholderreturns, and maximise cash and productivity.At the same time, the Group strengthened itsportfolio and advanced its high-valuegrowth projects.

Rio Tinto enters 2017 in good shape and willdeliver US$5 billion of extra free cash flow overthe next five years from its mine-to-marketproductivity programme. The Group’s valueover volume approach, coupled with a robustbalance sheet and world-class assets, placesRio Tinto in a strong position to deliver superiorshareholder returns through the cycle.

2016 highlights

– Generating strong operating cash flow ofUS$8.5 billion.

– Delivering underlying earnings ofUS$5.1 billion.

– Achieving US$1.6 billion of pre-taxsustainable operating cashcost improvements. (1)

– Investing in three major growth projects inbauxite, copper and iron ore.

– Optimising the portfolio with disposals ofUS$1.3 billion announced or completed in2016 and up to US$2.45 billion announcedto date in 2017.

– Strengthening the balance sheet furtherwith net debt reduced to US$9.6 billion.

– Returning cash to shareholders withUS$3.6 billion announced for 2016:– full year dividend of 170 US cents per

share, equivalent to US$3.1 billion.– share buy-back of US$0.5 billion in

Rio Tinto plc shares over the courseof 2017.

– in total, representing 70 per cent of2016 underlying earnings.

– Generating free cash flow (2) ofUS$5.8 billion which included US$0.3 billionof sales of property, plant and equipment.

– Receiving US$0.8 billion in net proceedsfrom disposals in 2016, with up toUS$2.6 billion expected in 2017, includingthe Coal & Allied transaction for up toUS$2.45 billion.

Results at a glance

Year to 31 December 2016 2015 Change

KPI 112 Net cash generated from operating activities (US$ millions) 8,465 9,383 -10%KPI 130 Underlying earnings (3) (US$ millions) 5,100 4,540 +12%

Net earnings/(loss) (US$ millions) 4,617 (866) n/aKPI 128 Capital expenditure (4) (US$ millions) (3,012) (4,685) -36%

Underlying earnings per share (US cents) 283.8 248.8 +14%Basic earnings/(loss) per share (US cents) 256.9 (47.5) n/aOrdinary dividend per share (US cents) 170.0 215.0 -21%

At 31 December 2016 2015 Change

KPI 145 Net debt (5, 7) (US$ millions) 9,587 13,783 -30%

Gearing ratio (6, 7) 17% 24%

The financial results are prepared in accordance with IFRS.

(1) Operating cash cost improvements represent the difference between the current and prior year full cash cost of sales per unit based on the prior year volume sold.

(2) Free cash flow is defined as Net cash generated from operating activities less Purchases of property, plant and equipment (PP&E) plus Sales of PP&E. It is a key financial indicator whichmanagement uses internally to assess performance.

(3) Underlying earnings is a key financial performance indicator which management uses internally to assess performance. It is presented here to provide greater understanding of the underlyingbusiness performance of the Group’s operations. Net and underlying earnings relate to profit attributable to the owners of Rio Tinto. Underlying earnings is defined and reconciled to net earningson page 130. Additionally, underlying EBITDA is a key financial indicator which management uses internally to assess performance. It excludes the same items that are excluded in arriving atunderlying earnings.

(4) Capital expenditure is presented gross, before taking into account any disposals of property, plant and equipment.

(5) Net debt is defined and reconciled to the balance sheet on page 145.

(6) Gearing ratio is defined as net debt divided by the sum of net debt and total equity at each period end.

(7) These financial performance indicators are those which management use internally to assess performance, and therefore are considered relevant to users of the accounts.

2016 Strategic report riotinto.com 1

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Group overview

Introduction to Rio Tinto

At Rio Tinto, as pioneers in mining andmetals, we produce materials essential tohuman progress.

We have been in business for more than140 years and remain focused on the longterm. Our approach is driven by a clearstrategy, with the goal of delivering superiorvalue for our shareholders through the cycle(see page 8). Our strategy plays to ourstrengths: world-class assets, talentedemployees, a strong balance sheet andoperating excellence.

Our approach is underpinned by our values ofsafety, teamwork, respect, integrity andexcellence. Combined with the strengthprovided by our people and our assets, ourvalues help form the foundations of ourlong-term success.

We have a 51,000-strong workforce in around35 countries. We seek to foster a culturewhere our people keep their safety, and thatof their workmates, contractors andcommunities, at the top of their minds; whereevery person understands how they cancreate and preserve value for the business;where diversity and innovation are embraced;and where our values guide everything we do.

We find, mine, process and market mineralresources, producing a diverse suite ofminerals and metals that enable the world togrow and develop. These products give usexposure to markets around the world, andacross the economic development spectrum,from basic infrastructure needs, throughindustrial growth, to consumer-led demand.

Under our Group-wide organisationalstructure, our four product groups– Aluminium, Copper & Diamonds, Energy &Minerals and Iron Ore – are complementedby our Growth & Innovation group.Supporting these are our central supportfunctions, shared services, andheadquarters-based activities.

Our contribution to sustainable developmentis integral to how we do business. It is afundamental consideration in how wemanage the business, seeking long-termmutually beneficial outcomes for ourbusiness and our stakeholders. Find out moreon page 24.

Iron Ore

Rio Tinto operates a world-class iron orebusiness, supplying the global seaborne ironore trade. We are well positioned to benefitfrom continuing demand across China and thedeveloping world. The Iron Ore product group’soperations are located in the Pilbara region ofWestern Australia, where it hasindustry-leading margins, and in 2016 marked50 years since their first contracted shipment.

Products

Iron oreIron ore is the key ingredient in the productionof steel, one of the most fundamental anddurable products for modern-day living, withuses from railways to paperclips.

Strategic advantages

– Strong presence in key markets.– Proximity to key Asian markets.– World-class assets, comprising an

exclusive, integrated supply chain withextensive optionality.

– A premium product suite, which drivesstrong customer relationships, supportedby technical and commercialmarketing expertise.

– Low cost position with a Pilbara cash unitcost of US$13.7 in 2016.

– Strong mineral resources provide multiplehigh-quality, low-cost options to sustainand grow our Pilbara operations.

– Employees driving sustainable productivityimprovements: costs, quality and revenue.

– Industry leader in supply chainmanagement, responsible mining andtechnology and innovation.

Key production locations Key sales destinations

– Australia – China

– Japan

– South Korea

Full operating review 32

Aluminium

Building on more than a century of experienceand expertise, Rio Tinto is a global leader in thealuminium industry. Our business includeshigh-quality bauxite mines, large-scale aluminarefineries, and some of the world’s lowest-cost,most technologically-advancedaluminium smelters.

Products

BauxiteBauxite is the ore used to make aluminium. It isrefined into alumina which is smelted intoaluminium metal. Our wholly and partly ownedbauxite mines are located in Australia, Braziland Guinea.

AluminaAlumina (aluminium oxide) is extracted frombauxite via a refining process. Approximatelyfour tonnes of bauxite are required to producetwo tonnes of alumina, which in turn makesone tonne of aluminium metal. Our wholly andpartly owned alumina refineries are located inAustralia, Brazil and Canada.

AluminiumAluminium is a versatile modern metal. Light,strong, flexible, corrosion-resistant andinfinitely recyclable, aluminium is one of themost widely used metals in the world. Itslargest markets are transportation, machineryand construction. Our smelters are mainlyconcentrated in Canada. We also have smeltersin France, Australia, New Zealand, Icelandand Oman.


– Access to the largest and best-qualitybauxite ore reserves in the industry,strategically located to serve growingChinese bauxite demand.

– One of the lowest-cost bauxite producers.– Outstanding hydropower position, which

delivers significant cost and otheradvantages in an energy intensive industryand today’s carbon-constrained world.

– Rio Tinto has a low first-quartile averagecost position for aluminium smelting, withindustry-leading smelting technology.


– Canada – Asia

– Australia – Americas

– Europe – Europe


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Copper & Diamonds (a)

Rio Tinto’s Copper & Diamonds product grouphas managed operations in Australia, Canada,Mongolia and the US, and non-managedoperations in Chile and Indonesia. By-productsof the group’s copper production include gold,silver, molybdenum and others such assulphuric acid, rhenium, lead carbonateand selenium.

Products

CopperCopper makes a positive impact on many ofsociety’s challenges. It is the primary conductorin the world’s electrical infrastructure, andcarries voices, data and vital information to allcorners of the world. It is a key component ofgreen technologies, from wind energy and solarcollection to high-efficiency buildings andelectric vehicles.

DiamondsDiamonds are an important component in bothaffordable and higher-end jewellery. We areable to service all established and emergingmarkets as we produce the full range ofdiamonds in terms of size, quality andcolour distribution.

GoldGold is the ultimate store of value. It is used injewellery, as a financial instrument, andsupports the medical industry.

SilverAlso a precious metal, silver has the highestelectrical and thermal conductivity of anymetal and is used in many electronic devices. Itis also used in aerospace and medicalapplications, to make jewellery and asan investment.

MolybdenumMolybdenum enhances toughness,high-temperature strength and corrosionresistance when combined with other metals. Itis frequently used to produce stainless steeland other metal alloys.


– A portfolio of high-quality copper assets.– Attractive copper growth opportunities.– Fully integrated global copper and diamond

exploration, mining, and sales andmarketing business.

– A strong and trusted supplier of copper anddiamonds in markets where we have anestablished presence and in those where weare developing new opportunities.

– Leading technology and processes forunderground mining.


– Australia– Chile– Mongolia– North

America– Indonesia

– Australia– China– India– Japan– North America– Europe


Energy & Minerals (a)

Rio Tinto’s Energy & Minerals product groupcomprises mining, refining and marketingoperations in 14 countries, across six sectors:borates, coal, iron ore concentrate and pellets,salt, titanium dioxide and uranium. Energy &Minerals also includes the Jadar lithium-borateproject in Serbia and the Simandou iron oreproject in Guinea.

Products

BoratesRefined borates are used in hundreds ofproducts and processes. They are a vitalingredient of many building materials and areessential micro-nutrients for crops. They arealso commonly used in glass and ceramicapplications including fibreglass, televisionscreens, floor and wall tiles, andheat-resistant glass.

CoalCoal is a cost-effective and abundant energysource that plays an important role in theglobal energy mix. Thermal coal is used forelectricity generation in power stations. Thethermal coal from the Hunter Valley operationsfeatures the low ash and sulphur properties formodern lower-emissions power stations. Wealso produce high-value coking or metallurgicalcoal, which is mixed in furnaces with iron ore toproduce steel.

SaltSalt is one of the basic raw materials for thechemicals industry and is indispensable to awide array of automotive, construction andelectronic products, as well as for watertreatment, food and healthcare.

Titanium dioxideThe minerals ilmenite and rutile, together withtitanium dioxide slag, can be transformed into awhite titanium dioxide pigment or titaniummetal. The white pigment is a key componentin paints, plastics, paper, inks, textiles, food,sunscreen and cosmetics. Titanium metal islight weight, chemically inert and strong,making it ideal for use in medical applicationsand in the aerospace industry.

UraniumUranium is one of the most powerful energysources, and is used in the production of clean,stable, base-load electricity. After uranium ismined, it is processed into uranium oxide. Thisproduct is sold for processing into fuel rods foruse in nuclear power stations.

Other products from the Energy & Mineralsproduct group include high-purity ductile iron,steel billets, metal powders and zircon.


– Industry-leading businesses operating inattractive markets.

– Demand-led, integrated operations that areresponsive to the changing externalenvironment.

– Minerals business poised to benefit frommid- to late-development-cycle demandgrowth as consumption increases inemerging markets.

– A lean, scalable operating model runningcash-focused businesses.


– NorthAmerica

– Australia– Africa

– North America– China– Japan– South Korea– Europe


Growth & Innovation (a)

The Growth & Innovation group operatesthrough the entire life cycle of Rio Tinto’smines and assets, optimising value from thetime of the initial exploration concept throughto when we close a mine or processing facility.

Growth & Innovation works in close partnershipwith Rio Tinto’s product groups, and isaccountable for finding, evaluating, developingand delivering a portfolio of Tier 1 growthoptions. It also provides technical support toRio Tinto operations to improve productivity,manage technical risk and drive innovation andautomation initiatives.Full operating review 40

(a) The Copper & Diamonds and Energy & Minerals productgroups, and the Growth & Innovation group, were formedin July 2016 in a reorganisation of Rio Tinto’scompany structure.


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Chairman’s letter

Dear shareholders,

In 2016, your company delivered a strongperformance despite challengingmacroeconomic conditions and significantgeopolitical uncertainty, which led tocommodity price volatility throughout the year.

Change was a feature of 2016, both in theexternal environment and within the company.It is critical that, in uncertain times, a long-termperspective prevails.

It is pleasing to report we made progressagainst each of our strategic priorities during2016, delivering robust earnings and cashgeneration, while maintaining balance sheetstrength and progressing our high-valuegrowth options.

Strength through the cycle

In 2016, average prices for our products wereslightly down on the previous year, yet weachieved underlying earnings of US$5.1 billion,up 12 per cent on 2015. At US$8.5 billion,operating cash flow was, however, ten per centlower than in 2015, primarily due to interestpaid on bond early redemptions and workingcapital movements.

During the year, your company continued torealise considerable savings from its costreduction programme. The Group has nowachieved US$7.8 billion in pre-tax operatingcash cost improvements and reductions inexploration and evaluation expenditurecompared with 2012.

Returns to shareholders

Last year, in response to a deterioration in thepricing environment and exceptional volatility,we determined that it was no longerappropriate to maintain our progressivedividend policy. We announced a new dividendpolicy with a more flexible approach whichbetter reflects our underlying earnings profileand outlook.

It balances three factors: maintaining a strongbalance sheet; reinvesting for future growth;and rewarding shareholders. We expect totalcash returns to shareholders to be in the rangeof 40-60 per cent of underlying earnings inaggregate through the cycle.

In February 2017, we announced cash returnsto shareholders of US$3.6 billion with respectto 2016. This comprises total dividends ofUS$3.1 billion and a share buy-back ofUS$500 million in Rio Tinto plc shares,representing, in aggregate, 70 per cent of 2016underlying earnings.

Global growth

After five years of global GDP growth belowthe long-term average, and with the impact ofinterest rate policy stimulus nearingsaturation, growth is now increasinglyinfluenced by geopolitical matters. The tectonicpolitical shifts in the UK and the US during2016 are yet to translate into clear globaleconomic impacts but there is no doubt thatthese events have contributed to a high levelof uncertainty across the globe.

However, if we look to the long term, webelieve there is plenty of opportunity. Over thenext 15 years the world is expected toconsume more copper than in the past

20 years, almost as much steel as in the past30 years, and almost as much aluminium as inthe past 40 years.

Consistent strategy

Given the increasing complexity anduncertainty in the external environment, we arefocusing more than ever on understanding themacro trends that may impact our companyand our industry in the future.

During the year, the board and managementreviewed these global trends and our strategyto address them. In September, the boardendorsed the company’s ten-year strategy. Thisremains consistent; our aim is to generate valueby focusing on assets that are long life, low costand expandable.

Economic and social contribution

While delivering shareholder value is ourprimary objective, there is no doubt that weneed to get better at explaining the economicand social contribution we make to our hostcountries, particularly during uncertain times.

In 2016, your company paid US$4 billion intaxes and royalties worldwide, with paymentsover the past five years of more thanUS$32 billion. Over the past five years,Rio Tinto’s direct economic contribution hasexceeded US$235(a) billion of which almost halfwas through payments to suppliers for goodsand services.

Our stakeholders have an increasing interest inhow we are preparing for – and how wecontribute to – a low-carbon future. In responseto a shareholder resolution at our 2016 annualgeneral meeting, this month we will publish ourfirst climate change report, which providesinformation on our approach.

Board and management

Over the last 12 months, we made a number ofchanges at both the board and managementlevels. In May 2016, Richard Goodmansonstepped down as a non-executive director andin February of this year, we announced thatRobert Brown and Anne Lauvergeon will alsostep down from the board at the Rio TintoLimited annual general meeting on 4 May2017. Richard, Bob and Anne contributedsignificantly to the board over the years and wewish them well for the future.

In February 2017, we appointed three newindependent non-executive directors to theboard. Former Sasol Ltd chief executive DavidConstable and former Centrica plc chiefexecutive Sam Laidlaw joined on 10 February2017. Royal Dutch Shell plc chief financialofficer Simon Henry will join the board witheffect from 1 July 2017.

On 1 July 2016, Sam Walsh retired as chiefexecutive of Rio Tinto, and I thank him for thesignificant service and transformativeleadership he gave to the company during histhree-and-a-half-year tenure as chiefexecutive. Since taking over as chief executivein July, Jean-Sébastien Jacques has set aboutdriving a new era of productivity, performance

and growth. During the first eight months in hisrole, J-S and our newly shaped executive teamhave continued the focus on generating cash,while maintaining a disciplined approach tocapital allocation and balance sheet strength,and progressing our high-value growth options.

In 2016, your board visited Mongolia to see ourmanagement teams and employees in action.Site visits by the board allow us to meet withthe company’s dedicated employees and wecontinue to be greatly impressed by theirexpertise and commitment.

Regulatory matters

I cannot reflect on 2016 without acknowledgingthe events of the final months of the year. On9 November 2016, we announced, following aninvestigation supported by external counsel,that we had notified the relevant authorities inthe US, UK and Australia about contractualpayments totalling US$10.5 million made to aconsultant who had provided advisory servicesin 2011 on the Simandou project in Guinea.

On 1 December 2016, Rio Tinto confirmed thatit was co-operating with relevant authorities inconnection with an investigation into theimpairment included in the company’s accountsin 2012 in respect of Rio TintoCoal Mozambique.

The outcome of the regulatory investigations,and any potential litigation, is uncertain.There is unfortunately little more I can say atthis time, other than to assure you that theboard is giving these matters its full andproper attention, and that we are continuingto co-operate fully with the relevantauthorities. Under my chairmanship, we haveestablished a dedicated board committee tomonitor progress.

National pride, international spirit

Despite the changes and uncertainties of thepast year, the world remains deeply connectedthrough bilateral agreements, shared culturalhistories and friendship. These factors will bethe foundations of future global growth.

National pride and international spirit havegone hand in hand since Rio Tinto’s formation144 years ago. That spirit continues today, aswe partner with our stakeholders to buildenduring businesses. On behalf of my fellowdirectors I would like to thank our hard-workingemployees and you, our shareholders, for yourongoing support.

Jan du PlessisChairman

1 March 2017

(a) Summarised on page 26.


Chief executive’s statement

Dear shareholders,

It is a privilege to serve as chief executive of agreat company with world-class assets,talented employees and a commitment todelivering value to our shareholders over theshort, medium and long term.

Safety comes first

At Rio Tinto, safety comes first. Our ambition isclear: all of our employees and contractorsmust return home safely at the end of eachand every day.

In 2016, most aspects of our safetyperformance improved, but this is still not goodenough.

It is a real concern that fatalities continue tooccur in the sector and at our operations. Thesedeaths are devastating losses for family,friends and colleagues.

In June, we had a tragic fatality at one of ouriron ore operations in Western Australia. One ofour colleagues was crushed while working on adrill rig. We completed a full investigation intothis event and have shared the learnings acrossRio Tinto to seek to prevent an incident like thisfrom happening again.

At the operations of our non-managed jointarrangements Alumar, Grasberg andEscondida, six people died during the year. Wehave shared our fatality prevention initiativeswith our joint-venture partners and learn fromtheir efforts as well.

During 2016, we deployed our critical riskmanagement (CRM) system across more than60 sites and completed more than 1.3 millionsafety verifications.

CRM is an important tool in our drive toeliminate fatalities across our organisation.

In 2016, our lost time injury numbersdecreased and we have reduced our all injuryfrequency rate by 64 per cent over the lastdecade.

We must continue to learn and shareinformation, for the benefit of our people, ourcontractors, and our partners.

For us, safety comes first and our drive toimprove continues.

Value over volume

In 2016, your company delivered on itscommitments. Most importantly, we met ourcommitment to deliver superior shareholderreturns. In February 2017, we announced totaldividends for 2016 of 170 US cents per share,well in excess of the previously indicated110 US cents per share minimum, and a sharebuy-back of US$0.5 billion.

We maximised cash from our world-classassets and focused on value over volume. Wedelivered US$1.6 billion in cost savings, and weprogressed our three high-value growthprojects, Oyu Tolgoi underground, Silvergrassand Amrun, while maintaining tight control ofour capital expenditure, which in 2016 totalledUS$3.0 billion.

Our success in generating cash, controllingcapex, and actively strengthening the portfolio,meant that we closed the year with net debt ofUS$9.6 billion. This is a reduction ofUS$4.2 billion compared with December 2015.

This strong performance was delivered againsta backdrop of significant commodity pricevolatility and geopolitical uncertainty. We seethis continuing into 2017 which is why weintend to maintain our strong balance sheet,the foundation of a resilient business.

Our team around the world is focused on ourfour Ps – portfolio, performance, people andpartners. Relentless and consistent deliveryagainst each of these will underpin our aim todeliver superior shareholder returns throughthe cycle.

Profitable performance from our

world-class assets

The external environment for our businessesremained challenging in 2016. The goal of ourfinancial planning is to set objectives for yourcompany that are resilient against variousmacroeconomic and commoditypricing scenarios.

Notwithstanding a significant lift in somecommodity prices in the latter part of 2016,from a very low base, the average prices for theyear were slightly lower than in 2015.

Our aim is to maximise cash and productivityacross our entire portfolio of assets.

We made good progress during 2016 withunderlying EBITDA of US$13.5 billion,representing a margin of 38 per cent for theGroup, compared with 34 per cent in 2015.

In 2016, our Iron Ore business delivered cashfrom operations of US$5.6 billion and deliveredindustry-leading margins. This group deliveredcost savings of US$315 million for the year.

The Pilbara infrastructure investments ofrecent years are essentially complete. In June,we announced the US$338 million Silvergrassinvestment which will provide new ore later in2017, and complement our Pilbara blend.

Our Aluminium group has world-leadingpositions in bauxite, alumina and aluminium,and achieved a solid financial performance in2016, driven by productivity and cash costimprovements.

With its low-carbon footprint, our aluminiumbusiness is among the best positioned in theworld, but the price declines of the past yearcontinue to pose industry-wide challenges.

In Aluminium, all of our assets were free cashflow positive, despite lower realised prices inthe first half. This product group reducedoperating costs by more than US$480 millionagainst a full year target of US$300 million.

The Copper & Diamonds product groupdelivered cash from operations ofUS$987 million and had underlying EBITDAmargins from its operations of 31 per cent.

The Energy & Minerals product group matchedproduction with market demand, generatingsignificant free cash flow in 2016 ofUS$1.3 billion, due to improved prices in somecommodities, including coal.

The Australian coal portfolio, which hasdelivered a reduction in unit costs of more than40 per cent over the last four years, benefitedfrom higher coking coal prices.

Driving productivity

Our aim is to deliver strong performance underany market conditions. Since 2012, we havereduced our annual cost run rate by more thanUS$7 billion, and we are well on track to deliveron our promise of US$2 billion in cost savingsacross 2016 and 2017.

It is energising to be leading a business wherecontinuous improvement and efficiency arepart of the culture, and we are taking everyopportunity to generate value, from mineto market.

Cutting costs can only deliver so much – wemust also lift productivity. Increasing themine-to-market productivity of ourUS$50 billion asset base is the highest returnavailable to us. As such, we have promised todeliver an additional US$5 billion ofproductivity-driven free cash flow over the nextfive years.

We will boost productivity across the entireorganisation, through harnessing technologyand through improved operation and utilisationof our fixed assets, organisational resourcesand systems. We will continue focusing onvalue, not volume, and using our commercialexcellence to achieve premium pricing for ourquality products such as the Pilbara blend.

Our new centre of commercial excellence inSingapore is focused on generating more ofthese types of initiatives, with the aim ofmaximising value across our customer andsupplier chains throughout the business.

Investing in future growth

The competitive advantage of our strongbalance sheet has meant that our cost andproductivity drive is not at the expense ofgrowth, and we seek to continue to investwisely where we see opportunities forattractive returns.

In 2016, we progressed our three compellinggrowth projects, which play to the company’sstrengths. In line with our strategy, they are allmulti-decade in outlook and offer highlyattractive returns.

In May, work began on the undergrounddevelopment at Oyu Tolgoi in Mongolia.

First production is expected in 2020. When theunderground is fully ramped up in 2027, thecompany expects it to produce more than500,000 tonnes of copper a year. The mine alsobenefits from significant gold by-products, withan average gold grade of 0.35 grams per tonne.


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Chief executive’s statementcontinued

The new Silvergrass iron ore mine will take thetotal number of mines in the Pilbara to 16. Ourintegrated system also includes 1,700kilometres of rail and four ports to serve morethan 100 customers globally.

In Cape York, Australia, the Amrun bauxiteproject is progressing well, with 70 per cent ofthe US$1.9 billion spend to occur in 2017 and2018. It builds on our expertise as a reliablesupplier of quality bauxite from Cape York,which Rio Tinto first discovered in the regionover six decades ago.

As the next generation of deposits becomesmore difficult to find and develop, we continueour focus on exploration. Rio Tinto has one ofthe largest exploration programmes in theindustry, and in 2016 we were active in14 countries across a range of commodities.

Portfolio of world-class businesses

At Rio Tinto our strategy is centred onworld-class assets – those that are long life,low cost and expandable.

During the year, we strengthened our portfolio.We announced or completed disposals of morethan US$1.3 billion in the year, includingcompleting the sale of Lochaber in the UK inDecember. In January 2017, we announced thedivestment of our thermal coal business inAustralia for up to US$2.45 billion, which,subject to approvals, should complete laterthis year.

In June 2016, we announced a reorganisation ofour product group structure which saw theformation of the Copper & Diamonds group tohelp maximise our technical undergroundmining expertise. We also created the Energy &Minerals group which now holds a suite ofpremium coking coal and speciality mineralproducts and will act as an incubator foremerging opportunities.

The Iron Ore group is now focused on ouroperations in Western Australia, and theAluminium group retains its focus on valuecreation from its high-quality bauxite, aluminaand aluminium businesses.

The product groups are complemented by anewly shaped Growth & Innovation group, todrive our productivity agenda, project deliveryexpertise and the deployment ofnew technologies.

People with purpose

My new role has provided me with anopportunity to visit many sites and meet ourgreat teams around the world. Our people workhard for their families, their communities, andour company.

We know there is more to be achieved. I wouldlike to thank our 51,000 people for their effortsduring 2016 and their commitment to steppingup further in 2017.

Our employee engagement score, measured inour 2016 People Survey, was lower than wewould have liked, but we will use the insightsthis provides to improve our leadership anddirect our initiatives to build engagement.

We will focus on developing our employees in2017, building commercial and technicalexpertise, as these are key enablers ofour performance.

How we do things is as important as what wedo. Integrity and The way we work – our globalcode of business conduct – guide our actions,and, at Rio Tinto, commitment to them isnon-negotiable.

We renewed our focus on graduates in 2016 aspart of our broader commitment to grow ourdiversity and critical capability for the future.

We are a global organisation with all thestrengths this provides and we must do moreto attract the next generation, and people fromthe places where we are operating, to becomepart of our company.

In 2016, we made some changes to theExecutive Committee. The new team offers astrong and diverse perspective with deepindustry expertise and global knowledge.

Strengthening our partnerships

Last year, we celebrated a number ofsignificant milestones which testify to thelong-term nature of our investment,commitment and partnerships with localcommunities and governments.

During 2016, I met with many stakeholders,including visiting Australia, China, and Canadato meet customers and business partners.

Our Rössing uranium mine in Namibia andRichards Bay Minerals operation in South Africaboth celebrated their 40th anniversaries.

And in Australia, we marked the50th anniversary of the company’s firstcontracted shipment of iron ore from thePilbara to Japan.

These businesses were all pioneered onfoundations of partnership between ourcompany, government, business partnersand communities.

In 2017, we will also mark 30 years of theChannar Mining Joint Venture with China’sSinosteel Corporation in the Pilbara, and the145th anniversary of our borates operationsin the US.

Our operations take years to plan and decadesto deliver. The benefits of taxes, wages andprocurement are shared across generations.

In an increasingly complex and uncertain world,which brings significant risks to our ongoingsuccess, it is critical we partner expertly withcustomers, governments, communities and oursuppliers. Our operations and our people makea material difference in the communities inwhich we have the privilege to work and live.

Looking to the future

Rio Tinto is in a strong position. Our robustbalance sheet, world-class assets, our focus onthe drivers of performance and our talentedemployees will keep us resilient in times ofvolatility.

We can, however, be confident about themedium and long term megatrends ofpopulation growth and urbanisation.

Combined with the large infrastructure deficitsthat exist in both advanced and emergingeconomies, the long-term view is positive forour industry.

Regardless of the pace of economic growth orchange in the years ahead, Rio Tinto’s purposewill continue to be to produce materialsessential to human progress, as we have donesince the company was founded.

In 2017, we will do all we can to improve safetyand our cash performance, drive ourproductivity agenda, and again deliver strongreturns to our shareholders.

Thank you for your ongoing support andconfidence in your company.

Jean-Sébastien JacquesChief executive

1 March 2017


Market environment

Global economy

For the fifth year in a row, global GDP growthunderperformed the long-term average,expanding at approximately three per cent in2016, yet still exceeded initial expectations.

At the start of the year, concerns over a secondwave of collapsing oil prices, negative interestrates in Japan and Europe, the possibility of ahard landing in China and revived expectationsof a US recession pushed market expectationsdown sharply. In the first few months the S&P500 fell by more than ten per cent from its2015 close and commodity prices hitfresh lows.

Meanwhile, an expansion was taking shape inChina as new fiscal support was released intandem with relaxed housing purchase andmortgage restrictions. The resulting propertymarket surge reversed the deflationaryconditions of the previous two years. Bymid-2016, job growth, rising real incomes andhigher corporate earnings in the US weresupporting a modest improvement in economicgrowth. Europe and Japan’s economicperformance also picked up, while thedownturn in many emerging markets appearedto bottom out. This levelling-off set the stagefor a sustained pick-up in commodity pricesand equities. It also provided room for theFederal Reserve Bank to raise the benchmarkrate later in the year and allowed a prolongedstrengthening of the US dollar.

China’s economic performance beat consensusexpectations, with full year growth of6.7 per cent. The end of deflation allowedChinese industrial profits to improvesubstantially, though production growthremained relatively weak. Improved balancesheets provided some support to investmentgrowth though it remains below trend. Whileconsumer price inflation remained modestduring 2016, surging commodity prices,particularly oil, drove a substantial reflation inproducer prices. The short-term property cycleappeared to have peaked by October. Even so,completion of projects under constructionprevented a sudden downward correction, andthe market has moved into a morebalanced position.

After signs of weakening momentum in thethird quarter, the global economy finished2016 with improved manufacturing andbusiness sentiment. The new USadministration’s plans for fiscal stimulus,corporate tax reform and reduced regulationalso helped to buoy market sentiment atyear-end. Europe also enjoyed a modestimprovement in demand, though bankingsector issues continue to constrain recovery.Though negative rates persist in Japan,inflation and growth appear to have improvedfollowing fiscal stimulus measures.

Despite the apparent improvement, otherevents signalled increasing risk. The Decemberincrease in the US benchmark rate drove upTreasury bond yields, with negative

implications for borrowing and credit. Higherrates pushed the dollar up against othercurrencies, a negative signal for commodityprices. Finally, the re-emergence of inflation inthe US, Europe and China supportsexpectations of further increases in USbenchmark rates.

Drivers of commodity prices

Long-term structural economic trends areimportant drivers of commodity prices throughtheir effects on demand. The economicdevelopment and urbanisation of emergingcountries goes through an initialinvestment-led growth phase, which benefitscommodities such as steel and copper used inconstruction and infrastructure. As economiesevolve, other commodities such as light metals,energy products and industrial minerals tend totake over as the main enablers ofconsumption-led growth.

The long-term nature of mining tends to resultin cyclical investment patterns, translating intocommodity price cyclicality. Over the pastthree years, the industry moved into the lowphase of the cycle. Investments made duringthe previous period of high prices and marginshave started to deliver new supply, into acontext of decelerating Chinese demand. Withmarkets for most metals and minerals movinginto oversupply, the industry has shifted fromcapital investment toward strategies focusedon strengthening balance sheets throughproductivity and cost reduction initiatives.

Commodity markets

Most commodity prices increased for the firsttime in a number of years in 2016, despitenumerous political and macro shocks to theglobal economy.

Iron ore prices started the year at aroundUS$40/dry metric tonne CFR (cost and freight)and ended the year around US$80. Following aweak start, China’s crude steel productionincreased in the second half of the year bynearly four per cent compared with 2015. Thishelped absorb new iron ore supply from RoyHill and Minas Rio. The improved demand wasunderpinned by an increased appetite forChinese steel demand as China’s governmentexpanded lending, eased monetary policy andsupported the property sector. China alsoeliminated inefficient steelmaking capacity,supporting steel prices and profitability.

Hard coking coal prices almost quadrupled toUS$310/tonne from January to November.Healthy Chinese steel demand contributed tothe spike, but the main driver was China’ssupply curtailment through theimplementation of the “276 Directive”,restricting coal mines to operating 276 days ofthe year. The thermal coal market was alsoaffected, with prices more than doubling toUS$110/tonne FOB (free on board) Newcastle.The directive was relaxed in the second halfand prices have since moderated.

Price increases for industrial metals were lessdramatic. Copper prices dipped belowUS$2/pound in early 2016 before rising25 per cent by year-end. Over one milliontonnes of new mine supply entered the market,and was accommodated through demandgrowth, lower scrap availability andmine curtailments.

Aluminium prices started 2016 belowUS$1,500/tonne and ended the year about15 per cent higher. Margins remained underpressure, however, as higher energy andalumina costs offset the price increase. Thealumina price rallied from less thanUS$200/tonne to US$350/tonne as refinerycurtailments caught up with the ten per centcutback of global smelting capacity announcedin 2015. Bauxite did not match these increases,with the average Chinese import price fallingmoderately to just under US$50/tonne as newsupply from Guinea, Australia and Brazilreplaced volumes lost to Malaysia’s export ban.

Outlook

The global economy starts 2017 with improvedmanufacturing conditions but also evidencethat cost pressures and tighter creditconditions in the US, the UK and China areaffecting corporate profit growth. Europe’seconomy has gained momentum, though thepick-up in household consumption remainsvery weak and is vulnerable to inflation.Meanwhile, Japan should benefit from aplanned fiscal policy expansion. China is facingthe wind-down of its short-term property cycleand renewed policy calls to constrain creditgrowth and push through heavy industryrestructuring and capacity reduction. At thesame time, the Chinese government is workinghard to keep growth relatively stable ahead ofthe 2017 mid-term leadership transition, withgrowth this year likely to be only slightlyweaker. The stronger dollar, higher interestrates and inflation will constrain the pace of USrecovery. However, should the new USAdministration follow through with fiscalexpansion, there is potential for higher USgrowth later in the year. Further strengtheningof the dollar and higher interest rates andinflation could ensue for the global economy.

Overall, the reflationary conditions thatdominated global commodity markets in 2016may be reaching their limits, though positivesentiment and further steel and coal capacitycuts in China may provide further support.Consensus now points to moderate downsiderisk for commodity prices in the short tomedium run. This context continues to favourproducers at the lower end of the cost curveand those that can improve productivity.Longer-term demand prospects remainpositive. The attractiveness of growthopportunities in some commodities is amplifiedby stronger mine depletion resulting fromrecent cutbacks in capital expenditure.


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Group strategy

Improved market conditions, but

uncertainty remains

By comparison with recent periods, themining sector enjoyed a relatively buoyantyear in 2016, with equity valuationsimproving considerably across large parts ofthe sector. Prices for a number ofcommodities improved during 2016, aided bya combination of fiscal stimulus in China,policy-driven capacity reductions and newsupply entering the market at a slower rate.This supportive environment allowed us togenerate strong cash flow and furtherstrengthen our financial position.

We continued to focus on productivity, costreductions and capital discipline in 2016, inorder to maximise our cash generation andthe return on every dollar we invest. Similarstrategic approaches played out across largeparts of the mining sector – allowing manycompanies facing financial distress at thebeginning of 2016 to pay down debt andregain some financial stability. However, ourearly and consistent action in these areas haspositioned us favourably, and allowed us tocontinue investing in our most attractiveorganic growth opportunities where othershave not been able to do so. We enter 2017 ingood shape.

Despite some renewed optimism for thesector during 2016, we remain cautious.Recent commodity price rises have beenhelped by discrete fiscal policy decisions thatcould quickly be unwound. In addition, thegeopolitical landscape remains uncertain, andmajor political transitions could impact ourmarkets and operating environments during2017. Elsewhere, we are seeing an increasedthreat of rent-seeking, resource nationalismand the adverse application of regulatorylaws to previously settled practices. Theseinclude Indonesia’s proposed revision to itsmining legislation, a mooted production taxincrease in Western Australia and theapplication of EU tax regulations oncompetitiveness. Accordingly, we willcontinue to adopt a conservative approach toour financial management and capitalspending.

A clear strategy to deliver value through the cycle

Superior cash generation

Performance

Operating excellence

People and partners

Capabilities

Portfolio

World-class assets

Capital allocation discipline

Balance sheet strength Compelling growthSuperior shareholder returns

A clear and effective strategy is critical for us to perform strongly under a range of industryconditions. Our goal is to deliver superior value for our shareholders through the cycle, and webelieve the best way to do this is to focus on the “four Ps”: portfolio, performance, people andpartners. We couple this with our disciplined approach to capital allocation. This ensures that everydollar we generate is applied to the highest-returning opportunity – whether that be formaintaining our balance sheet strength, investing in compelling growth opportunities or deliveringsuperior shareholder returns.

Superior cash generation

1. Portfolio

At the heart of our approach is a portfolio ofworld-class assets – from our Pilbara iron orebusiness, to our Queensland bauxite orereserves, our Canadian aluminium smelters andour global suite of copper mines. These aremulti-decade assets that deliver attractivereturns throughout the cycle, while providingmaterial opportunities for growth over the longterm. We use a clear strategic framework toassess our existing assets and newopportunities – taking into account the industryattractiveness and the competitive advantageof each asset, and its capacity to deliver strongand stable returns.

In 2016, we:– Invested US$1.3 billion in compelling

growth opportunities.– Announced an increase to our Pilbara iron

ore reserves in Western Australia.– Agreed the sale of our aluminium smelter

and hydroelectric facilities at Lochaberin Scotland.

– Signed a non-binding agreement to sell ourinterest in the Simandou project in Guinea.

– Completed the sales of our Mount Pleasantthermal coal assets and of our interest inthe Bengalla coal joint venture.

2. Performance

Safety is our number one priority and is core toeverything we do. A well-run operation is asafe operation.

We seek to generate value at all stages of thevalue chain – from mine through to market. Weprioritise value over volume in all of ouroperating and investment decisions. We havedelivered substantial cost savings over recentyears and this remains a key focus area.

Beyond this, we continue to increase theproductivity of our existing assets, as asubstantial and low-risk source ofincremental returns.

We have established a leading position in thedevelopment and use of technology andinnovation – allowing us to deliver more tonnesmore cheaply and with less risk. As the industryfaces increasingly complex geological,environmental and cost pressures, ourtechnology advantage will be an increasinglyimportant value driver.

Our commercial activities ensure we reap themaximum value from each of our businesses.Our marketing teams work hand-in-hand withour operations, so that our resourcemanagement is fully aligned to the market.

Over the years we have leveraged ourunderstanding of customer needs to createnew markets for our products, includinghigh-temperature Weipa bauxite, andchampagne and pink diamonds. We deployindustry-leading capabilities in supply chainoptimisation and a variety of logistics solutionsacross the Group – and have in-house centresof excellence for value-in-use analysis, pricingand contracting strategies. Together, theseactivities allow us to manage risk and capturevalue in all market conditions.

In 2016, we:– Completed more than 1.3 million safety

critical control verifications in our criticalrisk management programme.

– Committed to generating US$5.0 billion ofadditional free cash flow over the nextfive years from mine-to-marketproductivity improvements.

– Achieved a further US$1.6 billion ofoperating cash cost reductions, as part ofour target of US$2.0 billion over 2016and 2017.


– Strengthened our organisational structure, byadjusting our product groups to better alignour assets with the business strategy, helpdrive further efficiencies andoptimise performance.

– Appointed executives responsible for Health,Safety & Environment and Growth &Innovation to our Executive Committee.

In 2016, we adhered to our disciplined capitalallocation framework, resulting in: sustainingcapital of US$1.7 billion, dividends of US$2.7billion, reduced net debt by US$4.2 billion andcompelling growth capital of US$1.3 billion.

Balance sheet strength

In a cyclical and capital-intensive industrysuch as mining, a strong balance sheet isessential in order to preserve optionality andgenerate shareholder value at all points in thecycle. We have a guidance range for netgearing of between 20 and 30 per cent. At31 December 2016, we were below theguidance range at 17 per cent and intend toretain a conservative stance given theuncertain macroeconomic outlook.

In 2016, we:– Reduced our net debt from US$13.8 billion

to US$9.6 billion.– Reduced our gearing ratio from

24 per cent to 17 per cent.– Reduced our gross debt by US$5.4 billion.

Quality growth

We have a high-quality pipeline of near-termand longer dated projects across the portfolio.By reinforcing capital discipline and reshapingour projects, we have retained significant,high-quality growth despite further reducingour capital expenditure. Our project pipelinehas a compelling internal rate of return.

In 2016, we:– Reduced capital expenditure from

US$4.7 billion in 2015 to US$3.0 billion.– Approved US$338 million to complete the

development of the Silvergrass iron oremine in Western Australia.

– Approved US$5.3 billion capitalexpenditure to develop the undergroundcopper and gold mine at Oyu Tolgoi.

Superior shareholder returns

We are committed to delivering superiorreturns to shareholders over the long term,and the cash returns we pay out toshareholders are a vital component of this. Ina cyclical industry such as mining, we believethe most prudent way to deliver strongreturns is to allow the overall level of returnsto vary with the cycle. Accordingly, we aim todeliver shareholders total cash returns of 40to 60 per cent of underlying earnings throughthe cycle. This policy is sustainable duringcyclical lows, and allows shareholders toparticipate more fully in the upside duringhigh points in the cycle.

In 2016, we:– Adopted a new shareholder returns policy,

designed to deliver superior cash returnsto shareholders over the long term.

– Paid US$2.7 billion in dividends toshareholders. In February 2017 weannounced shareholder returns ofUS$3.6 billion with respect to 2016.

Our 2017 strategic priorities

Throughout 2017, we will continue to focus onthe four Ps and our value over volumeapproach, to generate superior cash flow andmaintain our balance sheet strength todayand into the future.

We will maintain our focus on safety as ournumber one priority – as measured both bythe elimination of fatalities and minimisingour all injury frequency rate and lost timeinjuries. Our strong focus on costs andperformance will continue in 2017, as we worktowards delivering operating cash costsavings of US$2.0 billion over 2016 and 2017.Beyond this, we will seek to extractproductivity gains across our entire valuechain, as part of our commitment to deliverUS$5.0 billion of incremental cash flow frommine-to-market productivity improvementsby 2021.

We will continue to shape our world-classportfolio of assets, ensuring that we focusonly on the highest returning assets in ourpreferred industry sectors and seeking to exitassets that do not fit these criteria. We willprogress our high returning growth projects,including the Amrun bauxite project, theunderground expansion at Oyu Tolgoi and ourSilvergrass iron ore mine. We expect to investaround US$5.0 billion in capital expenditureduring 2017.

Investing in our people and our partnershipswith external stakeholders will be a key focusduring 2017. We are investing more indeveloping employees at all levels of theorganisation – from our graduate intake to ourtop leaders. This is fundamental as we seek tobuild the technical and commercialcapabilities that will enable us to unlockmaximum value from our assets. In addition,we will continue building and maintainingstrong partnerships across all stages of thevalue chain, founded on trusted relationshipsand our reputation for doing things the rightway. Strong partnerships allow us to accessand execute new opportunities, maximisevalue from our existing assets and managelicence-to-operate risks.

We enter 2017 with a sense of cautiousoptimism. The long-term outlook for our keycommodities remains strong and ourworld-class assets, operating excellence andcommercial capabilities place us in a strongposition relative to peers. However, thenear-term environment is marked byuncertainty – with geopolitical risk at both amacro level and a local level, and governmentpolicies impacting supply and demand in anumber of key commodities. In this context, aconservative approach remains prudent andwe will maintain our balance sheet strengthand resilience to downside risks as corepriorities.

3. People

As our industry evolves, new capabilities will berequired and we must attract, develop and retainthe right people to meet this challenge. We arestrengthening our technical and commercialcapabilities in particular, and establishing centresof excellence around these areas. Beyond this, weare committed to building a diverse and inclusiveworkforce at all levels of the organisation.

In 2016, we:– Appointed a Human Resources Group

executive to our Executive Committee.– Announced we would be doubling our annual

graduate intake.

4. Partners

As a global company, the environment in which we operate is becoming more complex. In order to secure access to new resources, while managing the unique risk profiles of our businesses across the globe, we must partner with a range of external stakeholders. These include our customers, suppliers, investors, governments and local communities (see“Delivering value for all of our stakeholders” on page 11).

Partnerships are relevant at all stages of thevalue chain and mining life cycle – fromexploration, through to operations, marketing andmine closure. Successful partnerships enable usto secure and maintain our licence to operate andare a key long-term success factor for ourindustry.

In 2016, we:– Extended our Channar Mining joint venture in

Australia’s Pilbara region and agreed tosupply up to 70 million tonnes of iron ore toSinosteel Corporation over the next five years.

– Marked 50 years since our first contractediron ore shipment left the Pilbara, destined fora customer in Japan.

– Appointed a Corporate Relations Groupexecutive to our Executive Committee,strengthening our focus on external & internalstakeholder engagement.

Capital allocation discipline

We adopt a consistent and disciplined approachto capital allocation. Our first allocation is tosustaining capital. Secondly we fund dividends forour shareholders. Finally, we assess the best useof the remaining capital between compellinggrowth, debt reduction and further cash returnsto shareholders. At each stage, we applystringent governance and assessment criteria toensure that every dollar is spent in the right way.

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Business model

How we create value

Rio Tinto owns a global and diversifiedportfolio of world-class assets: the result ofinvestment decisions made in line with ourlongstanding strategy (see page 8).

We create value through the way we find,develop and operate these assets, how wemarket the minerals and metals theyproduce, and the legacy we leave at the endof their lives.

To optimise the value of our portfolio overtime, we pursue opportunities for productivityimprovements, cost reductions and focusedgrowth. We are committed to running andgrowing our business in ways that areincreasingly safer, smarter andmore sustainable.

Our competitive advantages stem from ourportfolio of world-class assets, our strongbalance sheet, and the operating and

commercial excellence achieved by ourexcellent teams.

Coupled with our framework for managingrisk effectively, these provide strength acrossthe cycle, and through the challenges that theexternal environment presents.

Our approach is described in our business lifecycle below, along with examples showingsome of the ways we differentiate ourselves.

Explore and evaluate Develop Mine and process

Our in-house exploration team has amulti-decade track record of discovery oforebodies in both greenfield and brownfieldsettings. To maintain our focus on targetsthat are important to Rio Tinto, we run mostexploration programmes ourselves, but wewill partner with others if it gives us access toskills or opportunities that we do notpossess in-house.

Our exploration teams are often the firstcontact with communities we may workalongside for decades, so we explorerespectfully and make sure we engage withthem from an early stage.

Using our orebody knowledge, we develop ourresources and position our products in themarketplace in ways that add value andsupport the Group’s investmentdecision-making. Our geological expertisegives us the confidence to keep looking forthe most elusive discoveries.

We have a strong tradition of developinginnovative technologies to resolve specificexploration challenges. We apply thesetechnologies, together with our tried andtested exploration techniques, to drive futurediscovery success.

Our approach is to develop orebodies so thatthey deliver value over the long term. Weapply rigorous assessment and reviewprocesses that aim to ensure we only approveinvestments that offer attractive returns wellabove our cost of capital. We assess thespectrum of risk and how we will manage it(see page 14).

Once we have confirmed the value of aresource and received internal and externalapprovals to develop it, the project movesinto the implementation phase. The productgroups work in partnership with Rio TintoProjects – part of the Growth & Innovationgroup (see page 40).

As we develop an operation, we plan the mostefficient configuration for mining the orebodyand getting the products to market. We workclosely with our customers to create demandthat maximises the value of the deposit overits lifetime. We also work in partnership withhost governments and communities,identifying ways in which we can delivermutual benefits from the development ofour operations.

We create value by operating our assetssafely and efficiently, and by building on ourleadership position in low-cost operations.With a global operating model, we can applystandard processes and systems across theGroup in areas such as health, safety,environment and communities, procurement,operations and maintenance. This extendsthe life of our equipment and optimises theextraction of ore, meaning higher production,lower costs and maximised value. Ouroperations bring benefit to local economies byproviding employment opportunities,procurement, and the transparent payment oftax and royalties.

Our commitment to technology andinnovation also sets Rio Tinto apart. It enablesus to take advantage of opportunities thatmay not be available to others, improves ourproductivity and helps us tailor our productsto customer needs. We can use our networkof partnerships with academia, technologysuppliers and other experts to tap intoknowledge and technical prowess thataugment our own capabilities.

Differentiation in action Differentiation in action Differentiation in action

Our Resistate Indicator Minerals technologyhelps us prioritise porphyry copperexploration and related commercialopportunities. At our facility in Bundoora,Australia, we have the capacity to generatehigh quality trace element analyses ofmineral grains, using high levels ofautomation. There is no equivalentcommercial facility able to generate thesetypes of data at this quality and at the rate orcost we can.

World-class capability in underground miningis critical for our successful, safe andproductive growth. The combination of ourcopper and diamonds businesses in 2016 isgiving us the opportunity to transfer bestpractices in underground mining and blockcaving. Growth & Innovation’s newunderground centre of excellence will supportour future mine developments, including theOyu Tolgoi underground project in Mongolia.

It has been 50 years since our first export ofiron ore from our Pilbara operations inWestern Australia. Our integrated network ofmines, rail, ports and related infrastructure isfully owned or managed by Rio Tinto for ourexclusive use, providing unique optionality,and we are supported by strong joint venturepartners. We are optimising our entire Pilbarasystem to deliver the best value, throughfocusing on revenue, operating cost andcapital expenditure.


Market and deliver Close down and rehabilitateDelivering value for all ofour stakeholders

To be successful, we must continue to buildstrong partnerships at all stages of ourbusiness model. Through our global footprintand diverse portfolio, we are able to createvalue for our stakeholders in a varietyof ways.

Customers

We supply our customers with the rightproducts at the right time, so they can addvalue by turning them into the end productsthat society needs to sustain and enhancemodern life.

Shareholders

Our primary objective is on deliveringsuperior shareholder returns through thecycle. We do this by balancing disciplinedinvestment with prudent management of ourbalance sheet and shareholder returns – asshown in our approach to capital allocation(see page 8).

Communities

Our operations create jobs for localcommunities and can open up new marketsfor local suppliers. Communities often benefitfrom the infrastructure we put in place andonce our operations are closed, we restorethe sites – for instance for community use,new industry, or back to native vegetation.

Our people

We invest in our people throughout theircareers, offering diverse employmentprospects, opportunities for development,and competitive rewards and benefits thathave a clear link to performance.

Governments

We are often a major economic and socialcontributor to the local, state and nationaljurisdictions in which we operate. Our tax andsovereign equity contributions enablegovernments to develop and maintain publicworks, services and institutions. We helpcreate growth that endures far beyond theactive life of our operations.

Suppliers

By seeking the right balance of global,national and local supply capability, andsupporting local supplier developmentwherever possible, we drive value for ourshareholders and deliver economic benefitsfor the communities in which we operate.

Our business is based on the supply ofhigh-quality products that have beendeveloped to meet our customers’ needs. Theminerals and metals we supply – mostly toindustrial companies that process themfurther – are the building blocks ofvalue-added goods. Our diverse portfolioallows us to respond to demand throughoutcountries’ economic development cycles,including in infrastructure, transport,machinery, energy and consumer goods.

Rio Tinto’s marketing teams work with ouroperations to align our resource managementwith market needs and to make sure weimprove our products and services in a waythat maximises value to customers. We arestrengthening our commercial capabilities,including through creating a commercialcentre of excellence in Singapore, supportedby strong sales presence in each of themarkets we serve.

What we learn from our markets andcustomers helps us to refine our investmentdecisions. In many cases we deliver productsourselves, with logistics capabilities thatinclude our own networks of rail, portsand ships.

Closure planning is part of every asset’s lifecycle. We start planning for closure from theearliest stages of development to helpoptimise outcomes and minimise risk.

We aim progressively to rehabilitate where wecan, before closure. When a resource reachesthe end of its life, we seek to minimise itsfinancial, social and environmental impact byfinding sustainable and beneficial futureland uses.

We identify post-closure options that take intoaccount stakeholders’ concerns whilst fulfillingregulatory requirements.

Differentiation in action Differentiation in action

With the launch of our RenewAl™ brand,Rio Tinto became the first producer to marketcertified low carbon footprint aluminium. Ouradvanced AP Technology™ for aluminiumsmelting, and our largely carbon-free energyprofile afforded by our hydropower portfolio, lieat the heart of RenewAl™. Production ofRenewAl™ has a carbon dioxide footprint threetimes lower than the industry average.

Open-cut mining was completed at EnergyResources of Australia in 2012, but closureplanning began soon after the Ranger minestarted producing uranium in 1981. In 2016,Pit 1 – which has been backfilled with tailings– was capped with laterite, a type of claymaterial. A custom-built, 27-metre dredgealso completed commissioning and is nowtransferring tailings to Pit 3.


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Key performance indicators

Our key performance indicators(KPIs) enable us to measure ourfinancial and sustainabledevelopment performance. Theirrelevance to our strategy and ourperformance against thesemeasures in 2016 are explainedon these pages.

Some KPIs are used as a measurein the long-term incentivearrangements for theremuneration of executives.These are identified withthis symbol:

See the Remuneration Report67

All injury frequency rate

(AIFR)

Total shareholder return

(TSR) (a)

Net cash generated from

operating activities (b)

Per 200,000 hours worked % US$ millions

Relevance to strategy Relevance to strategy Relevance to strategy

Safety is our number one priorityand is core to everything we do.Our goal is zero harm, including,above all, the elimination ofworkplace fatalities. We arecommitted to reinforcing ourstrong safety culture and a keypart of this is improving safetyleadership.

The aim of our strategy is tomaximise shareholder returnsthrough the cycle. This KPImeasures performance in termsof shareholder value. We alsomeasure relative TSRperformance against theEuromoney Global Mining Index ofpeers and the MSCI World Indexof large global companies.

Net cash generated fromoperating activities is a measuredemonstrating conversion ofunderlying earnings to cash. Itprovides additional insight to howwe are managing costs andincreasing efficiency andproductivity across the business.

Performance Performance Performance

KPI trend data

The Group’s performance againsteach KPI, and explanations of theactions taken by management tomaintain and improveperformance against them, arecovered in more detail in latersections of this Annual report.Explanations of the actions takenby management to maintain andimprove performance againsteach KPI support the data.

20162015201420132012

0.44

0.59

0.67

0.65

0.44

20162015201420132012

(0.8 )

18.8

(15.6)

(32.6)

41.3

20162015201420132012

14,286

15,078

8,465

9,430

9,383

Notes:(a) The data presented in this table

accounts for the dual corporatestructure of Rio Tinto. In 2016, theapproach used to weight the twoRio Tinto listings, and produce a GroupTSR figure, was adjusted. This approachis consistent with the methodology usedfor the Performance Share Plan (PSP).The figures in this table are in somecases slightly different to equivalenttables presented in prior years’ reports.

(b) The accounting information in thesecharts is extracted from the financialstatements.

(c) Underlying earnings is a key financialperformance indicator whichmanagement uses internally to assessperformance. It is presented here as ameasure of earnings to provide greaterunderstanding of the underlyingbusiness performance of the Group’soperations. Items excluded from netearnings to arrive at underlying earningsare explained in note 2 to the 2016financial statements. Both net earningsand underlying earnings deal withamounts attributable to the owners ofRio Tinto. However, IFRS requires thatthe profit for the year reported in theincome statement should also includeearnings attributable to non-controllinginterests in subsidiaries.

Our AIFR has improved by 34 percent over the last five years. At0.44, our AIFR remained the samein 2016 as in 2015. However, wedid not meet our goal of zerofatalities and one of ourcolleagues died while working atRio Tinto managed operationsin 2016.

Rio Tinto’s TSR performance from2012 to 2016 was impacted byweakness in commodity prices.Rio Tinto plc and Rio Tinto Limitedshare prices recovered during2016, supported by animprovement in the global macroenvironment and risingcommodity prices, particularly inthe second half of the year. TheGroup recorded a TSR of41.3 per cent in 2016 andoutperformed the EuromoneyGlobal Mining Index of peers overthe four-year period by17 percentage points butsignificantly underperformed theMSCI World Index over thesame timeframe.

Net cash from operating activitiesof US$8.5 billion was ten per centlower year-on-year. 2015benefited from a significantworking capital reduction while2016 saw a rebound inreceivables driven by higherprices at the end of the year. Inaddition, there was an increase ininterest paid of US$0.5 billion toUS$1.3 billion in 2016, mainlyrelated to early redemption costsassociated with the bondpurchase programmes.

Definition Definition Definition

AIFR is calculated based on thenumber of injuries per200,000 hours worked. Thisincludes medical treatment cases,restricted work-day and lost-dayinjuries for employeesand contractors.

TSR combines share priceappreciation and dividends paid toshow the total return tothe shareholder.

Net cash generated fromoperating activities represents thecash generated by the Group’sconsolidated operations, afterpayment of interest, taxes, anddividends to non-controllinginterests in subsidiaries.

More information More information More information

26 to 27 95 112


Underlying earnings (b)(c) Net debt Capital expenditure (b) Greenhouse gas (GHG)

emissions intensity

US$ millions US$ millions US$ millions Indexed relative to 2008 (2008being equivalent to 100)

Relevance to strategy Relevance to strategy Relevance to strategy Relevance to strategy

Underlying earnings givesinsight to cost management,production growth andperformance efficiency on a like-for-like basis. We are focused onreducing operating costs,increasing productivity andgenerating maximum revenuefrom each of our assets.

Net debt is a measure of how weare managing our balance sheetand capital structure. A strongbalance sheet is essential toremaining robust through thecycle and creating the ability todeliver appropriate shareholderreturns.

We are committed to adisciplined and rigorousinvestment process – investingcapital only in assets that, afterprudent assessment, offerattractive returns that are wellabove our cost of capital.

We are committed to reducingthe energy intensity of ouroperations and the carbonintensity of our energy, includingthrough the development andimplementation of innovativetechnologies. Our GHGperformance is an importantindicator of this commitmentand our ability to manageexposure to future climate policyand legislative costs.

Performance Performance Performance Performance

20162015201420132012

10,217

9,269

9,305

4,540

5,100

20162015201420132012

12,495

18,055

9,587

19,192

13,783

20162015201420132012

8,162

13,001

3,012

17,615

4,685

20162015201420132012

79.7*

81.7

94.1

83.2 74.1

Underlying earnings ofUS$5.1 billion wereUS$0.6 billion higher than 2015,with the impact of lower prices(US$0.5 billion post-tax) morethan offset by cashcost improvements.

Net debt decreased fromUS$13.8 billion to US$9.6 billion,principally as net cash generatedfrom operating activitiesexceeded capital expenditureand cash returnsto shareholders.

Total capital expenditure ofUS$3.0 billion in 2016 includedUS$1.7 billion of sustainingcapital expenditure.Development capitalexpenditure focused on threegrowth projects, the Silvergrassiron ore development, OyuTolgoi underground copperproject and the Amrunbauxite project.

There was a seven per centreduction in GHG emissionsintensity in 2016 versus 2015.This is largely a result of fullproduction at our modernisedKitimat smelter, and efficiencygains at Rio Tinto Kennecott andthe Oyu Tolgoi copper-goldmine. We are on track to meetour target of a 24 per centreduction in total GHG emissionsintensity between 2008and 2020.

* Number restated from 78.9 following theapplication from 1 January 2015 of updatedglobal warming potentials from the IPCC’sfourth assessment report

Definition Definition Definition Definition

Items excluded from netearnings to arrive at underlyingearnings are explained in note 2“Operating segments” to the2016 financial statements.

Net debt is calculated as: the netborrowings after adjusting forcash and cash equivalents, otherliquid investment and derivativesrelated to net debt. This isfurther explained in note 24“Consolidated net debt” to the2016 financial statements.

Capital expenditure comprisesthe cash outflow on purchases ofproperty, plant and equipment,and intangible assets.

Our GHG emissions intensitymeasure is the change in totalGHG emissions per unit ofcommodity production relativeto a base year. Total GHGemissions are direct emissions,plus emissions from imports ofelectricity and steam, minuselectricity and steam exportsand net carbon creditspurchased from, or sold to,recognised sources.

More information More information More information More information

129 145 128 28


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Risk management

Rio Tinto is exposed to a variety of risks thatcan have financial, operational and complianceimpacts on our business performance,reputation and licence to operate. The boardrecognises that creating shareholder value isthe reward for taking and accepting risk. Theeffective management of risk is thereforecritical to supporting the delivery of theGroup’s strategic objectives.

Risk management framework

Rio Tinto’s risk management frameworkreflects our belief that managing riskeffectively is an integral part of how the Groupcreates value, and fundamental to the Group’sbusiness success. The responsibility foridentifying and managing risks lies with all ofRio Tinto’s employees and business leaders.They operate within the Group-wide frameworkto manage risks within approved limits.

The framework includes clearly definedoversight responsibilities for the board and theExecutive Committee, who are supported bythe Risk Management Committee and centralsupport functions including Group Risk andGroup Internal Audit, to enable effective riskidentification, evaluation and managementacross Rio Tinto.

This approach reflects a “three lines ofdefence” model for the management of risksand controls:

– First line of defence: ownership of risk byemployees and business leaders.

– Second line of defence: control of riskframework by central support functions andthe Risk Management Committee.

– Third line of defence: assurance of systemsof internal control by Group Internal Audit.

The key risk management responsibilitiesthroughout the Group are outlined below.

Approach

The Group’s approach to risk management,underpinned by the Risk policy and standards,is aimed at embedding a risk-aware culture inall decision-making, and a commitment tomanaging risk in a proactive and effectivemanner. This includes the early identificationand evaluation of risks, the management andmitigation of risks before they materialise, anddealing with them effectively in the event theydo materialise. Accountability for riskmanagement is clear throughout the Groupand is a key performance area ofline managers.

To support risk understanding andmanagement at all levels, the Group Riskfunction provides the necessary infrastructureto support the management and reporting ofmaterial risks within the Group, and escalateskey issues through the management team andultimately to the board where appropriate.Group Risk also supports the Risk ManagementCommittee in its review of risk.

The process for identifying, evaluating andmanaging material business risks is designedto manage, rather than eliminate, risk andwhere appropriate accept risk to generatereturns. Certain risks, for example naturaldisasters, cannot be managed using internalcontrols. Such major risks are transferred tothird parties in the international insurancemarkets, to the extent considered appropriateor possible.

The Group has material investments in anumber of jointly controlled entities. WhereRio Tinto does not have managerial control, it isnot always able to ensure that managementwill comply with Rio Tinto policiesand standards.

Risk management framework

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Board – Determine the nature and extent of risk that is acceptable in pursuit of strategic objectives– Confirm that management’s risk limits reflect the level of risk the board is willing to accept in

pursuit of strategic objectives– Provide oversight across the risk management process

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Board committees – The Audit Committee monitors and reviews at least annually the maturity and effectiveness ofmanagement processes and controls designed to identify, assess, monitor and manage risk

– The Audit and Sustainability Committees review periodic reports from management: identifyingthe Group’s material business risks within the committees’ scope; and the risk managementstrategies and controls applied

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Executive Committee – Set risk strategy and assess risks inherent in key investments and in strategic, business orannual plans

Risk Management

Committee

– Oversee the risk management framework to facilitate the identification of significant risks toGroup-level objectives and ensure effective risk management processes are in place

Group Risk – Provide co-ordination and support of Group-level risk management activity and reporting– Embed risk management into core business processes, such as planning and capital allocation– Build risk management capability and a risk culture throughout the Group

Other central

support functions

and management

committees

– Provide targeted expertise and support to risk owners– Develop and maintain specific controls, including policies, standards and procedures, to support

the effective management of material Group-level risk within the agreed limits– Assure first line of defence compliance with controls

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– Monitor material risks and track activities to manage risk within their business activities, andescalate where appropriate

– Consider risk and uncertainty in strategic and business planning and capitalallocation proposals

Product groups and

business units

– Identify, assess and manage risks in operations, functions and projects, utilising risk registersand our Group-wide risk data system: RioRisk

Risk managers and

Risk Forum

– Provide technical expertise and risk management for line leaders and the product groupexecutive management teams

– The Risk Forum (risk managers across the Group) supports alignment, consistency andcontinuous improvement of risk management



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Principal risks and uncertainties

The principal risks and uncertainties outlined inthis section reflect the inherent risks that couldmaterially affect Rio Tinto or its ability to meetits strategic objectives, either directly or bytriggering a succession of events that inaggregate become material to the Group.

Effects on the Group in the following respectsmay be positive or negative:

Business modelThe basis on which the Group generates orpreserves value over the longer term, given itsmarket positioning as a global diversifiedmining and processing business.

Future performanceThe Group’s ability to deliver its financial planin the short to medium term.

SolvencyThe Group’s ability to maintain an appropriatecapital structure to meet its financial liabilitiesin full.

LiquidityThe Group’s ability to meet its financialliabilities as they fall due.

Health, safety, environment and communities(HSEC)The Group’s ability to send our employees andcontractors home safe and healthy every dayand to work with our communities and partnersto achieve our sustainable development goals.

Group reputationThe Group’s ability to maintain investorconfidence and licence to operate.

Rio Tinto’s business units and functions assessthe potential economic and non-economicconsequences of their respective risks usingthe framework defined by the Group’s Riskstandard. Once identified, each principal risk oruncertainty is reviewed and monitored by the

relevant internal experts and by the RiskManagement Committee, the relevant boardcommittees and the board.

There may be additional risks unknown toRio Tinto and other risks currently not believedto be material which could turn out to bematerial. A number of them, particulary thosewith longer-term potential impacts, are,referred to in the sustainable developmentsection of this Annual report on pages 24 to 30.

2016 movements

As illustrated in the summary table below, theGroup’s exposure to a number of principal risksand uncertainties has changed through 2016.Market uncertainties were greater thanplanned, with greater upside movement incommodity prices and demand than forecast.With greater than planned cash flow, ourbalance sheet strengthened, decreasing ourliquidity risk. Geopolitical uncertaintyincreased, as did the threat of greaterrent-seeking and resource nationalism.Uncertainty regarding the performance andoutlook of our joint venture operations alsoincreased. Further detail on movements andmonitoring of these exposures is provided inthe relevant section of the Strategic report,including the Market environment, Groupstrategy, product group overviews, theDirectors’ report and the Notes to the 2016financial statements.

Assessment

The board confirms that, with the assistance ofmanagement, it has carried out a robustassessment of the principal risks of the Groupas detailed below and has also tested thefinancial plans of the Group for each of theseprincipal risks, and for a series of severe butplausible scenarios, made up of theconcurrence or close sequence of a number ofprincipal and material risks.

The Group will continue to monitor thepotential impacts of the UK’s departure fromthe European Union as a result of thereferendum that took place in June 2016, butno material impacts are expected at this time.

Longer-term viability statement

Current business planning processes withinRio Tinto require the preparation of detailedfinancial plans over a three-year time horizon.The Group’s strategy is developed, and capitalinvestment decisions are made, based on anassessment of cash flows over a multi-decadehorizon, with financial investment capacityregularly tested to ensure capitalcommitments can be funded in line with theGroup’s capital allocation model. Thismulti-year planning approach reflects ourbusiness model of investing in, and operating,long-life mining assets, whose outputs we sellinto commodity markets over which we havelimited influence.

The planning process requires modelling undera series of macroeconomic scenarios andassumptions of both internal and externalparameters. Key assumptions include:projections of economic growth, and thuscommodity demand in major markets, primarilyChina; commodity prices and exchange rates,often correlated; cost and supply parametersfor major inputs such as labour and fuel; and aseries of assumptions around the schedule andcost of implementation of organic and inorganicgrowth programmes.

Reflecting the speed and degree of changepossible in a number of these parameters, suchas Chinese demand, commodity prices, andexchange rates, Rio Tinto has deemed athree-year period of assessment appropriate forthe longer-term viability statement, consistentwith the Group’s detailed planning horizon.

Robust stress-testing has been undertaken, aspart of the business planning process, tofurther test and confirm the longer-termviability of the Group, beyond commodity priceand exchange rate movements. Production andsocial licence to operate related assumptionswere also stressed, individually andcollectively, to levels considered severe butplausible and well beyond those expected inthe normal course of business.

The viability of the Group under thesescenarios remained sound with the use of asuite of management actions available toredress the situation, including accessing linesof credit, changing capital allocation levers,and, if necessary, selling (down) assets.

Therefore, taking into account the Group’scurrent position and principal risks, thedirectors have assessed the prospects of theGroup, over the next three years, and have areasonable expectation that the Group will beable to continue to operate and meet itsliabilities as they fall due over that period.

It is impossible to foresee all risks, and thecombinations in which they could manifest, andthere may be risks that currently or individuallydo not appear material that could turn out to bematerial, particularly if occurring inclose sequence.

Principal risks and uncertainties exposure at a glance – 2016 trend

External Internal Internal and external

Increasingrisk oruncertainty

Commodity prices

China developmentpathway

Strategic partnerships

Sovereign risk

Regulation and regulatoryintervention

No changein risk oruncertainty

Attracting andretaining talent

Execution of acquisitionsand divestments

Capital projectdevelopment

HSEC

Exploration and resources

Operational excellence

Decreasingrisk oruncertainty

Liquidity

Principal risks and uncertainties

The principal risks and uncertainties in this section have beencategorised into Financial risks (Market, Financial and Strategic);Operational risks (HSEC, Resources, Operations, Projects and People);and Compliance risks (Stakeholder, Governance).

The principal risks and uncertainties should be considered in connectionwith any forward-looking statements in this Annual report and thecautionary statement on the inside front cover.

Financial risks

Inherent risk and uncertainty Risk exposure

2016 trend

Potential impact on viability,

HSEC and reputation

Potential upside impact

(opportunities)

Market risks

Rio Tinto operates in global markets and accepts the impact of exchange rate movementsand market-driven prices for our commodities, seeking premiums where possible.

Commodity prices, driven by demand andsupply for the Group’s products, varyoutside of expectations over time.Exchange rate variations and geopoliticalissues may offset or exacerbate this risk.

Anticipating and responding to marketmovements is inherently uncertain andoutcomes may vary.

Priceuncertainty hasincreased.

Prices strongerthan forecast.

– Business model

– Future performance

– Solvency

– Liquidity

– Group reputation

A rise in commodity prices, or favourableexchange rate movement, allows the Group topursue strategic capital expansions, pay downdebt and/or increase returns to shareholders.

Capturing above-planned returns fromcommercial excellence activities would deliveradditional cash flow to the Group.

China’s development pathway could impactdemand for the Group’s products outside ofexpectations. Demand stronger

than forecast.

– Business model


Strong growth, positive policy decisions andreforms drive demand for commodities,resulting in rising prices which enable capitalexpansion and increased shareholder returns inthe short to medium term.

Financial risks

Rio Tinto maintains a strong balance sheet and liquidity position to preserve financialflexibility through the cycle.

External events and internal discipline mayimpact Group liquidity.

Balance sheetstrengthened bystronger thanforecast cashflows driven byhighercommodityprices.


– Solvency

– Liquidity

– Group reputation

Favourable market conditions and stronginternal discipline could increase Groupliquidity and/or balance sheet strength andallow it to pursue investment opportunities andenhance returns to shareholders.


Potential downside impact

(threats)

Mitigating actions include:

Falling commodity prices, or adverse exchange rate movements,reduce cash flow, limiting profitability and dividend payments.These may trigger impairments and/or impact rating agencymetrics. Extended subdued prices may reflect a longer-term fall indemand for the Group’s products, and consequent reducedrevenue streams may limit investment opportunities.

Failure to deliver planned returns from commercial excellenceactivities would negatively impact cash flows for the Group.

An economic slowdown in China, and/or a material change in policy,results in a slowdown in demand and reduced investmentopportunities.

– Pursue low cost production, allowing profitable supply throughout thecommodity price cycle.

– Maintain a diverse portfolio of commodities across a number of geographies.– Maintain global portfolio of customers and contracts.– Maintain a strong balance sheet.– Monitor multiple leading indicators and undertake detailed industry analysis to

develop more accurate assumptions in our commodity price and exchange rateforecasting used for capital allocation and planning process, and CommercialExcellence activities.

– Comply with the Group’s Treasury policy and standard, which outlines thefundamental principles that govern the Group’s financial riskmanagement practices.

– Closely coordinate market-facing commercial excellence resources in the Group.– Apply strong governance reflecting relevant regulatory frameworks and

jurisdictions.

The Group’s ability to raise sufficient funds for planned expenditure,such as capital growth and/or mergers and acquisitions, as well as theability to weather a major economic downturn could be compromised bya weak balance sheet and/or inadequate access to liquidity.

– Comply with the Group’s Treasury policy and standard, which outlines thefundamental principles that govern the Group’s financial riskmanagement practices.

– Maintain a net gearing ratio of 20 to 30 per cent and other financial metricscommensurate with a strong investment-grade credit rating.

– Manage the liquidity and financing structure of the Group using forecasts andsensitivity analysis tools to actively monitor, determine and enable access to theappropriate level, sources and types of financing required.

– Subject funds invested by the Group to credit limits and maturity profiles basedon board-approved frameworks, to promote diversification and maintainappropriate liquidity.

– Embed Finance teams within the business support management and developaccurate financial reporting and tracking of our business performance.

– Report financial performance monthly to senior management and the board.– Seek board approval of the financial strategy, long-term planning and cash

flow forecasting.– Apply a dividend policy which allows shareholder returns to adjust with the cycle.


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Principal risks and uncertaintiescontinued

Financial risks continued


2016 trend


HSEC and reputation


(opportunities)

Strategic risks

Rio Tinto enforces disciplined capital allocation to the best returning opportunities(organic and inorganic growth projects or returns to shareholders).

Rio Tinto’s ability to secure planned valueby successfully executing divestments andacquisitions may vary.

– Business model– Future performance– Solvency– Liquidity– Group reputation

Proceeds realised from divested assets aregreater than planned, allowing more capital tobe redeployed into higher returning or moreproductive uses. The Group is successful inacquiring businesses that provide cash flowand/or future growth optionality, above thatanticipated at the time of acquisition.

The Group’s ability to develop new projectssuccessfully may vary.

– Future performance– HSEC– Group reputation– Solvency

An ability to develop projects on time andwithin budget enhances licence to operate andinvestor confidence.

Operational risks


2016 trend


HSEC and reputation


(opportunities)

HSEC risks

Rio Tinto’s operations are inherently dangerous. We lead responsibly to preserve our social licenceto operate and ensure our employees and contractors go home safe and healthy.

Our operations and projects are inherentlyhazardous with the potential to causeillness or injury, damage to theenvironment, disruption to a community ora threat to personal security.

– Future performance– HSEC– Group reputation

Delivering leading health, safety, environmentand communities performance is essential toour business success. Meeting or exceedingour commitments in these areas contributes tosustainable development and underpins ourcontinued access to resources, capital and adiverse workforce to sustain the organisation.

Good performance in legacy management (ofclosed sites) and closure can enhance ourreputation and enable us to maintain access toland, resources, people and capital, so we cancontinue to establish new projects with thesupport of local communities.

Resources risks

Rio Tinto invests materially to accurately identify new deposits and develop orebody knowledge,underpinning our operations and projects.

The success of the Group’s explorationactivity may vary. In addition, estimates ofore reserves are based on uncertainassumptions that, if changed, could resultin the need to restate ore reserves andmine plans.

– Business model– Future performance– Group reputation

The discovery of a new viable orebody cansignificantly improve future growth options.

The volume of ore is based on the availablegeological, commercial and technicalinformation which is by its nature, incomplete.As new information comes to light theeconomic viability of some ore reserves andmine plans can be restated upwards. As aresult, projects may be more successful and oflonger duration than initially anticipated.



(threats)


Divestment and acquisition activity incurs transaction costs thatcannot be recouped, or may result in value destruction by realisingless than planned value for divestments or paying more than fairvalue for acquisitions. This could result in unforeseen pressure on theGroup’s cash position or reduce the Group’s ability to expandoperations. The Group may also be liable for the past acts, omissionsor liabilities of assets it has acquired that were unforeseen or greaterthan anticipated at the time of acquisition. The Group may also faceliabilities for divested entities if the buyer fails to honourcommitments or the Group agrees to retain certain liabilities.

A delay or overrun in the project schedule could negatively impact theGroup’s profitability, cash flows, ability to repay project-specificindebtedness, asset carrying values, growth aspirations andrelationships with key stakeholders.

– Complete detailed, independent due diligence on all material potentialdivestments and acquisitions, including technical review, commercial review andfunctional sign-offs, before consideration by the Investment Committee andboard where appropriate.

– Resource Business Development team appropriately, supported by externalspecialists as required.

– Involve business unit leaders early in process to recognise integration planningand synergies, or separation threats and opportunities.

– Undertake post-investment reviews on divestments and acquisitions, to identifykey learnings to embed into future initiatives.

– Consistently approach development of large-scale capital projects, through aspecialised projects division.

– Follow rigorous project approval and stage-gating process, including monitoringand status evaluation, as articulated in Project evaluation standardand guidance.

– Ensure effective stakeholder management in project development.


(threats)


Failure to manage our health, safety, environment or community risks,could result in a catastrophic event or other long-term damage whichcould in turn harm the Group’s financial performance and licenceto operate.

Recognised hazards and threats include, among others, undergroundoperations, aviation, pit slope instability, tailings facilities, vector-borneand pandemic disease, chemicals, gases, vehicles and machinery,extreme natural environments, endangered flora or fauna, areas ofcultural heritage significance, water supply stress and climate change.

– Continue focus on HSEC as a core priority at all operations, and projects, overseenby the Sustainability Committee.

– Clearly define and ensure compliance with Group HSEC strategy, policy andperformance standards.

– Regularly review and audit HSEC processes, training and controls to promote andimprove effectiveness, at managed and non-managed operations.

– Monitor HSEC performance measurement metrics at the Group level monthly.– Report, investigate and share learnings from HSEC incidents.– Build safety targets into personal performance metrics to incentivise safe

behaviour and effective risk management (see RemunerationImplementation Report).

– Develop mutually beneficial partnerships with local communities and establishappropriate social performance targets.

– Report annually on performance on greenhouse gas emissions, water, land useand rehabilitation, among others.

– Focus on fatality elimination through implementation of a programme to verifysafety risk controls.

A failure to discover new viable orebodies could undermine futuregrowth prospects.

The risk that new information comes to light or operating conditionschange means that the economic viability of some ore reserves andmine plans can be restated downwards. As a result, projects may beless successful and of shorter duration than initially anticipated, and/orthe asset value may be impaired.

– Comply with the Group’s resources and reserves standard.– Recruit and retain skilled and experienced exploration and evaluation personnel.– Provide stable funding for exploration activities.– Prioritise the exploration portfolio continuously.– Utilise new technologies where appropriate.– Develop and leverage and manage third-party partnerships.– Coordinate orebody knowledge through active Group-wide leadership forum.


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Principal risks and uncertaintiescontinued

Operational risks continued

Inherent risk and uncertainty Risk exposure2016 trend

Potential impact on viability,HSEC and reputation

Potential upside impact(opportunities)

Operations, projects and people risksRio Tinto seeks to achieve operational and commercial excellence, and to attract and retainthe best people in the industry.

Operational excellence is derivedfrom high operational and humanproductivity. Productivity which is driven byoptimisation of the balance of people,process and systems may vary.

– Future performance– Liquidity– HSEC– Group reputation

Improved productivity and innovation from newsystems can decrease costs and increaseoutput, delivering additional cash flow.

Development and retention of talent enhancesproductivity, financial and HSEC outcomes.

Attracting and retaining talent as thecompany and industry evolves presents aconstant challenge.


Leveraging the evolving company and marketto attract a diverse and engaged workforce willdeliver a competitive advantage to the Group.

Compliance risks

Inherent risk and uncertainty Risk exposure2016 trend

Potential impact on viability,HSEC and reputation

Potential upside impact(opportunities)

Stakeholder risksRio Tinto recognises positive engagement with a range of stakeholders, and seeks to develop collaborativeand mutually beneficial partnerships that underpin our social licence to operate.

Strategic partnerships and third partiesinfluence the Group’s supply, operationsand reputation. The Group’s ability tocontrol the actions of these parties varies.

– Business model– Future performance– HSEC– Group reputation

Joint venture and third parties offeropportunities to increase shareholderreturns, reduce political risk and reduceoperational risks.

The Group’s operations are located across anumber of jurisdictions, which exposes theGroup to a wide range of economic, political,societal and regulatory environments.


Proactive engagement with governments,communities and other stakeholders canincrease access to new resources, supportstable and predictable investment frameworksand operational environments, and shapemutually beneficial policies and legal/regulatory frameworks.

Governance risksRio Tinto employees operate in compliance with The way we work – our global code of business conduct,the Group delegation of authorities and all Group policies, standards and procedures.

The Group’s reputation and regulatorylicences are dependent upon appropriatebusiness conduct and are threatened by apublic allegation or regulatory investigation.


Good corporate citizens are acknowledged tooperate to a high ethical standard, thusattracting talent.

Securing access to resources andinvestment opportunities.


Potential downside impact(threats)


Business interruption may arise from a number ofcircumstances, including:– Operational difficulties such as extended industrial dispute,

delayed development, bottlenecks or interruptions toinfrastructure for power, water and transportation, throughoutthe value chain.

– Operational failure such as a process safety incident, major pitslope, dump or tailings/water impoundment failure,underground incident.

– Cyber breach/incident of commercial and operational systems.– Natural disasters such as earthquakes, subsidence, drought,

flood, fire, storm and climate change can impact mines,smelters, refineries and infrastructure installations.

Any of these events could result in a significant HSEC incident, aninterruption to operations, or the inability to deliver products and acommercial loss.

– Preserve geographically diverse portfolio limiting physical events/disruptions to a specific business, single infrastructure or logistical event.

– Comply with slope geotechnical, tailings management, underground miningand process safety technical and safety standards, supported by subjectmatter experts and audit protocols, reducing the risk (likelihood andconsequence) of operational failure.

– Comply with the Acceptable use of information and electronic resourcesstandard, supported by periodic reviews of IT infrastructure and securitycontrols by dedicated (in-house) cyber-security team.

– Operate under strong human resources and employee relations framework.– Undertake business resilience planning and preparedness exercises for

execution of plans, across all operations.For certain risks involving higher-value losses the Group purchases insurance. Risksnot transferred to the external insurance market are retained within the business.

The inability to attract or retain key talent will constrain the Group’sability to reach its goals within planned timeframes.

– Improve HR processes in recruitment, development and leadership training.– Introduce employee engagement programme and metrics, to

enhance engagement.– Enhance focus on inclusion and diversity, at all levels of the Group.– Refresh Group purpose and values statements.

Potential downside impact(threats)


Joint venture partners may hinder growth by not agreeing to supportinvestment decisions. For non-managed operations, controllingpartners may take action contrary to the Group’s interests orstandards and policies, resulting in adverse impact to health andsafety, performance, cyber integrity, reputation or legal liability.

– Approach investments and partnerships with a long term relationship ratherthan transactional.

– Shape governance structures to ensure appropriate influenceand engagement.

– Maintain strong focus on contractor management.– Actively participate within the governance structures of joint ventures to

promote, where possible, compliance with the Group’s policies andalignment with strategic priorities.

– Participate in strategic partnerships or financing structures to moderatepolitical risk.

– Maintain geographically diverse portoflio to reduce exposure to changes inthese environments.

– Monitor jurisdictional, including sovereign, risks and take appropriate action.– Develop long-term relationships with a range of international and

national stakeholders.– Comply with Group policies and standards which provide guidance

concerning risk management, human rights, cyber threat, data privacy,business integrity and external communications.

– Undertake rigorous third-party due diligence.

Adverse actions by governments and others can result in operational/project delays or loss of licence to operate. Other potential actions caninclude expropriation, changes in taxation, and export or foreigninvestment restrictions, which may threaten the investmentproposition, title, or carrying value of assets. Legal frameworks withrespect to policies such as energy, climate change and mineral lawmay also change in a way that increases costs.

Fines may be imposed against Group companies for breachingantitrust rules, anti-corruption legislation, sanctions or human rightsviolations or for other inappropriate business conduct.

A serious allegation or formal investigation by increasingly connectedregulatory authorities (regardless of ultimate finding) could result in aloss in share price value, and/or loss of business. Other consequencescould include the criminal prosecution of individuals, imprisonmentand/ or personal fines, and reputational damage to the Group. Theremay also be considerable cost and disruption in responding toallegations or investigations and taking remedial action.

– Identify and meet our regulatory obligations and respond toemerging requirements.

– Comply with Group policies, standards and procedures which provideguidance to our businesses and drive compliance withregulatory obligations.

– Dedicate legal and compliance teams to assist Group businesses incomplying with regulatory obligations and internal standardsand procedures.

– Maintain appropriate oversight and reporting, supported by training andawareness, to drive compliance with regulatory obligations.

– Continue to develop and deploy training across relevant sectors of theworkforce.


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Portfolio management

Rio Tinto has a programme of high-quality projects delivering industry-leading returns across a broad range of commodities. In 2016, Rio Tintoapproved two additional capital projects: the Oyu Tolgoi underground mine development in Mongolia and the Silvergrass iron ore development in thePilbara region of Western Australia. In 2016, Rio Tinto funded its capital expenditure with net cash generated from operating activities and aims tocontinue funding its capital programme from internal sources, except for the Oyu Tolgoi underground development for which there is a separateproject financing arrangement.

Major capital projects

(Rio Tinto 100% owned unless otherwise stated)

Totalapproved

capital cost(100%)

Approvedcapital

remaining tobe spent from

1 January2017 Status/milestones

In production

Investment in Nammuldi Incremental Tonnes(NIT) projects in the Pilbara, to maintain thePilbara blend.

US$0.2bn – NIT1, with five million tonnes annual capacity, commencedproduction in the fourth quarter of 2015. NIT2, which tookannual mine capacity from five to ten million tonnes, wasdelivered in October 2016.

Ongoing and approved

Copper & Diamonds

Construction of a desalination facility to ensurecontinued water supply and sustain operationsat Escondida (Rio Tinto 30%), Chile.

US$1.0bn(Rio Tinto

share)

US$0.1bn(Rio Tinto

share)

Approved in July 2013, the project is designed to provide along-term sustainable supply of water for the operations.It remains on schedule and on budget and is 99 per centcomplete, with commissioning scheduled in 2017.

Grasberg project funding to 2017. US$0.2bn(Rio Tinto

share)

US$0.1bn(Rio Tinto

share)

Investment to continue the pre-production construction of theGrasberg Block Cave, the Deep Mill Level Zone undergroundmines and the associated common infrastructure. Rio Tinto’sfinal share of capital expenditure will be influenced in part byits share of production over the period of investment.

Remediation of the east wall at Rio TintoKennecott, US.

US$0.3bn – Following the pit wall slide in 2013, mine operations havefocused on remediation from the slide and the east wall ofBingham Canyon, including significant deweighting anddewatering activities. There is a small amount of dewateringactivity scheduled to be completed in 2017.

Investment to extend mine life at Rio TintoKennecott, US beyond 2019.

US$0.7bn US$0.6bn Funding for the continuation of open pit mining via the pushback of the south wall has been approved and will largelyconsist of simple mine stripping activities.

Development of A21 pipe at the Diavik DiamondMine in Canada (Rio Tinto 60%).

US$0.2bn(Rio Tinto

share)

US$0.1bn(Rio Tinto

share)

Approved in November 2014, the development of the A21 pipeis expected to ensure the continuation of existing productionlevels. First carats are planned for mid-2018.

Development of the Oyu Tolgoi undergroundmine in Mongolia (Rio Tinto 34%) where averagecopper grades of 1.66 per cent are more thanthree times higher than the open pit.

US$5.3bn US$5.1bn Approved in May 2016, first production from the undergroundis expected in 2020. Contractor mobilisation commenced inthe third quarter of 2016. Work on the underground minedevelopment, accommodation camp, conveyor to surfacedecline, sinking of shaft #2 and shaft #5 and critical facilitiesare continuing to progress. The focus is on completing theunderground crusher and dewatering system to enableincreased lateral development rates.


Major capital projects continued

(Rio Tinto 100% owned unless otherwise stated)

Totalapproved

capital cost(100%)

Approvedcapital

remaining tobe spent from

1 January2017 Status/milestones

Ongoing and approved continued

Aluminium

Investment in the Amrun bauxite mine on theCape York Peninsula in north Queensland witha planned initial output of 22.8 million tonnesa year.

US$1.9bn US$1.7bn Approved in December 2015, output includes an expected10 million tonne increase in annual exports with productioncommencing in the first half of 2019.

Investment in the Compagnie des Bauxites deGuinée (CBG) bauxite mine to expand from14.5 to 18.5 million tonnes a year. Rio Tinto’sshare of capex is $0.3bn.

US$0.7bn(100%)

US$0.6bn(100%)

Approved in 2016. Financing completed in November 2016.First incremental shipment expected in June 2018.

Iron Ore

Development of the Silvergrass iron ore mine inthe Pilbara, to maintain the Pilbara blend.

US$0.3bn US$0.3bn The US$338m approval in August 2016 is expected to add10 million tonnes of annual capacity with commissioninganticipated for the second half of 2017.

Material acquisitions and divestments

AssetConsideration

US$m Status

Divested in 2016

Bengalla Joint Venture 599 Sold to New Hope Corporation Limited

Lochaber 410(a) Sold to SIMEC

Divested in 2014

Clermont Joint Venture 1,015(a) Sold to GS Coal Pty Ltd

Rio Tinto Coal Mozambique 50(a) Sold to International Coal Ventures Private Limited (ICVL)

SØRAL Undisclosed Sold to Norsk Hydro

Alucam Undisclosed Sold to the Government of Cameroon

(a) Before working capital and completion adjustments.

There were no material acquisitions in 2016 or 2015. There were no material divestments completed during 2015.

Further information on acquisitions and divestments is included in note 37 to the financial statements on page 165.


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Sustainable development

Producing minerals and metals is vital forsustaining and growing social wellbeing. It isessential for human progress. Our activities canaffect people, communities and theenvironment. We work in partnership withthose affected to share the wealth and benefitsour business creates and to minimisenegative impacts.

Rio Tinto’s contribution to sustainabledevelopment underpins our ongoingcommercial results. It benefits ourshareholders, partners, neighbouringcommunities, suppliers, customers, employeesand society.

We recognise that we can always improve, andwork in partnership to find smarter ways ofoperating. To achieve our goals we look beyondour business and industry, seeking innovativesolutions that we can adopt to manage ourimpacts. We participate in industryorganisations such as the International Councilon Mining & Metals (ICMM), and globalinitiatives such as the Extractive IndustriesTransparency Initiative and B20 taskforces andsummits which support the work of the G20, tohelp drive change and set sustainabilitystandards that reflect societal expectations andchallenges. We also work in partnership withnon-government organisations to help usbetter understand and meet the needsof stakeholders.

Our global code of business conduct, The waywe work, sets out the behaviour we expect ofour people, consistent with Rio Tinto’s values:safety, teamwork, respect, integrity andexcellence. Together our code of conduct andour values are the foundation of our business.

Our Sustainability Committee ensures ourapproach is consistent with Rio Tinto’s visionand values, that material risks (both local andglobal) are managed effectively, and that ouractivities contribute to sustainabledevelopment. Further information on thiscommittee can be found on page 61 of theDirectors’ report.

A summary of our 2016 performance follows.Greater detail, including disclosure ofperformance metrics and the materialityassessment, is contained in our 2016Sustainable development report, available atriotinto.com/sd2016

Materiality

Every year we rank the sustainability issuesthat matter most to our business andstakeholders. This helps focus our responseand aligns our report with the Global ReportingInitiative (GRI) G4 Guidelines.

In 2016, to compile this ranking, we combinedfeedback from our internal subject matterexperts and discipline leaders, stakeholderexpectations and analysis of the externalenvironment. The Sustainability Committeereviewed and approved the assessment.

Our materiality ranking scheme comprisesthree tiers:

– Highly material aspects that are core to oursustainability performance, to our businessand stakeholders. These aspects aredescribed in this Annual report.

– Material aspects that could have localisedor moderate impacts on our overallsustainability performance and tostakeholders. These aspects are describedin our Sustainable development report.

– Other issues considered important acrossRio Tinto and to specific stakeholders.

Performance overview

Tragically, one colleague lost his life whileworking at the Paraburdoo iron ore operation in2016. This incident reinforces the importanceof strong safety standards, procedures andleadership. Our ongoing reduction in thenumber of work-related injuries gives usconfidence that our safety processes andculture are strong. Furthermore, by continuingto implement critical risk management (CRM),eliminating fatalities is achievable.

Our performance is assessed globally byexternal agencies. In 2016, Rio Tinto has againbeen recognised by the Dow JonesSustainability Index Metals & MiningSustainability Leaders group and theFTSE4Good indices.

Materiality ranking

Important Highly material

Impo

rtan

t

Impo

rtan

ce t

o ou

r st

akeh

olde

rs

Highly material

Economic contributionsSafetyCommunitiesEmployee relationsOperational environment performanceWaterHealthClimate changeHuman rightsNon-managed operationsTailings and structuresBusiness integrityAssuranceClosure

Material

Value chainBusiness resilienceBiodiversity

Important

WasteAir

Material aspectsreported in theAnnual report

Material aspectsreported in theSustainabledevelopment report

Aspects addressedthrough othercommunications

Importance to our business

Material

Hig

hly

mat

eria

lM

ater

ial


We aim to improve our performance each year.Some highlights and examples of our progressin 2016 included:

– Rolling out the CRM programme acrossmore than 60 operational sites, resulting in1.3 million risk verifications.

– At 0.44 our all injury frequency rate (AIFR)per 200,000 hours worked was the same asin 2015, the lowest rate in our companyhistory, and we recorded 14 fewer lost timeinjuries than in 2015.

– 25.9 per cent reduction in our greenhousegas emissions intensity from 2008 – aseven per cent improvement from 2015.

– Meeting our 2016 target of graduate genderdiversity and intake of nationals fromregions where we are developingnew businesses.

– Introducing a new global Communities andSocial Performance (CSP) target to ourprocurement practices for 2016-2020, with100 per cent of businesses on track.

– Achieving an Elevate Reconciliation ActionPlan (RAP), the highest possible phase inReconciliation Australia’s RAP programme.

– Publishing the Why agreements matterbest practice guide and our Know yoursupplier procedure.

– Developing our first modern slaverystatement in compliance with the UKModern Slavery Act 2015 and our newclimate change report.

– Reviewing our water managementpractices, opportunities and obligations toensure responsible oversight ofthis resource.

– A seven per cent improvement in managedoperations on track to meet their localwater performance targets by 2018.

– Implementing a number of updatedtechnical standards and procedures,including those covering the Managementof tailings and water storage facilities,geotechnical risk and rail safety.

– Receiving endorsement from the ICMMtailings review group on Rio Tinto’s safetailings governance practices.

At 19.2 per cent, we fell just short of our targetfor 20 per cent of women in seniormanagement positions and we did not meetour targets for year-on-year reductions inreporting of new cases of occupational illness(the rate increased by 36 per cent from 2015).Actions to address these shortfalls are coveredlater in the report.

Our employee engagement score was lowerthan we would have liked but provides harddata for us to improve our leadership andprovides direction for our 2017 initiatives inthat area.

We reported one significant environmentalincident. There was an alleged breach ofWarkworth Mining Limited’s EnvironmentalProtection Licence conditions in relation to thepartial failure of a sediment dam at the MountThorley Warkworth mine. The incident did notresult in any environmental harm. We paidUS$57,618 in fines related to environmentalcompliance. Further information on the Group’senvironmental regulation, including incidentsand fines, is in the Directors’ report on page 48.

Goals and targets

We set targets to communicate across the company the areas where we need to improve in sustainability performance and to stretch our thinking asto what is possible and acceptable. Our performance against these targets is summarised below. Actions to maintain or improve performance in theseareas is described in the following pages. Further information on the risk framework we apply to identify these metrics can be found on pages 14to 23.

Targets Outcomes in 2016

Our goal is zero harm, including, above all, the elimination ofworkplace fatalities.

One fatality at managed operations in 2016.

Performance against this goal is measured by the number of fatalitiesand a year-on-year improvement in our all injury frequency rate (AIFR)per 200,000 hours worked.

AIFR remains the same as 2015.

A year-on-year improvement in the rate of new cases of occupationalillness per 10,000 employees annually.

36 per cent increase in the rate of new cases of occupational illnesscompared with 2015.

By the end of 2018, all managed operations will be effectively controllingexposure to all identified material health risks by verifying that criticalcontrols are reducing harmful exposure.

57 per cent of businesses identified and consolidated critical controlmanagement plans for their material health risks with the remainder ontrack to achieve our end of 2018 goal.

Our diversity goal is to employ people based on job requirements thatrepresent the diversity of our surrounding communities.

We are targeting:– Women to represent 20 per cent of our senior management by 2016. – Women represented 19.2 per cent of our senior management in 2016.– Women to represent 40 per cent of our 2016 graduate intake. – Women represented ten per cent of our Executive committee in 2016.

From 1 January 2017, women represented 27.3 per cent of ourExecutive Committee.

– 15 per cent of our 2016 graduate intake to be nationals from regionswhere we are developing new businesses.

– Women represented 46.4 per cent of our 2016 graduate intake.– 36.2 per cent of our 2016 graduate intake were nationals from regions

where we are developing new businesses.

From 2016 all operations will locally report on an annual basis, and willdemonstrably achieve by 2020:

100 per cent of sites established their Communities and SocialPerformance targets in 2016.

– Progress against a locally defined target that demonstrates the localeconomic benefits of employment and procurement of goodsand services.

– Effective capture and management of community complaints withyear-on-year reduction in repeat and significant complaints.

24 per cent reduction in total greenhouse gas emissions intensitybetween 2008 and 2020.

We are on track to meet our 2020 target. Seven per cent reduction ingreenhouse gas emissions intensity in 2016 versus 2015.

All managed operations with material water risk will have achieved theirapproved local water performance targets by 2018.

67 per cent of managed operations are on track to meet their approvedlocal water performance targets.


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Sustainable developmentcontinued

Performance data

A summary of our performance data isprovided in the table below. The data arereported for calendar years and unless statedotherwise represent 100 per cent of theparameters at each managed operation eventhough Rio Tinto may have onlypartial ownership.

Data reported in previous years may bemodified if verification processes detectmaterial errors, or if changes are required toensure comparability over time.

We have incorporated the requirements of theten principles of the ICMM and the mandatoryrequirements set out in the ICMM position

statements into our own policies, strategiesand standards. We report in accordance withthe GRI G4 guidelines.

Further information on our data definitions, ourGRI G4 report and our alignment with the ICMMare available online at riotinto.com/sd2016.

Performance data 2012-2016(a)

2016 2015 2014 2013 2012

Social

Fatalities at managed operations from safety incidents 1 4 2 3 2Fatalities at managed operations from health incidents – – – – 1All injury frequency rate (per 200,000 hours worked) 0.44 0.44 0.59 0.65 0.67Number of lost time injuries 206 220 381 500 535Lost time injury frequency rate (per 200,000 hours worked) 0.26 0.25 0.37 0.42 0.37New cases of occupational illness (per 10,000 employees) 44 31* 17 16 15Employees (number)(b) 51,000 55,000 60,000 66,000 71,000

Environment

Greenhouse gas emissions intensity (indexed relative to 2008) 74.1 79.7*# 81.7 83.2 94.1Total energy use (petajoules) 454 433 450 484 502Freshwater used (billion litres) 467 460* 465 436 446Land footprint – disturbed (square kilometres) 3,696 3,629 3,592 3,556 3,530Land footprint – rehabilitated (square kilometres) 541 533 502 472 446

Direct economic contribution

Value add (US$ million)(c)(d) 19,515 18,888 29,178 31,818 26,195Payments to suppliers (US$ million)(c) 15,637 17,896 21,370 26,054 30,271Community contributions (US$ million) 166 184 264 332 291

* Numbers restated from those originally published to ensure comparability over time.

# Number restated from 78.9 following the application from 1 January 2015 of updated global warming potentials from the IPCC’s fourth assessment report.

(a) Data reported in previous years may be modified if verification processes detect material errors, or if changes are required to ensure comparability over time. Wherever possible, data foroperations acquired prior to 1 October of the reporting period are included. Divested operations are included in data collection processes up until the transfer of management control.

(b) These figures include the Group’s share of joint ventures and associates (rounded to the nearest thousand).

(c) These figures include the Group’s share of joint ventures and associates.

(d) Value add is the sum of labour, payments to governments and returns on capital invested in operations.

There will always be opportunities to improveand to contribute further to sustainabledevelopment.

2017 priorities

Our priorities for 2017 are to:

– Maintain momentum of the CRMprogramme and achieve our firstfatality-free year.

– Collaborate with our joint venture partnersto improve safety performance across ourmanaged and non-managed sites, such aswith PT Freeport Indonesia on theimplementation of a fatality preventionprogramme at the Grasberg joint operationin Indonesia.

– Reduce new cases of occupational illnesses,with a particular focus on stress,noise-induced hearing loss and fitnessfor work.

– Continue the focus on our technical riskstandards such as those covering processsafety, water and tailings management, andgeotechnical events.

– Implement measures to improveemployee engagement.

– Increase our graduate intake for 2017.– Strengthen our understanding and improve

the management and disclosure ofresilience to climate change risks.

– Meet the expectations of the new ICMMposition statement on water stewardship fortransparent water governance and watermanagement at operations.

– Participate in the tailings committee of theAustralian National Committee on LargeDams to further improve industry guidelineson tailings dams.

– Strengthen processes to manage humanrights risk across our value chain throughour third-party due diligence project.

– Strengthen integration of human rightsconsiderations in incident reporting, impactassessments, and complaints handling.

– Progress the closure planning for facilitiesnearing the end of their economicallyviable life.

Our people

Safety

The safety of our people is Rio Tinto’s highestpriority and we believe all safety incidents arepreventable. We work to create a safeenvironment through strong safety systems,processes and tools, and verifications of criticalcontrols – together with visible and caring

leadership. We take a balanced approach tosafety, which is focused on the three core areasof fatality elimination, injury reduction andcatastrophic risk prevention includingprocess safety.

CRM is crucial to achieving our fatalityprevention goal. It is a dedicated fatalityprevention programme which involves everyperson at our operational sites checking thatcritical controls are in place for jobs thatinclude a fatality risk, and that they are workingeffectively. In 2016 every Rio Tinto managedoperation rolled out CRM and over 1.3 millioncritical control verifications were completed.

Whilst we have maintained our injuryperformance, we are yet to achieve a fatalityfree year. In June we experienced a fatalitywithin our managed operations when anemployee was killed while undertakingmaintenance on a drill at the Paraburdoo ironore operation in the Pilbara, Western Australia.This tragedy continues to impact family,friends, workmates and the local community.The business provided immediate support andcounselling services and continues to do so. Afull investigation has been completed and thelearnings have been shared across Rio Tinto toprevent an incident like this being repeated.


The all injury frequency rate (AIFR), whichincludes data for employees and contractors,was 0.44 per 200,000 hours worked for the2016 year. Over the last five years, we havereduced our AIFR by 34 per cent. Although wehad 14 fewer lost time injuries in 2016 whencompared with 2015, due to a reduction in ourworkforce hours, our lost time injury frequencyrate (LTIFR) was 0.26 per 200,000 hoursworked in 2016 – a four per cent increasecompared with 2015.

Catastrophic risks are managed and assuredthrough a suite of standards, deep dives andexternal reviews. Process safety is one such riskand its management involves designing,operating and maintaining our processes forpreventing a catastrophic release of hazardousmaterials or energy. There were no processsafety incidents with a major or catastrophicconsequence in 2016. We progressed theimplementation of our Process safety standard,updated in 2015, to reduce process safety risks.

Health

We aim to eliminate occupational illness and tocreate workplaces that protect health andpromote wellbeing. Guided by our healthstandards, we identify emerging health issuesand key occupational health risks, and applycontrols to mitigate these. Our focus areas in2016 were occupational illness reduction,health risk management, wellness and mentalhealth, and the control of vector-borne andinfectious diseases.

In 2016, the rate of new cases of occupationalillness increased by 36 per cent from 2015.This further increase is due to increasedreporting of noise-induced hearing loss (NIHL)and a number of previously unreported historicNIHLs being identified and reported in 2016. Anincreasing awareness of medical surveillanceand tighter reporting requirements of healthincidents also contributed to the increase. Themain types of occupational illnesses in 2016were noise-induced hearing loss (60 per cent),musculoskeletal disorders (11 per cent) andstress (23 per cent).

Our health risk management programme helpsoperational sites manage their material healthrisks effectively by verifying that criticalcontrols are reducing harmful exposure foremployees and contractors. During 2016,businesses identified and consolidated criticalcontrol management plans for their materialhealth risks.

We are implementing a range of wellness andmental health programmes and working toimprove how we measure their effectiveness.Fatigue remains a critical risk and, during 2016,in conjunction with the Central QueenslandUniversity in Australia and the University ofWitwatersrand in South Africa, we began astudy of management attitudes to fatigueacross a number of sites in Africa and Australia.

We are working with local governments andhealth organisations to ensure effectiveeducation in, control of and, where necessary,treatment of our employees, contractors and

communities surrounding our operations forvector-borne and infectious diseases such astuberculosis, Ebola, malaria and HIV/AIDS and,more recently, Zika. During 2016, wecontributed to the international response to theZika virus by preparing our business resilienceteams. We also continued to collect data forthe epidemiological study of the workforce atthe Rössing uranium mine in Namibia, whichhas gained approval by the Ethics Committeeof the University of Manchester and theUniversity of Witwatersrand.

Employee relations

In 2016, we employed 51,000 people, includingthe Group’s share of joint ventures andassociates, in around 35 countries. Of these,approximately 28,000 were located inAustralasia, 13,000 in North America, 6,000 inAfrica, 2,000 in Europe, and 2,000 in Centraland South America. See page 201 for abreakdown of employees by business units.

We understand the relationship betweenemployee engagement and the productivity ofour business, and are focused on increasingengagement levels with all employees andtheir representatives. We want to be apreferred employer. In our 2016 survey ofemployee engagement, the results indicatedthat our leaders have more to do in addressingthe impacts of past organisational change andheadcount reductions. We were, however, verypleased with the level of engagement at ournewest large project, Oyu Tolgoi, and withstrong recognition across the Group on ourapproach to safety.

We value the strength that a diverse workforceand an inclusive culture bring to our business.We employ people on the basis of jobrequirements and do not discriminate ongrounds of age, ethnic or social origin, gender,sexual orientation, politics, religion, disability orany other status. We do not employ forced,bonded or child labour. We recognise the rightof all employees to choose to belong to a unionand to seek to bargain collectively. We employpeople with disabilities and make considerableefforts to offer suitable alternative employmentand retraining to employees who becomedisabled and can no longer perform theirregular duties.

We remain one of the largest private sectoremployers of Indigenous Australians, with over1,467 full-time Indigenous employees whorepresented approximately 8.3 per cent of ourAustralian employees in 2016. Our localemployment commitments are often managedthrough directly negotiated agreements withTraditional Owners.

In 2016, women represented 46.4 per cent(female: 32; male: 37) of our graduate intake,27.3 per cent (female: 3; male: 8) of the board,19.2 per cent (female: 100; male: 420) of oursenior management, and 18.2 per cent (female:7,933; male: 35,701)(a) of our total workforce.Further information on inclusion and diversitycan be found in the Corporate governancesection on page 63.

Communities and regional

developmentOur Communities and Social Performance(CSP) standard is the basis on which we buildrelationships and local knowledge, engage withcommunities and develop programmes thatreflect mutually agreed priorities. Ourframework is founded on trust and mutualrespect and we use it to identify and managesocial risks, and to build relationships thatsecure community support for our work.

Agreements are the basis of many of ourrelationships. Across the business we havenegotiated more than 40 participationagreements and more than 120 globalexploration access agreements. In 2016 welaunched a new guide, Why agreementsmatter, which describes practices related tocommunity agreements. This guide supportsour commitment to build strong communityrelationships and publicly shares the lessonswe have learned over the past two decades ofagreement making.

Our partnership with Australia’s NorthernTerritory Government, Developing EastArnhem Limited (DEAL), won a NationalEconomic Development Excellence Award forbest rural and remote initiative. We createdDEAL to help generate new economic activity inthe East Arnhem region following curtailmentof the Gove alumina refinery. DEAL’s housingprogramme allows businesses to rentproperties to accommodate employees andtheir familes and has helped generate morethan 200 jobs in the region. The revenue DEALderives from the housing assets is reinvested inlocal economic development initiatives.

Sharing the wealth and benefits that ouroperations create is also fundamental to ourapproach. In addition to the taxes and royaltiespaid to both regional and federal governmentsin 2016 (see our Taxes paid in 2016 report,which will be published later this year on theGroup’s website), we also contributed to 1,294programmes covering a wide range of sectorssuch as health, education, environmentalprotection, housing, agricultural and businessdevelopment. Our business spentUS$166 million on community contributionprogrammes. This was a decrease in overallcommunity contributions of ten per centcompared with 2015 due to lower agreement-related payments flowing from lowercommodity prices.

We introduced a new CSP target for2016-2020 aimed at capacity-building in ourlocal communities. It requires all operations todevelop locally tailored employment,procurement and complaint managementtargets, and report annually on progress. At theend of 2016, all sites had establishedtheir targets.

During 2016, Rio Tinto launched its secondReconciliation Action Plan (RAP), whichoutlines how we will build deeper engagementbetween Indigenous communities and(a) Gender distribution for our total workforce is based on

managed operations (excludes non-managed operationsand joint ventures) as of 31 December 2016. Less thanone per cent of the workforce gender is undeclared.


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our operations around Australia. The2016-2019 RAP sets stretch targets forIndigenous employment, education andtraining, and business development. At the endof 2016, the total national percentage ofAboriginal and Torres Strait Islander peopleemployed by Rio Tinto in Australia was8.3 per cent compared with our eight per centtarget by December 2019. The Group is thefirst resources company to obtain an ElevateRAP, the highest possible phase achievable inReconciliation Australia’s RAP programme.

Protecting the environment

Climate change and energy

We acknowledge the changing global climate,and support the intent and aspirations of theParis Agreement to limit global warming to lessthan two degrees Celsius above pre-industriallevels. We are aiming for a substantialdecarbonisation of our business by 2050 andare taking steps to reduce emissions, managerisk and build resilience to climate change. Thiswork is supported by our climate changeposition statement.

Our climate change programme focuses onreducing the energy intensity of our operationsand the carbon intensity of our energy. Ourtotal greenhouse gas (GHG) emissions were32 million tonnes of carbon dioxide equivalent(CO2-e) in 2016, 0.3 million tonnes higher thanin 2015. The majority of our GHG emissions aregenerated as a result of energy use (electricity,fuel) and chemical processes (anodes andreductants) at our operations. The majority(68 per cent) of the electricity we use is fromhydro, wind and solar power, which is similar toprevious years.

Transportation, processing and use of ourproducts also contribute to GHG emissions. In2016, the three most significant sources ofindirect emissions associated with ourproducts were:

– Approximately 6 million tonnes of CO2-eassociated with third-party transport of ourproducts and raw materials, representing aten per cent increase versus 2015.

– An estimated 102 million tonnes of CO2-eassociated with customers using our coal inelectricity generation and steel production,representing a 13 per cent decreaseversus 2015.

– Approximately 524 million tonnes of CO2-eassociated with customers using our ironore to produce steel (these emissions arenot all in addition to the coal-use emissionsabove, as some customers use both our ironore and our coal to produce steel),representing a three per cent increaseversus 2015.

In 2016, our shareholders passed a resolutionto report on our progress in addressing climateresilience. Our new climate change report willprovide information on what we are doing toprepare our business for a low-carbon futureunder five areas: operational emissionsmanagement; asset portfolio resilience to post-

2035 scenarios; low-carbon energy R&D andinvestment strategies; key performanceindicators; and public policy activities. In 2016we commenced work on identifying appropriatescenarios against which to test our businessresilience. The focus in 2017 will be on applyingthese scenarios to our assets and products.

Operational environment performance

We manage ongoing environmental aspects atour operations to avoid or minimise relatedhealth or environmental impacts, including airemissions, noise, water discharge and waste.We have our own internal environmental andoccupational health standards and are subjectto various environmental regulations. Our airquality protection standard is designed toprevent breaches under normal and worst-caseweather conditions, with the focus oncontrolling and monitoring our air emissions attheir source and understanding impacts onlocal airsheds.

We have mechanisms to record and enable usto respond to complaints, disputes andgrievances about issues such as noise anddust. While the overall number of recordedgrievances is low, we work with communitiesneighbouring our operations to understand theimpact and improve our practices. Our airquality monitoring information is made publiclyavailable through site-specific websites andcommunity monitoring programmes.

We look for opportunities to reuse or recycleour waste. Where that is not possible, wemanage it in facilities suited to its specificphysical nature and risks whilst also minimisingdisposal costs and avoiding future liabilities. In2016, we disposed of or stored 1,781 milliontonnes of mineral waste (predominantly wasterock and tailings) and 529,123 tonnes ofnon-mineral waste. About one fifth of ourmineral waste has the potential to react withair and water or break down to createpotentially harmful contaminants, such asacidic and metalliferous drainage (AMD). Ourcontrols are designed to prevent AMD impacts.

Our water resource management programmefocuses on site-specific risks, such as securityof water supply, managing the quality of waterreturned to the environment during operationsand at closure, and balancing operationalneeds with those of local communities,Traditional Owners andregulatory requirements.

We carry out an annual assessment ofperformance against site-specific watertargets, which have been established for thosesites where water is a material risk for thebusiness, and focus efforts on operations thatmay need to improve. At the end of 2016,67 per cent of managed operations were ontrack to meet their local water performancetargets by 2018.

To ensure we are maintaining the rightemphasis on long-term water management, wecompleted a detailed analysis of ourwater-related risks during 2016. The outcomes

of this will see us adopt further improvementsin water governance and planning processes.During the year we supported the developmentof the new ICMM position statement onWater Stewardship.

Management of tailings and structures

We operate tailings and large water storagefacilities at 33 sites and currently have closedimpoundments that we continue to monitor atfive sites. We continue to review and auditoperations (including with independentexternal reviews) to ensure that practices at allmanaged tailings and major water storagefacilities are in full compliance with all relevantindustry standards as well as our Managementof tailings and water storage facilities standard.Assurance over these storage facilities byinternal and independent third-party reviewsremains a focus.

During 2016, we participated in the ICMMreview of tailings dam management amongstits member companies by sharing practices,protocols and assurance processes. Theresultant ICMM position statement on tailingsmanagement is consistent with our ownapproach. It outlines principles for preventingcatastrophic failures of tailings dams throughrisk control for planning and design,implementation and operation, monitoring andinspection, and disaster management. Sincethe principles identified in ICMM’s positionstatement are already incorporated in ourstandard, it was not necessary for the Rio Tintostandard to be updated.

Economic contributions

Equitably sharing the wealth that ouroperations create provides substantial benefitsand long-term opportunities for thecommunities, regions and countries in whichwe operate. Our contributions include thetransparent payment of tax to local andnational governments, dividends toshareholders, the direct and indirectemployment we generate, and investment incommunity programmes. The payments wemake to our suppliers also represent asignificant part of our global economiccontribution. The figures in this section includethe Group’s share of joint venturesand associates.

Globally, the Group’s direct economiccontribution was US$35.1 billion in 2016.This includes:

– US$19.5 billion in value add, made up ofpayments to employees, payments togovernments and returns on capital.

– US$15.6 billion as payments to suppliers.

During 2016, our capital investment wasUS$3.0 billion.

We are a major employer and tax contributor tolocal, state and national jurisdictions. Wepromote governance over the benefits ofmining that flow through to host communitiesand governments by being transparent in thepayments we make and by striving to providelocal employment and procurement


opportunities. Details of the payments wemade to governments will be published in ourTaxes paid in 2016 report, and madeavailable online.

Governance

Business integrity

We are firmly committed to operating withintegrity and being accountable for our actions.The key principles that guide our behaviour inthe The way we work are supported bystandards that cover antitrust, businessintegrity, conflicts of interest, data privacy,fraud and third party due diligence. All of theseare supported by workforce training. During2016 we began a review of our company’spurpose and vision in consultation with ouremployees and included safety and excellenceinto our values.

We maintain a strict stance against bribery andcorruption. We remain dedicated to open andtransparent dealings with our stakeholders.Our integrity and compliance programme isaligned with the risk-based approach includedin our business integrity standard. We updateour training materials and delivery to ensurethey remain engaging and relevant to the risksemployees encounter.

Speak-OUT, the Group’s confidential andindependently-operated whistleblowingprogramme, enables employees, supplierscontractors and community members to reportanonymously, subject to local law, anysignificant concerns about the business, orbehaviour of individuals. This could includesuspicion around safety violations,environmental procedures, human rights,financial reporting or business integrity issuesin general. We are committed to a culture oftransparency and encourage employees tospeak up about their issues and concerns,whether through their management, humanresources or through Speak-OUT.

In 2016, 674 incidents were reported throughSpeak-OUT, compliance managers and/ormanagement, representing an increase ofapproximately 12 per cent on last year. Theincrease is mainly due to a higher volume ofincidents raised outside of the hotline. Twentysix per cent of cases raised this year weresubstantiated, resulting in corrective andpreventative actions.

Information on the Group’s operational,financial and sustainable developmentperformance is issued on time through anumber of channels, such as media releasesand regulatory filings. We communicate viewsto governments and others on mattersaffecting our business interests.

Human rights

We respect and support human rightsconsistent with the Universal Declaration ofHuman Rights, wherever we operate. We haveour own human rights policy and proceduresand have made voluntary commitments to theOECD Guidelines for Multinational Enterprises,the UN Global Compact and the Voluntary

Principles on Security and Human Rights(VPSHR). Our human rights approach isconsistent with the United Nations GuidingPrinciples on Business and Human Rights(UNGPs). Where our standards and proceduresare stricter than local laws, we seek to applyour own standards.

Our most salient human rights issues are thoserelating to security, land access andresettlement, Indigenous people’s rightsincluding cultural heritage, environmentincluding access to water, labour rights andin-migration-related impacts on localcommunities such as access to health services.In 2016 we engaged with investors, civil societyand community members on issues related toour own operations and to our businesspartners such as land access, cultural heritage,environment and labour rights.

Human rights considerations are included inour business processes and we conductstandalone studies and programmes at high-risk sites when required. In 2016 we updatedour human rights training. The introductorymodule will be required to be undertaken by allemployees as part of our business integritytraining from 2017. Function-specific modulesaround communities, procurement, securityand inclusion and diversity will also bemade available.

To support our Communities and SocialPerformance target for 2016-2020, sites begancollecting data relating to the effective captureand management of community complaints. Allsites are required to have a complaints,disputes and grievance mechanism in place inline with the effectiveness criteria foroperational-level grievance mechanisms in theUNGPs. We strive to achieve the free, prior andinformed consent of Indigenous communitiesas defined in the 2012 International FinanceCorporation Performance Standard 7 and theICMM position statement on IndigenousPeoples and Mining.

In 2016, our new Supplier code of conduct waslaunched, which clearly outlines expectationsof our suppliers, their subsidiaries andsub-contractors including around human andlabour rights. The code is available on ourwebsite and we distributed 32,000 copies toour current suppliers. We continue to work toensure we have a comprehensive approach onresponsible supply chains and human rights.Work also progressed on third-party duediligence including in relation to suppliers. Welaunched our Know your supplier procedurewhich establishes a process to understandlegal, ethical and reputational risks arising fromuse of a supplier.

We developed our first annual modern slaverystatement in compliance with the UK ModernSlavery Act 2015. The statement outlines thesteps taken in 2016 to ensure that slavery andhuman trafficking are not taking place in any ofour operations or supply chains. This will bepublished online at riotinto.com in March 2017.

We provide training for security personnel andconduct security and human rights analysis insupport of our security arrangements. Ouronline VPSHR training is mandatory for allsecurity personnel at high risk sites and isstrongly recommended for all our otherbusinesses. During the year we conductedVPSHR and Use of Force training for securityproviders at three of our locations in SouthAfrica and Guinea.

Non-managed operations and arrangements

We hold interests in companies and jointarrangements that we do not manage, the twolargest being the Escondida copper mine inChile and the Grasberg copper-gold mine inIndonesia. We actively engage with ourpartners through formal governance structuresand technical exchanges and endeavour toensure that the principles in The way we workare applied. We also encourage our partners toembed a strong safety, security and humanrights culture in their workforces.

EscondidaRio Tinto has a 30 per cent interest inEscondida, which is managed by BHP Billiton.Our seats on the Owners’ Council enable usregular input on strategic and policy matters.Sadly, there was one fatality in 2016, wherebya maintainer was fatally injured when workingon the mill.

Construction of the Escondida Water Supplydesalination project progressed well in 2016.Initial start-up milestones have been met andthe plant is on track to be fully operational in2017. By utilising seawater, the plant willsignificantly reduce demand on freshgroundwater resources around the mine.

GrasbergPT Freeport Indonesia (PTFI), a subsidiary ofFreeport-McMoRan Copper & Gold, Inc., ownsand operates the Grasberg mine in Papua,Indonesia. We have a joint operation interestattributable to the 1995 mine expansion, whichentitles Rio Tinto to a 40 per cent share ofproduction above specified levels until the endof 2021 and 40 per cent of all production after2021 (this date is subject to extension undercertain conditions). We engage with PTFIthrough four forums: the Operating, Technicaland Sustainable Development committees andthe Tailings Management board.

The largest of these, the multidisciplinaryTechnical Committee, enables discussion ofjoint operation activities such as environmentalmanagement, orebody knowledge, projectexecution, worker health and safety,communities, mine planning, processing andtailings management. Rio Tinto is representedby a senior environmental manager on the PTFItailings management board, which meets twicea year at Grasberg and includes third-partyexperts. A Rio Tinto senior manager also worksclosely with PTFI on key safety improvementactivities such as fatalityprevention programmes.


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Tragically, there were four fatalities at PTFIoperations in 2016: one electrician was fatallyinjured whilst performing routine maintenanceon a transmission line; one worker was struckby a moving forklift; one worker fellapproximately six metres when checking apower supply fault; and one mine operator whowas not properly secured in a bulldozer wasthrown from the machine when it slid down abench slope. We worked with the PTFI team toshare fatality prevention initiatives includingCRM and “learning critical lessons” to ensurethe circumstances leading to these incidentsare not repeated.

Closure

Our planning for closure starts early to ensurethat post-closure outcomes are achievable andthat impacts and risks are minimised. The workis overseen by our Closure Steering Committeeto ensure good closure processesand governance.

We work with local communities and regulatorsto evaluate potential post-closure land usesand agree on closure objectives. During 2016,we continued detailed closure planning for anumber of large mines that will reach the endof their commercially viable life over the nextten years.

We manage a range of non-operational sites,including those inherited through acquisitionsand mergers, some of which are remotelylocated or are former industrial or brownfieldsites. During 2016, 11 of the sites progressedto the point where we can relinquish them.In many jurisdictions we maintain long-termresponsibility for monitoring and managing thesites. We are also learning from the

commitments and expectations associatedwith operations we have relinquished.

We aim to progressively rehabilitate land as weoperate at a mine site. In 2016, 26 per cent ofour disturbed land (excluding land disturbedfor hydroelectricity dams) hadbeen rehabilitated.

Our industry is entering a new stage in mineclosure, with many of our peers also planningto close large operations over the next decade.In many jurisdictions where we operate,regulatory frameworks for large mine closureremain undeveloped or untested. Incollaboration with our peers, we are improvingour understanding of opportunities, seekingsolutions to challenges and engaginggovernments to establish good closure policiesand regulations.

Assurance

We engaged an independent externalassurance organisation,PricewaterhouseCoopers, to provide thedirectors of Rio Tinto with assurance onselected sustainable development subjectmatters, as explained on the next page.

PricewaterhouseCoopers’ assurance statementsatisfies the requirements of subject matters 1to 4 of the ICMM assurance procedure.

Further information on external auditors andinternal assurance is included in the Directors’report under the Corporate governance sectionon pages 60 and 66.


Independent limited assurance report

What we found

Based on the work described below, nothing has come to our attention that causes us to believe that the selected

subject matter for the year ended 31 December 2016 has not been prepared, in all material respects, in

accordance with the Reporting criteria.

To the directors of Rio Tinto plc and Rio TintoLimited (together Rio Tinto)

What we did

Rio Tinto engaged us to perform a limitedassurance engagement on the selected subjectmatter within the Sustainable developmentsections of the Rio Tinto 2016 Annual reportand the Rio Tinto 2016 Strategic report for theyear ended 31 December 2016.

Selected subject matter

– Rio Tinto’s assertion that it has incorporatedthe requirements of the 10 sustainabledevelopment principles of the InternationalCouncil on Mining & Metals (ICMM) and themandatory requirements set out in ICMMPosition Statements into its own policies

– Rio Tinto’s assertions regarding theapproach that it has adopted to identify andprioritise its material sustainabledevelopment risks and opportunities

– Rio Tinto’s assertions regarding theexistence and status of implementation ofsystems and approaches used to managethe following selected sustainabledevelopment risk areas:– Safety– Greenhouse gas emissions– Energy use– Water management

– The following Rio Tinto performance datarelated to the selected sustainabledevelopment risk areas:– Number of fatalities– All injury frequency rate– Lost time injury frequency rate– Number of lost time injuries– Total greenhouse gas emissions– Greenhouse gas emissions intensity– Total energy use– Percentage of managed operations with

material water risk that are on track toachieving their approved local waterperformance targets

Reporting criteria

The subject matter above has been assessedagainst the ICMM Sustainable Development

Framework and the definitions and approacheswithin the Glossary which will be presented atwww.riotinto.com/sd2016/glossary as at 2March 2017.

Independence and Quality Control

We have complied with relevant independencerequirements and other ethical requirements ofthe Code for Ethics for ProfessionalAccountants issued by the International EthicsStandards Board for Accountants, which isfounded on fundamental principles of integrity,objectivity, professional competence and duecare, confidentiality andprofessional behaviour.

PricewaterhouseCoopers applies InternationalStandard on Quality Control 1 and accordinglymaintains a comprehensive system of qualitycontrol including documented policies andprocedures regarding compliance with ethicalrequirements, professional standards andapplicable legal and regulatory requirements.

Responsibilities

PricewaterhouseCoopers

Our responsibility is to express a conclusionbased on the work we performed.

Rio Tinto

Rio Tinto management is responsible for thepreparation and presentation of the selectedsubject matter in accordance with theReporting criteria.

What our work involved

We conducted our work in accordance with theInternational Standard on AssuranceEngagements 3000 (Revised) AssuranceEngagements Other than Audits or Reviews ofHistorical Financial Information and (forselected subject matter relating to greenhousegas emissions) the International Standard onAssurance Engagements 3410 AssuranceEngagements on Greenhouse Gas Statements.These Standards require that we comply withindependence and ethical requirements andplan the engagement so that it will beperformed effectively.

Main procedures performed

– Making enquiries of relevant managementof Rio Tinto regarding the processes andcontrols for capturing, collating andreporting the performance data within theselected subject matter, and evaluating thedesign and effectiveness of these processesand controls

– Validating the operation of controls over theaccuracy of injury classification andassessing the final injury classificationapplied for a sample of injuries reportedduring the year ended 31 December 2016

– Testing the arithmetic accuracy of a sampleof calculations of performance data withinthe selected subject matter

– Assessing the appropriateness of thegreenhouse gas emission factors applied incalculating the Total greenhouse gasemissions and Greenhouse gasemissions intensity

– Testing performance data, on a selectivebasis, substantively at both an operationaland corporate level, which included testingat a selection of operations from acrossAluminium, Copper & Diamonds, Energy &Minerals, and Iron Ore

– Undertaking analytical procedures over theperformance data within the selectedsubject matter

– Making enquiries of relevant managementand reviewing a sample of relevantmanagement information anddocumentation supporting assertions madein the selected subject matter

We believe that the information we haveobtained is sufficient and appropriate toprovide a basis for our conclusion.

Liza MaimonePartner

1 March 2017

PricewaterhouseCoopersCanberra

Liability limited by a scheme approved under ProfessionalStandards Legislation

Inherent limitationsInherent limitations exist in all assurance engagements due tothe selective testing of the information being examined.Therefore fraud, error or non-compliance may occur and notbe detected. Additionally, non-financial data may be subject tomore inherent limitations than financial data, given both itsnature and the methods used for determining, calculating andsampling or estimating such data.

Restriction on useThis report has been prepared in accordance with ourengagement terms to assist Rio Tinto in reporting itssustainable development performance. We do not accept orassume responsibility for the consequences of any relianceon this report for any other purpose or to any other person ororganisation. Any reliance on this report by any third party isentirely at its own risk.

We consent to the inclusion of this report in the Rio Tinto2016 Annual report and the Rio Tinto 2016 Strategic reportto assist Rio Tinto’s members in assessing whether thedirectors have discharged their responsibilities bycommissioning an independent assurance report inconnection with the selected subject matter.

Limited assuranceThis engagement is aimed at obtaining limited assurance forour conclusions. As a limited assurance engagement isrestricted primarily to enquiries and analytical proceduresand the work is substantially less detailed than thatundertaken for a reasonable assurance engagement, thelevel of assurance is lower than would be obtained in areasonable assurance engagement.


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Iron Ore

Financial performance

2016US$ million

2015US$ million

Gross revenue (a) 14,605 13,952

Net cash generatedfrom operatingactivities 5,644 5,844

Underlying earnings 4,611 3,940

Capital expenditure (a) 868 1,608

Net operating assets 16,339 16,850

Underlying EBITDA 8,526 7,675

Iron Ore Company of Canada and Simandou are reportedwithin Energy & Minerals (see page 38), reflectingmanagement responsibility.

(a) Gross revenue and capital expenditure are defined onpage 202 under Notes to financial information by businessunit.

Strategy and priorities

The Iron Ore product group’s vision andstrategy is focused on delivering optimal valuefrom its integrated system of assets.

These strategic principles guide the business:

– Safety is the number one priority.– Focus on value over volume to ensure the

optimum outcome based on thecombination of revenue, operating costsand capital expenditure.

– Engaged employees are the key to success.– Mine-to-market productivity is an important

driver of cash generation.– Making a lasting and positive contribution

will build strong partnerships.

The group’s strategic priorities are to:

– Run safe and fatality-free operations.– Employ a workforce of fully

engaged people.– Sustain the competitive advantage of

premium Pilbara Blend products.– Realise the full potential of the system to

maximise cash flow and productivity fromthe existing asset base.

– Harness innovation and technology to helpdrive superior performance.

– Follow a disciplined, value-accretiveapproach to growth.

– Engage with its highly valued partners andsupport sustainable local andregional investment.

Safety

The tragic death of a colleague at theParaburdoo operations in June was a soberingreminder of the critical risks in the business. Amaintainer died following the unexpectedmovement of a hydraulic arm while carryingout maintenance work on a drill rig. Thebusiness is implementing the learnings fromthis incident, so that the same or a similaraccident can never happen again. This terribleevent strengthened the resolve of the businessto fully implement the critical risk managementfatality elimination programme which wasrolled out in 2016. This programme aims toensure key risks are identified and the right

protections are in place before any job starts.Critical control checklists were fullyimplemented across all operations andoperational leaders and team members areactively verifying tasks to ensure that criticalcontrols are in place.

The all injury frequency rate stayed consistentin 2016 at 0.45 compared with 0.45 in 2015. Afocus by frontline leaders on visible leadershipin the field has been maintained and will helpdrive the rate down.

In 2016, Iron Ore continued to work to sustainthe employee wellbeing strategy throughtraining and educating leaders in how tomanage fitness for work, understand mentalwellness and build resilience.

The Yandicoogina team was named the winnerof the 2016 Safety and Health Innovationaward by the Chamber of Minerals and Energyof Western Australia for its breakthroughproject to reduce manual handling injuries.

Greenhouse gas emissions

Throughout 2016, Iron Ore continued to reduceits greenhouse gas emissions intensity acrossmine, rail and port operations compared withthe baseline target set in 2008. Since 2008, theproduct group’s greenhouse gas emissionsintensity has improved by 2.2 per cent.

Review of operations

In the Pilbara, Rio Tinto operates the world’slargest integrated portfolio of iron ore assets.This system comprises 15 mines, fourindependent port terminals, over 1,700km ofthe largest privately owned heavy freightrailway in Australia, and supportinginfrastructure, all linked by the OperationsCentre in Perth.

In 2016, Rio Tinto celebrated 50 years since thefirst shipment of iron ore from the Pilbaraoperations. Events were held in regionalWestern Australia, Perth and internationally torecognise and acknowledge the significantcontribution of past and present employees,customers, suppliers, communities and otherpartners who helped shape theworld-class business.

Rio Tinto Marine delivers shipping services tothe wider Rio Tinto Group, including Iron Ore.

In 2016, Iron Ore’s underlying earningsincreased by US$671 million, up 17 per cent on2015. This was achieved through record salesvolumes, continued cash cost savings andhigher iron ore prices.

Iron Ore shipments for 2016 met the guidanceat 327.6 million tonnes (Rio Tinto share:268.9 million tonnes), an increase of three percent on 2015, attributable to the newlyexpanded infrastructure and minimalweather events.

Production of 329.5 million tonnes (Rio Tintoshare: 270.7 million tonnes) in 2016 wassix per cent higher than in 2015. The strongproduction performance in 2016 follows theramp up of expanded mines, operational

productivity improvement projects across mostsites and minimal weather events.

Contestable iron ore demand in 2016 increasedby around 80 million tonnes to 1.8 billiontonnes. Rest-of-world contestable demandrecovered from a weak start to the year to beslightly higher than 2015 levels. Additionaldemand was met predominantly by expansionsfrom the top six producers which netted around55 million tonnes in 2016. Notably, theramp-ups of Roy Hill and Minas Rio addedalmost 30 million tonnes.

In 2016, the iron ore price averaged aroundUS$58.40 per dry metric tonne (Platts 62 percent Fe CFR), up from an average of aroundUS$55.50 per dry metric tonne in 2015. Thismasks a significant range in iron ore pricesduring 2016. Prices ranged from a low ofUS$39.25 per dry metric tonne in mid-Januaryto a peak of US$83.95 per dry metric tonne inmid-December.

Rio Tinto Marine shipped 281 million tonnes ofdry bulk cargo on behalf of the entire Rio TintoGroup, an increase of six per cent on 2015. Byvolume, Rio Tinto is the largest dry bulkshipping business in the world, operating17 vessels of its own and contracting a fleet ofaround 200 vessels at any given time.Average freight rates in 2016 tracked below2015 and forward voyage rate curves are flat,reflecting ongoing vessel oversupply and lowbunker fuel prices.

A strong pipeline of initiatives in 2016 resultedin pre-tax cash cost reductions ofUS$318 million. Iron Ore has now deliveredUS$1.4 billion of cumulative savings comparedwith the 2012 base, making a significantcontribution to the wider Rio Tinto Grouppre-tax savings.

Further efficiency improvements reduced thePilbara cash unit costs to US$13.7 per tonne in2016, compared with US$14.9 per tonne in2015. Cost savings initiatives includedoptimising system maintenance shut intervalsand alignment, and improving contractingarrangements such as the ten-year integratedfacilities management agreement signed in2016 that is expected to deliver more thanUS$75 million in cash benefits during 2016 and2017. Productivity improvements includedincreasing effective utilisation across thePilbara fleet, increasing payloads and reducingore car dumper cycle times.

Iron Ore continues to be a leader in safeautonomous mining technologies. TheOperations Centre controls and operates majorassets including autonomous haul trucks anddrills, processing plants, train loading andunloading, and stockyard stacking andreclaiming machines.

The automated truck fleet continues to provideadvantages relating to safety, productivity andoperating costs. On average, each of the72 autonomous haul trucks, which is 20 percent of the fleet, operated an additional1,000 hours and at 15 per cent lower cost in2016 than comparable conventionalhaul trucks.


The performance of autonomous trucks andincreased utilisation of all trucks, together withimprovements in payload, has reduced fleetrequirements, resulting in lower capitalexpenditure and operating costs.

Iron Ore continues to consider the optimal sizeof its automated truck fleet, including newpurchases and evaluatingmanned-to-autonomous conversion for theexisting fleet.

Autonomous drills at West Angelas alsooperated for an average 1,000 more hours perdrill compared with conventional drills.Autonomous drills are now being deployedat Yandicoogina.

Further progress was made with theAutoHaul® project in 2016, bringing it closer toimplementation. This will deliver a step changein the safety controls and productivity of railoperations. One hundred per cent of plannedterritory track is now AutoHaul® enabled. Sincetesting began in 2014, more than600,000 kilometres of track has been coveredin AutoHaul® mode with a driver in attendance.The implementation of AutoHaul® willtransition to the rail operations team in 2017and its use is expected to progressively expandduring the year. Full implementation isscheduled for the end of 2018.

Iron Ore maintained its focus on supportinglocal communities, Aboriginal TraditionalOwners, businesses and people within itsoperational footprint. The product groupcontinued actively implementing participationagreements with Traditional Owners in thePilbara, which secure land access for the life ofmining operations. In 2016, along with PilbaraTraditional Owners, Iron Ore completedfive-year reviews of the ParticipationAgreements and Regional Framework Deed. Italso finalised the Participation Agreement withthe Banjima people, its tenth agreement in thePilbara. Relationships with Pilbara TraditionalOwners are integral to Iron Ore’s privilege tooperate and it has now signed agreements withall Native Title Claim groups who hold interestsin areas of the Pilbara in which it operates.These agreements incorporate mutualobligations to deliver outcomes in employment,financial compensation, education and training,heritage surveys and practices, environmentalcare and land use.

Iron Ore remains one of the largestprivate-sector employers of Indigenous peoplein Australia, with approximately 900 Indigenousemployees, including 380 Pilbara Aboriginalpeople. In 2016, Rio Tinto launched its elevateReconciliation Action Plan – the first industrygroup to launch a RAP at this level – where itpublicly committed to meeting eight per centIndigenous employment across Australia bythe end of 2018. Indigenous employment was7.8 per cent across Iron Ore as atDecember 2016.

Iron Ore continues to support programmes andinitiatives across the Pilbara, and its fly-in,fly-out (FIFO) source communities in regionalWestern Australia and Perth. Its award-winningCommunity Infrastructure and ServicesPartnership with Pilbara local governmentscontinued its success during 2016 with thedelivery of key community infrastructureprojects. The Partnerships with the City ofKarratha and the Shire of Ashburton work todeliver real benefits to the community toensure the Pilbara is a great place to livethrough a shared vision of improving townamenities and revitalising communities.

Development projects

Iron Ore’s mineral resources position continuesto support sustaining production and growthoptions in the Pilbara. Managing this baseefficiently forms the basis of creating adevelopment sequence which maximises thevalue of its assets and maintains the requireddelivery of customer product. Ore reserves arebeing maintained in line with mine production.Given their significance to the business andcustomers, the focus continues on thepremium Pilbara Blend products.

Iron Ore has invested over US$14 billion inPilbara mines and infrastructure growth,increasing production by more than 50 per centand expanding port operations to 360 milliontonne capacity. With the completion of theports development the focus has shifted toproductivity-driven growth supported bylow-capital-cost brownfield developments.

Since 2012, Iron Ore has followed a disciplined,value-accretive, low-cost brownfield approachto the expansion of Pilbara operations. Mostrecently, efforts have been concentrated on theNammuldi Incremental Tonnes (NIT) projectwhich was fully commissioned in 2016 andprovides 10 million tonnes of high-grade,low-phosphorus ore annually.

The balance of the full Silvergrass minecomprises the installation of a satellite crusherand overland conveyor, increased autonomousmining capacity and the expansion ofNammuldi non-process infrastructure. It willadd an extra 10 million tonne capacity to theNIT expansion with first ore expected in thesecond half of 2017. Following approval of thefinal capital allocation for the full Silvergrassproject in August 2016, the overall capitalintensity is around US$29 per tonne. Replacingthe road trains being used at Nammuldi with aconveyor will also significantly reduceoperating costs.

A number of sustaining mine developmentsalso progressed in 2016. The West AngelasDeposit F project will use existing processingand plant infrastructure to support totalproduction of 35 million tonnes per year fromthe West Angelas mine.

Yandicoogina Oxbow is being built as asupporting mine for the Yandicooginaoperations, assisting in sustaining currentproduction rates of 56 million tonnes per year.Yandicoogina Oxbow will use existing facilitiesand will expand the Yandicoogina autonomoustruck fleet.

The Iron Ore group continues to invest incommunity infrastructure in regional towns.The A$18 million Dampier Community Hub wasofficially opened in July while the A$4.6 millionParaburdoo Childcare Centre opened inOctober. The Red Earth Arts Precinctcommenced construction in the fourth quarterwhich will provide state of the art theatre andlibrary services. These projects were madepossible through financial contributions fromRio Tinto and the State Government’s Royaltiesfor Regions programme and local government.

Rio Tinto will contribute A$8 million towardsthe construction and operation of theA$14.5 million Paraburdoo Community Hub.The Shire of Ashburton secured remainingfunds for the project in the fourth quarter of2016. Construction is expected to commence in2017, with completion of the ParaburdooCommunity Hub in 2018. Various other civicprojects were also unveiled during the year.

Outlook

Iron ore and steel, along with a number of othercommodity prices, experienced strong priceappreciation towards the end of 2016. Severalfactors have buoyed China’s steel demand suchas downstream restocking, higher inflationexpectations and a supportive credit andmonetary environment. Rest-of-world steeloutput has been supported by a considerableimprovement in macroeconomic conditionsacross advanced economies in the fourthquarter of 2016.

China’s current high rates of steel productionare anticipated to unwind somewhat in 2017 inpart due to an expected gradual withdrawal instimulus. Over the longer term, there is stillroom for Chinese steel production to grow– driven by manufactured goods such asautomobiles and machinery, and increasingreplacement requirements. Steel production inthe world ex-China will continue to grow withcapacity expansions in India, the Middle Eastand ASEAN coming to fruition and strongermacroeconomic conditions in other keysteel markets.

Over the next few years, Rio Tinto expectsfurther supply from low-cost producers andnew entrants. In addition, the Group expects tosee further exits as the significant input costdeflation experienced in 2015, particularly in oiland exchange rates, begin to reverse.


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Aluminium


2016US$ million

2015US$ million

Gross revenue 9,458 10,117


Underlying earnings 947 1,118

Capital expenditure 916 1,682




Rio Tinto’s Aluminium product groupcontinues to focus on deliveringindustry-leading performance and valuecreation throughout the cycle. The productgroup benefits from a sector-leading bauxiteposition, large-scale alumina refineries and alow first-quartile average cost smelterportfolio. Aluminium’s strategy focuses on:

– Safety as the number one priority.– Prioritising value over volume.

Each of the three areas of the business –bauxite, alumina and primary metal – has itsown targets and strategies, summarised below:

– In bauxite, the emphasis is on capturingvalue from expanding seaborne demand.This involves continuing to enhanceperformance and output at currentoperations while developing Tier 1 growthopportunities such as the Amrun project.

– In alumina, providing security of supply tothe group’s smelter portfolio is essential.The focus is on aggressively driving downcosts to improve the refineries’ positioningon the industry cost curve.

– In primary metal, the Aluminium groupfocuses on leveraging its low-cost,low-carbon power position – a significantand sustainable competitive advantage.

The three product areas are supported by asingle global commercial organisation thatfocuses on maximising value from mine tomarket, while providing customers withhigher-margin, value-added productsand services.

Safety

In 2016, Aluminium achieved a secondconsecutive fatality-free year. The productgroup’s all injury frequency rate continued itsdownward trend, ending the year at0.46 compared with the 0.48 rate recorded atthe end of 2015. The group is striving toimprove its overall safety performance further,with the ultimate goal of achieving a zero harmworkplace. To that end, it has deployed acomprehensive systems-based approach,including the roll-out of the critical riskmanagement fatality elimination programmeduring 2016.


Rio Tinto’s Aluminium group has one of thelowest carbon footprints in the aluminiumindustry. Since 2008, the group has reducedgreenhouse gas (GHG) emissions by45 per cent in absolute terms and 36 per centin intensity. GHG emissions intensity of thegroup’s primary aluminium production reducedby 39 per cent in 2016 compared with 2008,due to portfolio management and the ramp-upof the modernised Kitimat smelter in 2016.Compared with the global aluminium industry,Rio Tinto offers a metal with one of the lowestGHG footprints based on a life cycle analysisapproach(a). This GHG footprint is 50 per centlower than the global industry average, thanksto low-carbon sources of electricity andworld-leading technology. Almost 80 per centof the Aluminium group’s total power needsare supplied by low-carbon sources, with55 per cent coming from self-generatedhydropower, compared with 35 per cent for theindustry. This unique combination enables theAluminium group to respond to increasingmarket demand for responsible metalproduced with a low carbon dioxide footprintthrough Rio Tinto’s globally availableRenewAl™ brand.


The quality of its assets combined with arobust, highly disciplined performancemanagement system enabled the Aluminiumgroup to reinforce its position as a sector-leading business in 2016 and to deliversuperior results, despite the ongoingmarket challenges.

The product group achieved underlyingearnings of US$947 million (2015: US$1,118million). This performance was driven by theongoing strength of the group’s operationalperformance and the continued delivery ofstrong cash cost savings. This helped largely tooffset the ten per cent reduction in Rio Tinto’saverage realised price for primary metalproducts – including regional and productpremia (US$1,849 per tonne in 2016 comparedwith US$2,058 per tonne in 2015). Cash costimprovements of US$481 million (pre-tax), a48 per cent increase compared with 2015savings, are evidence of the efficiencymomentum within the Aluminium group.Savings realised over the past four years nowtotal more than US$1.6 billion, furtherentrenching the group’s superior integratedEBITDA margins. The resilience of the group’sunderlying EBITDA, combined with furtherreductions in working capital levels, resulted innet cash generated from operating activities ofUS$2,074 million.

(a) Life cycle analysis approach takes into account the entireproduction process, electricity generation, and theproduct’s use and end-of-life.

At the end of 2016, the Aluminium productgroup was carrying out some 1,200 valueimprovement initiatives across its operations.These are designed to strengthen marginsfurther through production and procurementefficiencies and reduced support costs.

All three of the Aluminium group’s productsegments demonstrated strong operationalperformance and delivered strong year-on-yearproduction increases. In 2016, the Aluminiumproduct group delivered more than 29 milliontonnes of bauxite to third parties. Thisrepresented a ten per cent increase on 2015levels and reinforced Rio Tinto’s position as thelargest single seaborne bauxite supplier in theworld. Record production achieved at theWeipa and Gove mines in Australia contributedto a nine per cent increase in Rio Tinto’s globalbauxite production. Alumina productionincreased by five per cent in 2016 due primarilyto operational improvements driving recordproduction at Yarwun (up 11 per cent).Production records were also realised at theJonquière and São Luis refineries.

Rio Tinto’s aluminium production for 2016 wasten per cent higher than in 2015, reflecting thesuccessful ramp-up of the modernised andexpanded Kitimat smelter. This delivered itsfull nameplate capacity of 420,000 tonnes fromthe second quarter, while ongoing productioncreep through productivity improvementshelped to deliver annual production records atten smelters.

In 2016, Rio Tinto completed the sale of itsCarbone Savoie cathode blocks business inFrance, and its Lochaber smelter andhydropower facilities in the UK. Thedivestments reflect the Aluminium group’sdetermination to continue refining its portfolioto ensure the most effective use of capital.



The Aluminium group’s development pipelinefocuses on its competitive advantages inenergy and bauxite.

In 2016, construction commenced on theAmrun bauxite project, south of the EmbleyRiver in Cape York, Queensland, Australia. Withmining costs projected to be in the first quartileof the cost curve, Amrun is an exceptionalproject: long life, low cost and expandable; andstrategically placed to satisfy increasingdemand for seaborne bauxite. With anapproved capital cost of US$1.9 billion, theproject includes a mine plus port facilities andinfrastructure that could be leveraged forfuture expansions. At the end of 2016, theproject was 25 per cent complete andproceeding on time and on budget, having metall major project milestones for the year.Planned initial output for Amrun is 22.8 milliontonnes per annum beginning in 2019. Theproject will partly replace the depleting EastWeipa mine with lower-cost production, whilealso delivering additional volumes ofaround 10 Mt/a.

A US$0.7 billion expansion currently under wayby the joint-venture Compagnie des Bauxitesde Guinée will further enhance Rio Tinto’sstrong bauxite position.

The Kitimat Modernisation Project wassuccessfully completed at the end of Q1 2016,and the modernised and expanded smelterreached full nameplate capacity in April 2016.Output at the smelter, which uses theAluminium group’s wholly owned Kemanohydropower resource and high-efficiency APsmelting technology, has been increased by48 per cent while overall environmentalemissions have been reduced by nearly 50 percent. Energy efficiency has also increased by33 per cent. Kitimat is already positioned in thelowest decile of the industry cost curve.

Outlook

The long-term outlook for aluminium remainsstrong. The consensus view foresees a steadyincrease in demand, averaging two to three percent per year over the next 15 years. Thistranslates into additional consumption of25.8 Mt (around 1.7 Mt/a) compared with a2015 base of 56.6 Mt.

This outlook is driven mainly by risingutilisation intensity and more diverse end-useapplications. In the automotive sector, forexample, manufacturers are planning to usesignificantly more aluminium in the future tomake lighter vehicles that consume less fueland produce fewer emissions.

Developing economies, where currentconsumption is low, also provide solid growthpotential for aluminium. In India, for example,consumption is less than two kilograms ofaluminium per capita compared with20 kilograms in more developed economies.

Despite this positive long-term view, 2016 wasanother difficult year for the aluminiumindustry, with London Metal Exchange (LME)prices remaining at levels last seen during theglobal financial crisis.

Looking forward, while China continues to addsmelting capacity, the global market is movingback towards balance after eight years ofworking through excess inventory and capacityoverhang. At year-end 2016, stocks were downto 11 weeks of supply, compared with a high of16 weeks in 2009, and the downward trendappears set to continue.

Prospects for bauxite – a sector whereRio Tinto maintains a very strong competitiveposition – are positive. The projected growthrate, driven mostly by seaborne bauxite tradedinto the China market, is outpacing that ofaluminium. This is due to both a desire byChina to be self-sufficient in alumina, and thecontinuing depletion and reduction in quality ofChina’s bauxite resource position.


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Copper & Diamonds


2016US$ million

2015US$ million


Net cash generatedfrom operatingactivities (1) 987 1,575

Underlying (loss)/earnings (18) 370

Capital expenditure 924 806



(1) Net cash generated from operating activities excludes theoperating cash flows from equity accounted units (mainlyEscondida) but includes dividends from equityaccounted units.


The Copper & Diamonds product group’sstrategy is to deliver sustainable value by:

– driving continuous improvements in safety,the number one priority;

– focusing on value over volume at ourexisting operations;

– driving improvements in productivity andcommercial excellence;

– developing copper brownfield growthoptions and new, world-class greenfieldprojects in low-risk jurisdictions;

– focusing on cost control and cashgeneration; and

– developing strong leaders and an aligned,capable, engaged, diverse andcollaborative workforce.

Safety

In 2016, there were zero fatalities in theCopper & Diamonds group’s managedoperations, and the all injury frequency ratewas 0.38 compared with 0.45 in 2015.

Sadly, the Grasberg and Escondida mines, inwhich we are a joint venture partner, sufferedfatal incidents during 2016. At Grasberg therewere four fatalities. Further details are includedon page 30.

Rio Tinto continues to support PT FreeportIndonesia, Grasberg’s managing partner, indeveloping and implementing safetyprogrammes and initiatives.

Copper & Diamonds continued to embed thecompany’s critical risk management fatalityelimination programme, which is aimed atidentifying and mitigating the common dangersthat can lead to fatalities, into all its operations.


The Copper & Diamonds group’s 2016greenhouse gas (GHG) emissions were3.3 million tonnes of carbon dioxide equivalent(tCO2-e), which is 0.1 million tonnes CO2-e lessthan 2015. The emissions intensity improved atRio Tinto Kennecott and the Oyu Tolgoi copper-gold mine while marginally deteriorating forDiamonds. This was due to increased intensityat the Diavik Diamond Mine.


Rio Tinto combined its copper and diamondsbusinesses in July. At the end of 2016, theintegrated Copper & Diamonds group had fourcopper assets and two diamonds assetsin production.

In 2016, both total mined copper and totaldiamonds production increased by four percent. The product group produced523 thousand tonnes of mined copper(Rio Tinto share), and 18 million carats of roughdiamonds (Rio Tinto share) in 2016. Copper &Diamonds also produced 294 thousand ouncesof mined gold, 4,210 thousand ounces of minedsilver and 2.8 thousand tonnes of molybdenumas byproducts. Rio Tinto is now the world’sseventh largest copper supplier and remainsone of the largest diamond producers.

The Copper & Diamonds group’s underlyingloss of US$18 million (compared withunderlying earnings of US$370 million in 2015)was driven by lower prices. This includesUS$114 million of one-off non-cash assetwrite-downs which concludes the assetportfolio review at Rio Tinto Kennecott. Thegroup generated pre-tax cash costimprovements of US$278 million in 2016,delivering US$78 million in free cash flow. AllCopper & Diamonds managed operations werecash flow positive in challengingmarket conditions.

The Bunder diamond project in India wasclosed down at the end of 2016 and projectassets have been approved to be gifted to theState Government of Madhya Pradesh in 2017.

In June 2016, Rio Tinto transferred its53.8 per cent shareholding Bougainville CopperLimited (BCL) to an independent trustee.

Operating assets

Copper

Rio Tinto Kennecott(Rio Tinto: 100 per cent)Kennecott supplies approximatelyeight per cent of US refined copperrequirements. In 2016, Kennecott produced156 thousand tonnes of refined copper,135 thousand ounces of refined gold, and2.8 thousand tonnes of molybdenum.

Mined copper production in 2016 wassignificantly higher than 2015 as miningprogressed through an area of higher grades.

In addition, the operation maximised smelterutilisation by receipt of 315 thousand tonnes ofthird-party concentrate for tolling in 2016.

Oyu Tolgoi(Rio Tinto: 50.8 per cent interest in TurquoiseHill Resources)Located in Mongolia’s South Gobi Desert, OyuTolgoi is one of the world’s largest copper-goldmines. In 2016, Oyu Tolgoi’s open-pit mineproduced 201 thousand tonnes of copper,300 thousand ounces of mined gold and1,420 thousand ounces of silver (100 per centbasis). Mined copper production for 2016 wasin line with 2015, as the impact of lower gradeswas offset by higher throughput, a new recordfor the mill.

Escondida(Rio Tinto: 30 per cent interest)Located in Chile’s Atacama Desert, Escondidais the world’s largest copper-producing mine. In2016, Escondida produced 1,011 thousandtonnes of mined copper (100 per cent basis).Mined copper production at Escondida in 2016was 12 per cent below 2015 due to lowergrades and slightly reduced mill throughput.

Grasberg(A joint operation that gives Rio Tinto a 40 percent share of production above specified levelsuntil the end of 2021 and 40 per cent of allproduction thereafter under the ParticipationAgreement. This date is subject to extensionunder certain conditions including forcemajeure.)Grasberg is owned and operated by PTFreeport Indonesia (PTFI), a subsidiary ofUS-based Freeport-McMoRan, Inc. Located inthe province of Papua, Indonesia, it is one of theworld’s largest copper mines. Rio Tinto’s shareof mined copper production at Grasberg was nilin 2016 due to the minimum productionthreshold not being met.

On 12 January 2017, the Government ofIndonesia issued new mining regulations toaddress exports of unrefined metals, includingcopper concentrates, and other matters relatedto the mining sector. These regulations impactPTFI’s operating rights, including its right tocontinue to export concentrate withoutrestriction, and may have a significant impacton Rio Tinto’s share of production in 2017.


PTFI continues to engage with Indonesiangovernment officials and has advised that if it isprohibited from exporting copper concentrate itwould be required to reduce production tomatch domestic smelting capacity, resulting innear-term actions to reduce its workforce,significantly reduce costs and suspend futureinvestments on its underground developmentprojects and new smelter. PTFI has indicatedthat it will consider legal action to enforce itscontractual rights should it fail to reach amutually satisfactory agreement with theIndonesian government.

Diamonds

Argyle Diamond Mine(Rio Tinto: 100 per cent)Located in the remote east Kimberley region ofWestern Australia, Argyle is one of the world’slargest producers of diamonds by volume.Ramp-up of production from the undergroundmine delivered a four per cent increase in caratproduction compared with 2015. However, thecombination of lower-than-expected volumesand prices has led to a pre-tax impairmentcharge of US$241 million to property, plant andequipment and intangible assets beingrecorded.

Diavik Diamond Mine(Rio Tinto: 60 per cent)Diavik is located in Canada’s remoteNorthwest Territories, 220km south of theArctic Circle. At Diavik, carats recovered in2016 were four per cent higher than 2015 dueto higher ore throughput offsettinglower grades.


Rio Tinto KennecottThrough improved utilisation and payload,Kennecott will drive an approximatelyfive per cent improvement in truck productivity,which equates to around 12 million tonnes ofadditional material moved in 2017.

Kennecott is in the process of executing theSouth Pushback project, which is key tounlocking the existing ore reserve and potentialgrowth options.

GrasbergWork continues to develop the large-scale,high-grade underground orebodies locatedbeneath and proximal to the Grasberg open pit.The underground orebodies are expected toramp up over several years following theanticipated transition from the Grasbergopen pit.

Oyu TolgoiDevelopment of Oyu Tolgoi’s undergroundmine was approved in May 2016, with firstproduction expected in 2020. When theunderground is fully ramped up in 2027, thecompany expects it to produce more than500,000 tonnes of copper a year.

DiavikThe development of the A21 kimberlite pipe atDiavik is advancing as planned, with firstproduction expected in 2018. A21 will providean important source of incremental productionto maintain current volumes through to the endof mine life.

Resolution Copper(Rio Tinto: 55 per cent)The Resolution Copper project, located inArizona, US, is one of the world’s largestundeveloped copper deposits. Drilling,proposed development and engineeringstudies continue and in March 2016, theNational Environmental Policy Act (NEPA)process formally began for theproposed development.

Operational & Technical Support

In 2016, the Copper & Diamonds group formedan Operational & Technical Support team toimprove the safety, cash flow and long-termvalue of its assets by delivering productivityimprovements. The team works across Copper& Diamonds’ managed and non-managedoperations in four disciplines: resourcestrategy, surface mining, underground miningand ore processing.

Outlook

Copper

After reaching multi-year lows in early 2016,the copper market saw an improvement in thefourth quarter of 2016 and this momentum hascontinued in the first months of 2017. Rio Tintocontinues to expect near-term volatility in thecopper market before a structural deficitemerges going into the next decade. The Groupexpects China to continue to be a key driver ofcommodity markets in the next decade, afterwhich, demand from emerging markets,including India, South East Asia, the MiddleEast, Latin America and Africa, will begin toramp up. In the developed world, greentechnologies should drive increased demandover time. Meanwhile, supply growth willcontinue to be constrained by lower grades andthe depletion of mature mines and often highercost and more challenging developmentoptions.

Diamonds

The diamond market outlook for 2017 ispositive, although macro events, currencymovements, policy choices and short-termsupply availability will continue to impactmarket confidence and trading conditions.

However, medium to long-term fundamentalsfor the diamond industry remain positive.Support for future price growth can beattributable to a declining global mineralresource base, exacerbated by limitedexploration investment and success, resultingin reductions in supply over the medium tolonger term. Demand in India and China isexpected to pick up as market conditionsimprove. Demand in mature markets isexpected to continue to grow in line withGDP growth.


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Energy & Minerals


2016US$ million

2015US$ million



Underlying earnings 610 175

Capital expenditure 141 552



Iron Ore Company of Canada and Simandou are reportedwithin Energy & Minerals, reflecting managementresponsibility.


The Energy & Minerals product group has anattractive portfolio of high-quality mining,refining and marketing operations and projectsthat connect customers and consumers aroundthe world with products that enhance theirquality of life. Demand growth for industrialminerals typically comes mid-to-late in theeconomic development cycle, following peakrequirements for commodities such as iron oreand copper.

The product group’s strategy is focused onoperating low-cost, demand-led businesses.Through its integrated marketing strategiesand insight, the product group creates andgrows global markets for its products to delivervalue for Rio Tinto and its shareholders.Energy & Minerals’ strategy focuses on:

– Safety as the number one priority.– Prioritising value over volume.– Operating demand-led, integrated

operations that can respond quickly to thechanging external environment.

– Creating and growing global marketsthrough technical research anddevelopment and market insight.

– Improving operating performance by drivingproductivity, reducing costs andstreamlining the organisation.

– Strengthening its position in traditionalsegments and entering attractivenew markets.

Safety

In its pursuit of zero harm, Energy & Mineralscontinues to focus on fostering a culture ofaccountability and awareness amongemployees and improving contractor safety.The product group’s health and safety targetcontinues to be on fatality elimination. This hasresulted in an emphasis on critical controls androbust process safety, including rolling out andimplementing the critical risk managementfatality elimination programme across thebusiness. In 2016, there were no fatalities inthe product group and a significant reduction inpotential fatal incidents. However, the all injuryfrequency rate rose to 0.47 in 2016 from 0.46in 2015.

With a workforce spanning multiplegeographies, languages and cultures, Energy &

Minerals faces health and safety challenges.Managers use innovative strategies and visiblesafety leadership to address these and to trainthe workforce.


Overall greenhouse gas (GHG) emissionsintensity across the product group wasmarginally higher in 2016 compared with 2015but still an improvement over 2008 (baseyear). Rio Tinto Coal Australia’s (RTCA)emissions intensity increased to 0.066 tonnesof carbon dioxide equivalent per tonne of coalproduced, compared with 0.062 tonnesin 2015.


The Energy & Minerals product group’sunderlying earnings of US$610 million wereUS$435 million higher than 2015. Thisreflected further cash cost improvements andweaker exchange rates while volumes wereslightly higher overall. Prices for coal and ironore were volatile but increased significantly inthe second half of the year. This impact wasoffset by lower prices for uranium, titaniumdioxide feedstocks, zircon and borates. Pre-taxcash cost improvements in the product groupwere US$342 million and the group has nowdelivered US$1.4 billion of cumulative savingscompared with the 2012 base.

Net cash generated from operating activities ofUS$1,431 million was three per cent lower thanin 2015, as the benefit of cash cost savings andweaker exchange rates was offset by theexpensing of all Simandou study costs from thestart of 2016, and the absence of one-offreductions in working capital achieved in 2015.The decline in capital expenditure reflectedcontinued capital discipline across the productgroup and the net proceeds from the sale ofMount Pleasant thermal coal assets ofUS$192 million. Free cash flow during the yearwas US$1,294 million, 40 per cent higher thanin 2015.

Borates

Rio Tinto Borates (Rio Tinto: 100 per cent)supplies over 30 per cent of the world’s refinedborates from its world-class deposit in Boron,California. It also has borates refineries and/orshipping facilities in China, France, Malaysia,the Netherlands, Spain and the US togetherwith the Jadar lithium-borate project (Rio Tinto:100 per cent) in Serbia. Rio Tinto Boratesproduction of 503,000 tonnes boric oxideequivalent was six per cent higher than in2015, driven primarily by higher marketdemand. Gross revenue of US$620 million wasessentially flat with 2015, and earnings ofUS$117 million were 14 per cent higher due tolower costs.

Coal

In Queensland, Rio Tinto Coal Australia (RTCA)manages the Hail Creek (Rio Tinto: 82 per cent)and Kestrel (Rio Tinto: 80 per cent) coal mines.In New South Wales, RTCA manages Coal &Allied’s coal mines, Hunter Valley Operations(Rio Tinto: 67.6 per cent) and the combined

Mount Thorley (Rio Tinto: 80 per cent) andWarkworth (Rio Tinto: 55.57 per cent)operations. On 30 September 2015, Rio Tintoannounced a restructure of Coal & Allied whichincluded changes in Rio Tinto’s interests inHunter Valley Operations and, indirectly, inWarkworth. The restructure completed on3 February 2016 and resulted in Rio Tintotaking a 100 per cent stake in Coal & Allied.The ownership shown above reflectsthese changes.

Hard coking coal production of 8.1 milliontonnes was four per cent higher than in 2015due to longwall and plant outperformance atKestrel. Semi-soft coking coal production of4.1 million tonnes was 12 per cent higher dueto mine production sequencing at HunterValley Operations and Mount ThorleyWarkworth. Thermal coal production of17.3 million tonnes was seven per cent lowerthan in 2015 as increased production from HailCreek, Kestrel and Mount Thorley Warkworthpartially offset lower volumes which resultedfrom the restructure of Coal & Allied and thedivestment of Bengalla in early 2016. Revenuefell four per cent to US$2,634 million as theimpact of higher prices and sales volumes wasoffset by the impact of the Coal & Alliedrestructure. However, earnings increased fromUS$48 million to US$382 million, driven byhigher prices, cash cost savings and favourableexchange rates.

On 30 September 2015, Rio Tinto reached abinding agreement for the sale of its interest inthe Bengalla Joint Venture to New HopeCorporation Limited. The sale completed on1 March 2016 for US$616.7 million. In January2016, Rio Tinto signed an agreement for thesale of its Mount Pleasant thermal coal assetsto MACH Energy Australia Pty Ltd forUS$220.7 million plus royalties. The salecompleted on 5 August 2016. In February2016, Rio Tinto signed an agreement to sell its74 per cent interest in Zululand AnthraciteColliery (ZAC), an anthracite coal mine in SouthAfrica, to Menar Holding. The sale completedon 2 September 2016. On 24 January 2017,RTCA declared a significant increase(561 million tonnes) in its managed mineralresources at Mount Thorley Warkworth. Thisraises total mineral resources, exclusive of runof mine (ROM) reserves, to a total of6,608 million tonnes. After depletion due tomining, total ROM reserves remain relativelystable at 1,566 million tonnes.

On 24 January 2017, Rio Tinto announced thatit had reached a binding agreement for the saleof its wholly owned subsidiary Coal & AlliedIndustries Limited to Yancoal Australia Limitedfor up to US$2.45 billion. The transaction issubject to certain conditions precedent beingsatisfied, including approvals from theAustralian Government, Chinese regulatoryagencies, the New South Wales Governmentand shareholder approval. Subject to allapprovals and other conditions precedent beingsatisfied, it is expected that the transaction willcomplete in the second half of 2017.


Iron Ore Company of Canada (IOC)

IOC operates a mine, concentrator andpelletising plant in the Canadian province ofNewfoundland and Labrador, together with railand port facilities in Sept-Îles, Quebec. IOCcontinued as a supplier of high-quality,premium pellets and high-quality, lowcontaminant concentrate. The companyremains focused on increasing production tonameplate capacity following completion of theConcentrate Expansion Project in 2014 andfurther increasing productivity. IOC achievedfull year production of 10.7 million tonnes ofsaleable production (concentrate and pellets)(Rio Tinto share), an increase of three per centover 2015. Revenues were two per cent lowerthan 2015, however, earnings increased fromUS$12 million to US$64 million, reflecting cashcost savings and favourable exchange rates.

Iron & Titanium

Rio Tinto Iron & Titanium (RTIT) is the world’slargest producer of high-grade titanium dioxidefeedstocks. It mines ilmenite at its whollyowned Rio Tinto Fer et Titane (RTFT) operationin Canada, its managed Richards Bay Minerals(RBM) operation in South Africa (Rio Tinto:74 per cent), and its QIT Madagascar Mineralsoperation (Rio Tinto: 80 per cent). RTITproduces high-grade titanium dioxidefeedstocks at its world-class metallurgicalcomplexes at RTFT and RBM as well asvaluable co-products that include high-purityductile iron, steel billets, metal powders andzircon. At 1 million tonnes, titanium dioxideslag production was four per cent lower in 2016than in 2015, as RTIT continues to optimiseproduction to match demand. Two of ninefurnaces at RTFT and one of four furnaces atRBM are currently idled. RTIT’s revenuesreduced by ten per cent due to lower salesvolumes and prices for titanium dioxidefeedstocks, metallic products and zircon.Earnings fell by 26 per cent to US$86 million.

Salt

Dampier Salt (Rio Tinto: 68 per cent), theworld’s largest solar salt exporter, producesindustrial salt by solar evaporation of seawaterat Dampier and Port Hedland, and fromunderground brine at Lake MacLeod, all inWestern Australia. Salt is sold principally tobase chemical industry markets in Asia. Saltproduction of 5.2 million tonnes (Rio Tintoshare) was six per cent lower than in 2015 as aresult of lower market demand. Earnings werein line with 2015 at US$25 million.

Uranium

The Uranium business comprises EnergyResources of Australia Ltd (ERA, Rio Tinto:68.4 per cent), which operates the Ranger Minein the Northern Territory of Australia andRössing Uranium Limited (Rio Tinto: 68.6 percent) in Namibia, together with the Roughriderproject (Rio Tinto: 100 per cent) in Canada’sAthabasca Basin.

Uranium production of 6.3 million pounds(Rio Tinto share) was 29 per cent higher than in2015 due to increased mill throughput, gradeand recovery. Revenues fell four per cent dueto lower prices, however, earnings ofUS$10 million were US$52 million morefavourable than 2015, including the effect ofcash cost savings and lower depreciation atERA following the impairment recognisedin 2015.


The Jadar project in Serbia is a lithium-boratedeposit that was discovered by Rio Tinto in2004. If developed, it could supply a significantproportion of global demand for lithium andborates. Findings so far are encouraging andprefeasibility assessments are ongoing toconfirm the economic business case andadvance the environmental and socio-economic impact assessments for the project.

Work continued on the feasibility study for theZulti South mine expansion at RBM, which willmaintain low-cost RBM smelting capacity. Thegroup entered into a joint venture withSavannah Resources Plc to conduct furtherevaluation work on its ilmenite tenementsin Mozambique.

Rio Tinto remains in discussion with NorthAtlantic Potash Inc. (NAPI), a subsidiary of JSCAcron, a world leader in fertiliser production,regarding the optimum development pathwayfor their exploration joint venture inSaskatchewan, Canada.

Simfer (owned 42.8 per cent indirectly byRio Tinto) completed the integrated BankableFeasibility Studies for the mine, rail, port andinfrastructure elements of the Simandou ironore project in May 2016 in accordance with itsobligations under the Investment Framework.On 28 October 2016, Rio Tinto and Chinalcosigned a non-binding agreement to sellRio Tinto’s entire stake in the Simandou projectin Guinea to Chinalco. The Heads of Agreementsets out the proposed principal terms of thesale with the aim of signing a bindingagreement within six months. If the saleoccurs, Rio Tinto expects to receive paymentsof US$1.1-1.3 billion depending on the timingof the development of the project.

Outlook

Whilst markets remain volatile, the medium tolong term outlook continues to be positiveacross all products as urbanisation and risingstandards of living, particularly in China, drivehigher levels of demand.

Last year saw dramatic changes in the supplyand demand balance driving spot prices forboth thermal and metallurgical coal from verylow levels early in 2016, to short-term recordhighs in November. The changing marketdynamics were primarily driven by Chinesepolicies which are likely to continue to affectcoal markets in the short to medium term.Even though market prices are at higher levelsfor both thermal and metallurgical coal,producers remain wary as potential exists forpricing to revert to levels seen in late 2015 andearly 2016.

Uranium prices fell through the latter half of2016, due to lacklustre demand growth andoversupply. Demand outlook was muted asJapan made slow progress restarting its offlinereactors, additional reactor closures wereannounced in the US, and no new Chinesereactors were approved in 2016. Stronguranium production and surplus secondarymaterial have exacerbated the price weaknessand it will likely take some time for the marketto rebalance and prices to recover.

Even though titanium dioxide marketconditions remained challenging in 2016, thereare signs of improving demand fundamentalswith excess titanium dioxide pigment andfeedstock inventories across the supply chainstarting to normalise and pigment prices rising,albeit with ongoing latent capacity in thefeedstock market. In response to thechallenging market, RTIT has taken action at anumber of its operations, including flexingproduction capacity to align with demand,optimising working capital, and structural costreductions. In the medium to long term,demand for titanium dioxide feedstock isexpected to grow, in line with improving globaleconomic conditions, urbanisation and demandgrowth in emerging markets, supported byrising per capita incomes.

Long-term borate sector fundamentals remainattractive. Near-term demand is stable, withNorth American housing-related sectors andglobal glass and agricultural demandperforming well. Rio Tinto Borates is focusedupon increasing refined borate capacity tomeet above-GDP global demand growth whileimproving safety performance and its costposition.


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Growth & Innovation

Growth & Innovation was formed in July 2016,bringing together Exploration and Technology& Innovation. It supports Rio Tinto’s assets inachieving superior performance throughouttheir life cycle, to ensure the Group ismanaging risk effectively and generatingmaximum cash. Growth & Innovation partnerswith the Rio Tinto product groups to optimisevalue from the time of the initial explorationconcept through to closure of a mine orprocessing facility.


Growth & Innovation is accountable for finding,evaluating, developing and optimising assetsso they are safe, productive and profitable.Centralised technical knowledge andexperience enable Growth & Innovation todeliver portfolio growth effectively, driveinnovative solutions to operational andbusiness challenges and provide support forquality decision-making.

Safety is the number one priority. Growth &Innovation works with and through the productgroups to deliver results in line with theRio Tinto strategy in the following areas:

– Finding: exploring, discovering or acquiringnew Tier 1 resources.

– Evaluating: ensuring the right projectsproceed with the optimal business case.

– Developing: delivering major capitalprojects safely and efficiently, on time, onbudget and ready for a seamless handoverto operations.

– Optimising: leading a step change in Groupproductivity as well as providing technicalservices to operations, replicating bestpractice, building technical capability,managing strategic technical risk andoverseeing the Group’s innovation andautomation platforms.

Safety

In 2016, Growth & Innovation achieved afatality free year. The all injury frequency ratewas 0.57 against 0.44 in 2015. Explorationachieved excellent results with four monthsinjury free from September. However, Rio TintoProjects reported a disappointing all injuryfrequency rate of 0.66 compared with 0.46in 2015.

During 2016, the focus on fatality preventioncontinued in Growth & Innovation with furtherimplementation and embedding of the criticalrisk management programme. Explorationcompleted five successful pilots of critical riskmanagement and the programme will be rolledout across all of Exploration in 2017. TheProjects team continued embedding the criticalrisk management fatality eliminationprogramme, reporting high levels of leaderengagement and consistently identifyingopportunities to strengthen critical controls forfatality risks.

Growth & Innovation continued to buildcapability and improve the management of

major hazard risks across the Group.

Performance

Exploration

Exploration creates value for Rio Tinto bydiscovering or acquiring well-located,high-grade Tier 1 resources. Its work includesboth greenfield exploration to identifycompletely new business opportunities andbrownfield exploration to sustain or growexisting Rio Tinto businesses. Exploration alsoprovides orebody knowledge and resourceevaluation support to a range of projects withinthe company as well as potential acquisitions.

Increasingly complex community, sustainabilityand investment requirements mean it typicallytakes more than a decade to progress frominitial exploration through to discovery,evaluation and then to a final developmentdecision. Exploration’s comprehensiveapproach to stakeholder and communityengagement contributes to the Group’s sociallicence to operate. Rio Tinto has continued toinvest in exploration despite the difficultmarket conditions of the last few years.Maintaining this core exploration capability andapplying a rigorous prioritisation process haveconsistently delivered Tier 1 discoveries, whichin the last ten years include:

Year Discovery Commodity Location

2008 Sulawesi Nickel Indonesia2008 Mutamba Titanium Mozambique2009 Jadar Lithium/

boratesSerbia

2011 Amargosa Bauxite Brazil2013 KP405 Potash Canada2014 Yandi Braid Iron ore Australia2015 Mount

ThorleyWarkworth/HunterValley

Coking coal Australia

At the end of 2016, the Exploration group wasactive in 14 countries and continued to assessopportunities across a range of commoditiesincluding copper, nickel, iron ore, bauxite,coking coal, uranium, diamonds and mineralsands. During the year, Exploration increasedits commercial activity, establishing jointventures in the US, Chile, Serbia, Kazakhstan,Canada, Mexico, Papua New Guinea andAustralia. Divestment activities continued forprojects that do not meet Rio Tinto’sinvestment criteria, reinforcing the approach oftreating Exploration like a business. In the pastdecade the Group has spent aroundUS$1.7 billion on greenfield exploration and inturn generated US$2.2 billion fromdivestments of exploration projects that thecompany decided did not meet these criteria.

In 2016, the Group reduced its exploration andevaluation expenditure to US$497 million(a).This represented a 14 per cent decreasecompared with 2015 expenditure ofUS$576 million. Of the 2016 spend,

US$206 million relates to centrally controlledexploration and evaluation activity. In total,Rio Tinto’s 2016 exploration and evaluationactivity covered eight commodities across arange of greenfield and brownfieldenvironments. In recent years, Rio Tinto hasshifted the emphasis of Explorationexpenditure to projects in the OECD and Peruin line with the increasing focus oncopper exploration.

At the Roughrider uranium project inSaskatchewan, orebody knowledge continuedto progress, with resource modelling, drillingactivities and identification of new explorationtargets. At the Sanxai bauxite project in Laos,ongoing exploration improved understanding ofresource quality, while infrastructure studiescontinued to assess options for moving futureore to a suitable port for export. At the LaGranja copper project in Peru ongoing orebodyknowledge and brownfield explorationprogressed with drill testing of new geophysicaland geochemical targets within the orbit. Atthe Tamarack nickel project in the US, drillingand exploration activities continued, providinggreater confidence in resource quality.Brownfield projects again generated gooddrilling results at iron ore projects in the Pilbaraand for bauxite in the Weipa region in Australia.In 2016, the five year exploration partnershipwith Chinalco in China concluded. Explorationretains a presence in the country to monitorexploration opportunities and options forfuture partnerships.

Evaluation

Discoveries that align to company strategyprogress to evaluation to ensure “the rightproject” is undertaken. Business objectives ofinvestment returns are balanced with technicaland resource certainty and stakeholderrequirements to manage overall project risk.The goal is to minimise uncertainty associatedwith the resource and to develop the optimaltechnical solutions using proven methods ornew innovation to bring the project to market.

In collaboration with business units, Growth &Innovation applies a range of strategic planningprocesses and expertise to identify, analyseand select the optimal configuration and timingof greenfield and brownfield projects. Duringthe year, this support was provided to projectsin the Aluminium and Copper & Diamondsproduct groups.

In 2016, extensive work was also done on apilot process for the Jadar project to enableproduction of both borates and lithium from thenewly discovered mineral jadarite. At OyuTolgoi, the Group’s experience in block cavingenabled more efficient mine design, to enhanceproductivity and safety.

(a) An additional US$21 million gain on disposal ofundeveloped evaluation projects was recorded separatelyin profit/(loss) relating to interest in undeveloped projectsin the income statement.


To maximise value, Growth & Innovation looksbeyond the technical solution, reviewing capitalintensity and project timing to ensure allaspects of each project are optimised. TheAmrun bauxite and Silvergrass iron ore projectsin Australia benefited from these reviewsin 2016.

Engagement with a broad range of stakeholdersduring evaluation protects and enhances ourlicence to operate. The enduring relationshipsbuilt during exploration and evaluation areessential to future operational success.

The Group’s major evaluation projects in2016 were:

Project Commodity Country

La Granja Copper PeruResolution Copper USPilbara Iron ore AustraliaBowen Basin Coking coal AustraliaZulti South Mineral

sandsSouthAfrica

Jadar Lithium/borates

Serbia

Simandou Iron ore GuineaWeipa Bauxite Australia

Projects

Rio Tinto has a central major capital projectsteam that uses standardised projectmanagement systems and processes to deliverprojects safely and efficiently, on time and onbudget and ready for a seamless handover tooperations upon completion.

In 2016, the US$1.9 billion Amrun bauxiteproject in the Weipa region in Australiaadvanced to schedule in both engineering andconstruction. All major contracts have beencommitted as planned, and site establishmentcontinued with the construction of theaccommodation village progressing to plan. The40 kilometre main access road was completedin December and the river terminals areexpected to be operational in Q1 2017.

In 2016, the Oyu Tolgoi underground projectramped up significantly. More than2,800 personnel were mobilised, with87 per cent of these Mongolian nationals. Workson underground mine development, theaccommodation camp, conveyor to surfacedecline, sinking of shaft #2 and shaft #5, andcritical facilities continue to progress.

During the year, a range of projects werecompleted in the Pilbara for the Iron Orebusiness including Cape Lambert Port B, thePilbara Fuel Infrastructure project, Yandi BilliardSouth and phase two of the NammuldiIncremental Tonnes project, which wasdelivered in October. The Silvergrass projectcommenced and is on schedule to becompleted in 2017, increasing the Nammuldioperation by ten million tonnes per annum byadding a primary crushing facility and ninekilometres of overland conveying system tointegrate with the existing processing plant.

The Yandicoogina Oxbow project progressed in2016. Upon completion it will sustainYandicoogina fines production by openingaccess to a new orebody. Construction is morethan 50 per cent complete and three monthsahead of the construction plan. Construction ofthe Cape Lambert 80 megawatt gas-fired powerstation is ahead of plan – 70 per cent completeat the end of 2016 with planned completion inQ1 2018.

Following delays to the project schedule due tosoftware issues in early 2016, the AutoHaul®

project regained stability in the second half of2016 with improved reliability, and all relevantparts of the rail network are now enabled forautonomous trains. In 2017, the AutoHaul®

trains will operate extensively in automatedmode, with a driver on board until all safety andreliability systems arethoroughly demonstrated.

In 2016, the Holden Environmental Remediationproject was completed and received the 2015Environmental Excellence Award from theAmerican Exploration & Mining Association forcleaning up the historic site in WashingtonState in the US. The East Waste Rock Extensionproject at Kennecott was also completedin 2016.

Productivity and innovation

In 2016, Rio Tinto committed to a target ofUS$5 billion of free cash flow frommine-to-market productivity improvementsover the next five years. Growth & Innovationwill lead this step change in productivity andtechnical excellence across the Group, buildingupon the cost reduction and transformationachievements of the businesses to deliverfurther sustainable gains.

The productivity remit in Rio Tinto has multiplestreams including mining, processing,infrastructure and asset management. In 2016,the focus was on replication of leading practice,progressing integrated operations andcommencing redesign of the value chain.

All work in this space is underpinned by atechnical excellence programme to ensureimprovements are sustainable.

Rio Tinto continues to progress its Mine of theFuture™ automation and innovationprogramme, leveraging a partnership with theUniversity of Sydney to deliver innovative toolsto support Rio Tinto operations in the delivery ofimproved productivity. The Mine AutomationSystem (MAS) and RTVis™ orebody visualisationsoftware is now implemented at 85 per cent ofsurface mining sites, helping operators in thefield make better real-time decisions as well assupporting longer-term work likemine planning.

Outlook

In Exploration, challenges are expected tocontinue in relation to timely access to groundand the decreasing grade and quality ofpotential orebodies. For 2017, explorationprojects at a more advanced stage are listed inthe table at the base of the page.

In project evaluation and development, workwill continue to deliver priority Group projectson schedule and on budget including Amrun,Silvergrass, the Oyu Tolgoi underground andAutoHaul® projects as well as the progressionof studies for the Jadar project in Serbia.

The productivity programme will gainmomentum in 2017 in pursuit of savingstargets, driving improvements in key metricslike effective utilisation of plant and equipment,payload, maintenance intervals and processingrates. The Group’s approach to integratedoperations will be advanced, to leverage awealth of real-time data to enable quicker andbetter decision making across the whole valuechain. Work will also continue to centralisetechnical expertise to better supportoperational performance and problem solving.

In 2017, a centre of excellence for undergroundmining will be progressed to support Oyu Tolgoias well as future Rio Tinto underground minedevelopments, such as Resolution in the US.

2017 exploration projects

Project Commodity Country Type Stage

Tamarack Nickel US Greenfield Project of MeritRoughrider Uranium Canada Greenfield Order of MagnitudeSanxai Bauxite Laos Greenfield Project of MeritStargrove Diamonds Canada Greenfield Project of MeritLa Granja orbit Copper Peru Greenfield Project of MeritPilbara Iron ore Australia Brownfield Project of MeritWeipa Bauxite Australia Brownfield Project of Merit


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Five year review

Selected financial data

The selected consolidated financial information below has been derived from the historical audited consolidated financial statements of the Rio TintoGroup. The selected consolidated financial data should be read in conjunction with, and qualified in their entirety by reference to, the 2016 financialstatements and notes thereto. The financial statements as included on pages 110 to 194 have been prepared in accordance with IFRS as defined innote 1.

Rio Tinto GroupIncome statement data

For the years ended 31 DecemberAmounts in accordance with IFRS

2016US$m

2015US$m

2014US$m

2013US$m

2012US$m

Consolidated sales revenue 33,781 34,829 47,664 51,171 50,942

Group operating profit/(loss) (a) 6,795 3,615 11,346 7,430 (1,925)

Profit/(loss) for the year from continuing operations 4,776 (1,719) 6,499 1,079 (3,020)

Loss after tax from discontinued operations – – – – (7)

Profit/(loss) for the year 4,776 (1,719) 6,499 1,079 (3,027)

Basic earnings/(losses) per share (b)

– From continuing operations (US cents) 256.9 (47.5) 353.1 198.4 (163.4)

– From discontinued operations (US cents) – – – – (0.4)

Basic earnings/(losses) for the year per share (US cents) 256.9 (47.5) 353.1 198.4 (163.8)

Diluted earnings/(losses) per share (b)

– Profit/(loss) from continuing operations (US cents) 255.3 (47.5) 351.2 197.3 (163.4)

– Loss after tax from discontinued operations (US cents) – – – – (0.4)

Diluted earnings/(losses) for the year per share (US cents) 255.3 (47.5) 351.2 197.3 (163.8)

Dividends per share 2016 2015 2014 2013 2012

Dividends declared in respect of the year

US cents

– interim 45.0 107.5 96.0 83.5 72.5

– final 125.0 107.5 119.0 108.5 94.5

UK pence

– interim 33.80 68.92 56.9 54.3 46.4

– final 100.56 74.21 78.0 65.8 60.3

Australian cents

– interim 59.13 144.91 103.1 93.0 68.5

– final 163.62 151.89 153.0 120.14 91. 7

Dividends paid during the year (US cents)

– ordinary 152.5 226.5 204.5 178.0 163.5

Weighted average number of shares – basic (millions) 1,797.3 1,824.7 1,848.4 1,847.3 1,849.1

Weighted average number of shares – diluted (millions) (b) 1,808.6 1,824.7 1,858.7 1,857.7 1,849.1

Balance sheet data

at 31 DecemberAmounts in accordance with IFRS

2016US$m

2015US$m

2014US$m

2013US$m

2012US$m

Total assets 89,263 91,564 107,827 111,025 118,437

Share capital/premium 8,443 8,474 9,053 9,410 10,189

Total equity/net assets 45,730 44,128 54,594 53,502 57,740

Equity attributable to owners of Rio Tinto 39,290 37,349 46,285 45,886 46,553

(a) Group operating profit or loss includes the effects of charges and reversals resulting from impairments (other than impairments of equity accounted units) and profit and loss on disposals ofinterests in businesses. Group operating loss or profit amounts shown above excludes equity accounted operations, finance items, tax and discontinued operations.

(b) The effects of dilutive securities has not been taken into account when calculating diluted loss per share for the years ended 31 December 2015 and 2012, in accordance with IAS 33 “EarningsPer Share”.


Summary Remuneration Report: Annual statement byRemuneration Committee chairmanDear shareholders

On behalf of the board, I am pleased tointroduce our 2016 directors’ remunerationreport (the Remuneration Report), for which weseek your support at our annual generalmeetings (AGMs), in London in April, and inSydney in May.

The Remuneration Report is designed todemonstrate the link between the Group’sstrategy, its performance, and theremuneration outcomes for our executives,particularly the executive directors.

Rio Tinto takes a long-term approach to itsactivities. This means that we concentrate ondeveloping long-life, low-cost, expandableoperations, that are capable of providingattractive returns to our shareholdersthroughout the cycle. Our executives’performance objectives are set accordingly.

The Remuneration Report has been prepared inaccordance with applicable legislation andcorporate governance guidance in the UK andAustralia. Australian legislation requiresdisclosures in respect of “key managementpersonnel”, being those persons havingauthority and responsibility for planning,directing and controlling the activities of theGroup. The key management personnel are, inaddition to the directors, the non-directormembers of the Executive Committee. TheExecutive Committee comprises the executivedirectors, product group chief executives andGroup executives. Throughout thisRemuneration Report, the members of theExecutive Committee are collectively referredto as “executives”. They are listed on pages 53and 54, with details of the positions held duringthe year and dates of appointment tothose roles.

Shareholders will be aware that we have tocomply with UK and Australian legislation inthe remuneration arena and that the rulesdiffer. We have structured the votingarrangements such that all shareholders voteon both the resolutions that we are putting toour AGMs.

This Remuneration Report is divided into twoparts: the statement of remuneration policy,which summarises our policies and practices(the Remuneration Policy); and the annualreport on remuneration, which shows how theRemuneration Policy has been applied (theImplementation Report).

The Remuneration Policy was subject to abinding vote for UK law purposes in 2015 andbecame effective in respect of payments todirectors from 7 May 2015. Minor changeswere made to the Remuneration Policyincluded in the 2015 Annual report; these didnot require shareholder approval. A version ofthe Remuneration Policy which highlightsthese changes can be found on our website.There will be no vote this year for UK lawpurposes on the Remuneration Policy. It is ourintention that the Remuneration Policy will

next be put before shareholders for a vote, forUK law purposes, at our AGMs in 2018.

The Implementation Report (including thisstatement) is subject to an advisory vote forUK law purposes. The Remuneration Report asa whole is subject to an advisory vote forAustralian law purposes. Both resolutions areto be voted on at the AGMs as Joint DecisionMatters by Rio Tinto plc and Rio TintoLimited shareholders.

Although, as a matter of UK law, theRemuneration Policy only applies to theremuneration of our directors, it is the intentionof the Remuneration Committee (“theCommittee”) that its broad policy principles willcontinue to inform the way in which ournon-director key management personnel onthe Executive Committee are remunerated.

The Remuneration Policy describes, amongother things: our executive remunerationstructure; the details of the discretionsavailable to the Committee; our approach toremuneration on recruitment; the details ofexecutives’ service contracts; and how wetreat leavers.

Remuneration for executives comprises fixedcompensation in the form of base salary;participation in a pension plan, superannuationfund and/or a cash allowance to contribute to apension fund; the receipt of certain benefits;and performance-related remuneration. Eachelement is described in the RemunerationPolicy. The majority of the remuneration ofexecutives will normally be performancerelated, which is provided in the form ofvariable short and long-term incentives,weighted towards the long-term and deliveredin Rio Tinto shares.

In relation to the short-term incentive plan(STIP), the Committee each year setsperformance criteria relative to threebenchmarks: “threshold”, “target” and“outstanding”. “Target” performance isintended to be stretching, and is typicallyequivalent to the business plan for the year.

Our approach to the disclosure of measures,weightings and targets remains unchanged. Inrelation to the long-term incentive plan (LTIP),these will all be disclosed in advance, at thebeginning of each five-year performanceperiod. In relation to the STIP, we will, when itcomes to disclosure, distinguish betweensafety goals and financial and individual goals.In the area of safety goals, we will continue todisclose the measures, weightings and targetsat the beginning of each year. In the area offinancial and individual goals, we will continueto disclose, at the beginning of each year, themeasures and weightings only, because weregard the targets as commercially sensitive.However, as we said in the RemunerationReport last year, we intended to disclose, andhave in the Implementation Report disclosed,the targets and outcomes for 2016retrospectively. In the rare instances where thismay not be prudent on grounds of commercial

sensitivity, I will seek to explain why, and givean indication of when they would be disclosed.

The chart on page 92 demonstrates the usualtimeframe for the delivery of the componentsof remuneration, using 2016 as an example.This emphasises the long-term nature of ourremuneration arrangements.

You will see several mechanisms in theRemuneration Report that are intended tocreate alignment of interest betweenshareholders and executives. We have, for ourexecutives, a mandatory conversion of 50 percent of any annual short-term bonus paymentinto shares, with vesting deferred for threeyears. The performance measures under ourlong-term remuneration plans are structuredto support and incentivise the creation oflong-term shareholder value. In addition,should circumstances warrant, we havereserved to the Committee such discretions asenable it to safeguard against the returnexperience of shareholders being materiallymisaligned with the reward experienceof executives. Because we want theirremuneration outcomes properly to reflect theGroup’s overall performance. We also havemeaningful share ownership requirements forour executives which are described in theImplementation Report.

There are many examples in the RemunerationPolicy and practice of how our dialogue withshareholders has influenced the Committee’sdecisions. In 2013, we added a newperformance measure to our PerformanceShare Plan (PSP), namely the relative EBITmargin improvement measure. We did thisbecause many of our owners had expressed awish that our PSP should incorporate somediversification beyond total shareholder return(TSR). We extended the performance period ofthe PSP from four to five years and wematerially reduced the pay-out for “threshold”performance. We ceased new awards under ourShare Option Plan. We have adjusted the safetymeasures in our STIP targets to reflect losttime injuries and all injury frequency rates. Inaddition, from and including 2016, we includedperformance metrics relating to a keyprogramme to support our goal of fatalityelimination, called critical risk management(CRM), which is described in more detail onpage 26.

Our meetings with shareholders in 2016 werewell attended and provided an opportunity forme to discuss remuneration related topics withour owners. I look forward to continuing thatdialogue during 2017 as we prepare to presentour refreshed Remuneration Policy toshareholders at the 2018 AGM.

2017 decisions

In his letter, the chairman of the board hasprovided context to the issues arising from theSimandou project. The board has determinedthat it would be inappropriate, whileinvestigations are ongoing, to make anydetermination about Sam Walsh, our former

2016 Strategic report riotinto.com i

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Summary Remuneration Report: Annual statement by theRemuneration Committee chairman continued

chief executive, or about his outstandingremuneration. The company has thereforereached an agreement with Sam to defer thepayment of his 2016 STIP award and allremaining unvested LTIP awards (includingBDP and PSP awards) for a minimum of twoyears. Further details of these arrangementsare described in the Implementation Report.

There will be no annual salary increases for thechief executive or for the newly appointedmembers of the Executive Committee.Consistent with the prior practice, annualsalary increases for other executives are in linewith the base salary budgets applying to thebroader employee population.

For 2017, the STIP measures and opportunitiesfor executives remain weighted 50 per cent forfinancial, 30 per cent for individual and20 per cent for safety measures. The Groupfinancial targets relate to earnings and free cashflow. The individual targets cover objectivesdirectly relating to the five strategic priorities,described on page 9. These include safety, cash,license to operate, people and growth, togetherwith an assessment of broader leadershipcapability and contribution. The 2017 safetymeasures, weightings and targets are fullydisclosed on page 91. The financial measuresand weightings are also described on page 89.We expect to describe the 2017 financial andindividual targets retrospectively in the 2017Implementation Report.

The level of LTIP awards to be granted toexecutives in March 2017, as a percentage ofbase salary, will be broadly equivalent to thosemade in 2016. Consistent with our practicesince 1998, the awards made under the LTIPare calculated using the average share priceover the previous calendar year. As such, theawards granted in 2017 will be calculated usingthe 2016 average share prices of £23.352 andA$48.533 respectively. These prices are belowthe current share price as at the end ofFebruary 2017. When we made the awards lastyear, the reverse was true. The level of theaverage price compared to the current pricehas an impact on the number of sharescontained within an LTIP award. Our decision touse average prices over the year, rather thanspot prices, is intended to subdue the rewardconsequences of share price volatility.

The performance conditions for the 2017 PSPawards are outlined in the ImplementationReport. The 2017 comparator group for theEBIT margin measure remains unchanged from2016 although Alcoa’s membership will besubject to future review following its recentdemerger.

2016 performance and remuneration

On pages 80 and 82 of this Report, weretrospectively disclose the financial andindividual targets for our Short Term IncentivePlan (STIP), set by the board for 2016. I won’trepeat here the details of performance againsttargets, save to say that, in the main, targetswere exceeded, especially when looking at thefinancial targets on an “unflexed” basis. I talk

later in this statement about 2016remuneration outcomes, and I describe our“flexing” policy in relation to the STIP. This isdesigned to subdue the reward consequencesof significant foreign exchange and commodityprice volatility.

I know that shareholders expect to see strongalignment between the value of their ownshareholdings and the wealth of executives.The remuneration outcomes shown in thesingle total figure of remuneration testifyclearly to this alignment. Fifty per cent of theannual STIP awards are deferred into shares(through the Bonus Deferral Plan (BDP)) forthree years, specifically to ensure that amaterial proportion of short-term pay isexposed over the medium term to fluctuationsin our share price.

The single total figure of remuneration is ofunderstandable interest to shareholders, so letme comment on it. The picture is somewhatcomplicated in this year’s report because of theretirement of our previous chief executive, SamWalsh, at the beginning of July, and hissuccession by Jean-Sébastien Jacques.Jean-Sébastien’s base pay and variable payarrangements are at a similar level to hispredecessor’s, using three-year averageexchange rates. However, our new chiefexecutive does not receive the expatriatebenefits provided to his predecessor. If wecompare the chief executive’s total singlefigure of remuneration for 2016 with theequivalent figure for last year, it is lower,because Jean-Sébastien was paid as a deputychief executive and product group chiefexecutive for the first half of 2016. If wecompare Jean-Sébastien’s single figure for2016 compared to 2015, it is higher becausehis base pay and variable pay increased uponhis appointment as chief executive.

The single total figure of remuneration for thechief financial officer, Chris Lynch, is higher in2016 due mainly to the LTIP awards vesting in2016, this being the first vesting of suchawards following his appointment to theExecutive Committee in April 2013.

Short Term Incentive Plan (STIP)

The 2016 STIP awards for both executivedirectors are higher than last year (although inthe case of Jean-Sébastien, this comparison isdistorted by what I described above), reflectingperformance against stretching safety, financialand individual targets. I will talk in a momentabout the aggregate STIP financial result, butbefore that I will talk about the 2016 safetyperformance.

STIP – Safety

Our safety performance continues to improveyear on year, but the challenge to do betterremains. In June 2016, a colleague died atParaburdoo, our iron ore operation in WesternAustralia. Our Critical Risk Management (CRM)programme is designed to prevent fatalities inthe future – this is our most important safetygoal. Encouragingly, we saw some solid

learnings and improvements in 2016, startingthe rollout of CRM at every site, with leadersrecording more than 1.3 million verifications,and we introduced new procedures to make ourrail networks safer.

Looking at achievement against our 2016safety STIP targets, the Group’s all injuryfrequency rate remained unchanged at 0.44 for2016 which was the Group’s “threshold” target(set at the 2015 AIFR outcome). There were206 lost time injuries in 2016 compared with220 in 2015. This was above the level set for“threshold” performance for the Group, andjust below the level set for “target”, of 202 losttime injuries. Performance against the CRMmeasures was between “target” and“outstanding”. This has led to a total safetyoutcome for the Group of 106 per cent (out of200 per cent).

However, reductions were applied to the safetyperformance component of the STIP where afatality occurred. For example, the safety resultfor the chief executive was reduced from106 per cent to 85 per cent due to the impactof the Paraburdoo fatality. This was driven by a25 percent reduction for the period from thechief executive’s appointment as deputy chiefexecutive effective 17 March 2016, leading toan overall reduction of 20 percent for the year.Such adjustments reflect the level of oversightwhich the chief executive and other executiveshad for safety leadership during the year. Therewere also safety related downwardadjustments to the remuneration of the chieffinancial officer and of certain other executives.

STIP – Financial

To remind you, in considering financialperformance against the annual plan, wemeasure half against the original plan; theother half is “flexed” to exclude the impact offluctuations in exchange rates, and quotedmetal and other prices during the year, whichare outside management’s control. We haveused this approach consistently since 2005 formeasuring our earnings performance, and haveflexed the cash flow outcomes since theintroduction of this measure in the STIP in2009. When commodity prices rise, or there arefavourable exchange rate variations, we protectshareholders by ensuring that 50 per cent ofthe STIP opportunity (as it relates to financialperformance) is denied the benefit of that rise.When the reverse happens, and commodityprices fall or there are negative exchange ratevariations, that STIP opportunity is safeguarded(as to 50 per cent) against the fall. Our view isthat this approach maintains appropriateincentive for executives, even in times ofsignificant earnings volatility.

In terms of achievement against our 2016financial STIP targets, the Committeedetermined that the “outstanding” level forunderlying “unflexed” earnings and free cashflow set by the board was exceeded. The“flexed” earnings free cash flow targets werealso exceeded. It is worth noting that thetargets were set in early 2016 when there wasa subdued outlook for commodity prices. For

ii riotinto.com 2016 Strategic report

example, iron ore prices started 2016 at US$43per tonne and ended the year around US$80per tonne. Shareholders too benefited from theunexpected increase in commodity prices,particularly in the second half of the year,because this created higher profits for the yearthan were signaled by consensus estimates inJanuary 2016, with the commensuratestrengthening in share price and the level ofdividend payments. A significant contributionto the achievement of the “flexed” targets wasdriven by meeting and exceeding challengingcost savings and productivity targets.

Taking all these points into consideration, theCommittee determined that the STIP financialresult for 2016 should be 166 per cent out of amaximum of 200 per cent. This was aftercertain minor adjustments to the targets in2016 to take account of events outsidemanagement’s control and to ensure alike-for-like comparison. The financial resultbefore adjustments made by the Committeewas 167 per cent.

Long Term Incentive Plan

Turning to the LTIP, the PSP awards granted in2013 have three performance metrics – TSRrelative to the Euromoney Global Mining Index,TSR relative to the MSCI World Index andimprovement in EBIT margin relative to globalmining comparators (weighted one third each).Once again, I believe that the award outcomeclearly demonstrates that our decision someyears ago to have the two TSR indices operatealongside each other has protectedshareholders against windfall gains for

executives. For while our TSR against theMining Index demonstrated outperformance,we underperformed against the MSCI. Theoutcome against the TSR measures, which isexplained in the Implementation Report, wasan award of 24.67 per cent out of a potential66.67 per cent. The Committee gaveconsideration to the Group’s overallperformance during the four-year performanceperiod and concluded that the vesting ofawards, based upon the achievement of theTSR measures, was justified and, byconsequence, this portion of the award vestedon 20 February 2017.

The estimated performance against the EBITmargin measure is that Rio Tinto ranked no.2against the comparator group of eleven, whichwould result in a vesting of 100 percent for thismeasure (33.33 per cent of the total award).We can only provide an estimate at this time aswe do not have the reported data for all thecomparator companies. The overall estimatedvesting for the award when the TSR and EBITmargin portions are combined is therefore58.0 per cent. The Committee will make adefinitive assessment against the improvementin EBIT margin measure when the details of themargin performance of the comparator groupcompanies become available in May 2017 andif applicable, this portion of the award wouldvest on 31 May 2017.

There were a number of changes to theGroup’s Executive Committee during 2016, allof which have previously been announced. Thedetails of the retirement of the former chief

executive are included on page 87. Theappointment and departure terms for otherexecutives are included in the relevant sectionsof the Implementation Report. These includethe severance terms for Alan Davies and DebraValentine. The terms in all cases are compliantwith our Remuneration Policy and withprecedent.

The Company continues to monitor gender payand is satisfied that awards made betweenmale and female employeesdemonstrate equality.

Governance and owners’ views

It continues to be our intention to be alert toevolving best practice as well as to the viewsand guidance given to us in the conversationswe have with our owners. The Committeereaffirms its commitment to keep under reviewthe level of vesting for “threshold”performance under the PSP. We are committedto a continuing dialogue, including listening toviews about this report, which are mostwelcome.

Yours sincerely,

John VarleyRemuneration Committee chairman

References to page numbers in this letter and the pages following are references to relevant page numbers in the 2016 Annual Report. This is available online at riotinto.com/ar2016.

2016 Strategic report riotinto.com iii

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Remuneration Summary – Single total figure of remunerationThe table below provides the single total figure of remuneration for each individual who acted as an executive director during 2016, with appropriateprior year comparison figures, in accordance with the UK legislation. The amounts in this table are stated in currency of actual payment. This is inaddition to the Australian statutory disclosure requirements set out in US dollars in Table 1a on pages 98 and 99 of the 2016 Annual report whichinclude theoretical accounting values relating to various parts of the remuneration packages, most notably LTIP arrangements.

Jean-Sebastien Jacques (£) Chris Lynch (£)

2016 2015 2014 2016 2015 2014

Base salary paid (a) 887 546 500 836 834 817STIP payment – cash 732 465 394 717 690 746

STIP payment – deferred shares (b) 732 465 395 718 690 746

Total short-term pay 2,351 1,476 1,289 2,271 2,214 2,309Value of LTIP awards vesting (c) 501 58 350 1,016 0 0Pension (d) 225 130 117 209 208 204

Other benefits (e) 43 31 31 144 151 107

Single total figure of remuneration 3,120 1,695 1,787 3,640 2,573 2,620Percentage change in total remuneration (2016 versus 2015; 2015versus 2014) 84.1% (5.1%) 41.5% (1.8%)Percentage of total remuneration provided as performance-relatedpay (STIP and LTIP) 63.0% 58.3% 63.7% 67.3% 53.6% 56.9%Percentage of total remuneration provided as non-performance-related pay (base salary, pension and other benefits) 37.0% 41.7% 36.3% 32.7% 46.4% 43.1%Percentage of maximum STIP awarded (f) 82.4% 84.0% 77.0% 85.8% 82.5% 91.0%Percentage of maximum STIP forfeited 17.6% 16.0% 23.0% 14.2% 17.5% 9.0%Percentage of target STIP awarded 139.9% 168.1% 154.0% 143.0% 137.5% 151.7%Percentage of PSP award vesting (g) 58.0% 65.4% – 58.0% – –Percentage SOP award vesting (g) – – – – –

Sam Walsh (A$)

2016 2015 2014

Base salary paid (a) 1,004 1,985 1,940STIP payment – cash – 1,631 1,721

STIP payment – deferred shares (b) – 1,632 1,721

Total short-term pay 1,004 5,248 5,382Value of LTIP awards vesting (c) – 2,076 3,161Superannuation (d) 232 600 903

Other benefits (e) 421 1,217 1,030

Single total figure of remuneration 1,657 9,141 10,476Percentage change in total remuneration (2016 versus 2015; 2015versus 2014) (81.9%) (12.7%)Percentage of total remuneration provided as performance-relatedpay (STIP and LTIP) 0% 58.4% 63.0%Percentage of total remuneration provided as non-performance-related pay (base salary, pension and other benefits) 100% 41.6% 37.0%Percentage of maximum STIP awarded (f) – 81.9% 88.4%Percentage of maximum STIP forfeited – 18.1% 11.6%Percentage of target STIP awarded – 136.5% 147.3%Percentage of PSP award vesting – 65.4% 73.5%Percentage SOP award vesting – – –

(a) Salaries are generally reviewed with effect from 1 March. For Jean-Sebastien Jacques the amount indicates the salary paid in the financial year to 31 December. Jean-Sebastien did not receive asalary increase effective 1 March 2016. However, in 2016 Jean-Sebastien’s base salary was increased from £553,300 to £800,000 on appointment as deputy chief executive with effect from 17March 2016 and increased to £1,080,000 on appointment as chief executive with effect from 2 July 2016. The salary and single figure of remuneration for 2015 and 2014 relate to his positions aschief executive, Copper & Coal for the period 1 March 2015 to 31 December 2015 and as chief executive, Copper for the period 1 January 2014 to 28 February 2015. For Chris Lynch and SamWalsh the amounts indicate the salaries paid in the financial year to 31 December. Neither Chris nor Sam received a salary increase effective 1 March 2016.

(b) Value of STIP deferred under the BDP, the vesting of which is subject to the Plan rules. For Sam Walsh the 2016 STIP award is subject to the deferral agreement explained in the ImplementationReport.

(c) For Jean-Sebastien Jacques and Chris Lynch this is based on the estimated value of the LTIP awards, including dividend shares where applicable, which vested on 20 February 2017 (TSR portion)and which are anticipated to vest at 31 May 2017 (EBIT margin portion) for the performance period that ended 31 December 2016 and the LTIP awards which vested for the performance periodsthat ended 31 December 2015 and 31 December 2014. The Rio Tinto plc share price used to calculate the estimated value of the award vesting with respect to 2016 is the average share priceover the last quarter of 2016 of £29.30. The performance conditions for awards vesting for the period ending 31 December 2016 are detailed in the notes to table 3 on page 107.

For Sam Walsh the LTIP awards vesting with respect to the performance period ending 31 December 2016 is subject to the deferral agreement explained in the Implementation Report. The valueof the LTIP awards vesting with respect to the performance periods ending 31 December 2015 and 31 December 2014 includes the cash payment for dividends on the awards that vested. Theperformance conditions for awards vesting for the period ending 31 December 2016 are detailed in the notes to table 3 on page 107 in the Implementation Report.

(d) For Jean-Sebastien Jacques and Chris Lynch the amount reflects the value of the pension contribution and payment in lieu of pension paid during the year. For Sam Walsh the amount reflects thevalue of the superannuation accrued during the year assuming that it was to come into payment immediately. This differs from the value reported in table1a in the Implementation Report whichis calculated using an IAS19 methodology and assumptions on rates of investment return, inflation and salary increases.

iv riotinto.com 2016 Strategic report

(e) Includes healthcare, allowance for professional tax services and car allowance. For Sam Walsh the value includes international assignment benefits of A$293,000 for 2016 (2015: A$1,001,000),medical cover, allowance for professional tax compliance services, car allowance, Company provided transport and other contractual payments or benefits. Sam’s ‘other benefits’ value was lowerin 2016 due primarily to the proportion of the year worked.

(f) The maximum potential STIP award is 200 per cent of base salary.

(g) Jean-Sebastien had no PSP awards vest in respect of the performance period that ended 31 December 2014 as his first PSP award was granted in 2012 and vested in respect of the performanceperiod that ended 31 December 2015. He has received no awards under the SOP. Chris Lynch had no LTIP awards vest in respect of the performance periods that ended prior to 31 December2016 as he received no LTIP awards prior to the award made in 2013.

Single total figure of remuneration for non-executive directors

The table below provides details of the fees and other benefits paid to the chairman and non-executive directors in 2016 and 2015 and is reported inUS dollars.

Stated in US$’000 (a)Fees and

allowances (b)Non-monetary

benefits (c)(d)

Single totalfigure of

remuneration (e)Currency of

actual payment

Chairman

Jan du Plessis 2016 990 88 1,078 £2015 1,116 134 1,250 £

Non-executive directors

Robert Brown 2016 186 46 232 £2015 310 59 369 £

Megan Clark 2016 286 28 314 A$2015 268 0 268 A$

Michael L’Estrange 2016 237 25 262 A$2015 275 0 275 A$

Ann Godbehere 2016 221 9 230 £2015 249 20 269 £

Richard Goodmanson (f) 2016 122 10 132 £2015 340 25 365 £

Anne Lauvergeon 2016 173 13 186 £2015 218 23 241 £

Paul Tellier 2016 207 52 259 £2015 325 72 397 £

Simon Thompson 2016 196 8 204 £2015 218 9 227 £

John Varley 2016 295 5 300 £2015 333 13 346 £

Notes to Table 1b – Non-executive directors’ remuneration

(a) The remuneration is reported in US dollars. The amounts have been converted using the relevant 2016 average exchange rates of £1 = 1.35616 US$ and A$1 = 0.74406 US$ (1 January to31 December 2016 average).

(b) ‘Fees and allowances’ comprise the total fees for the chairman and all non-executive directors and travel allowances for the non-executive directors (other than the chairman). The payment ofstatutory minimum superannuation contributions for Australian non-executive directors is required by Australian superannuation law. These contributions are included in the Fees andAllowances amount disclosed for Australian non-executive directors. While the fees and allowances contractual values defined in British Pounds have not chanaged, the US Dollar values reflectedin Table 1b are a primarily a consequence of the weakening of the British Pound relative to the US Dollar in 2016 (note that the rate for 2015 was £1 = 1.52868 US$). Travel allowances wereoverpaid in 2015 due to an administrative error to Robert Brown and Paul Tellier and were refunded. The amounts stated in ‘Fees and allowances’ do not reflect the refunds.

(c) ‘Non-monetary benefits’ include, as in previous year, amounts which are deemed by the UK tax authorities to be benefits in kind relating largely to the costs of non-executive directors’ expensesin attending Board meetings held at the Company’s UK registered office (including associated hotel and subsistence expenses). Given these expenses are incurred by directors in the fulfilment oftheir duties, the Company pays the tax on them.

(d) In 2016, the following additional amounts are included as noted for the relevant director. For Jan du Plessis the value of company provided transport and medical insurance premiums.Mr du Plessis is provided with a car and driver in his capacity as chairman of Rio Tinto. For the year ended 31 December 2016, the amount was £30,353.

(e) Represents disclosure of the single total figure of remuneration under Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended)and total remuneration under the Australian Corporations Act 2001 and applicable accounting standards.

(f) The amounts reported for Richard Goodmanson reflect the period when he was an active member of the Board from 1 Jan to 5 May 2016.

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Summary shareholder information

Dividends

Both Companies have paid dividends on theirordinary shares every year since incorporationin 1962.

Dividend policy

The dividend policy adopted by the Board inFebruary 2016 provides that at the end of eachfinancial period, the board will determine anappropriate total level of ordinary dividend pershare, taking into account the results for thefinancial year, the outlook for our majorcommodities, the board’s view of the long-termgrowth prospects of the business and theCompany’s objective of maintaining a strongbalance sheet. The intention is that the balancebetween the interim and final dividend isweighted to the final dividend.

The board expects total cash returns toshareholders over the longer term to be in arange of 40 to 60 per cent of underlyingearnings in aggregate through the cycle.

The board is committed to maintaining anappropriate balance between cash returns toshareholders and investment in the business,with the intention of maximising shareholdervalue.

Acknowledging the cyclical nature of theindustry, in periods of strong earnings and cashgeneration, it is the board’s intention to

supplement the ordinary dividends withadditional returns to shareholders.

Dividend determination

The majority of our sales are transacted inUS dollars, making this the most appropriatemeasure for our global business performance.It is our main reporting currency and,consequently, the natural currency for dividenddetermination. Dividends determined inUS dollars are translated at exchange ratesprevailing two days prior to the declaration andpayable in sterling by Rio Tinto plc and inAustralian dollars by Rio Tinto Limited.

On request, shareholders of Rio Tinto plc canelect to receive dividends in Australian dollarsand Rio Tinto Limited shareholders can elect toreceive dividends in pounds sterling. If such anelection is made, the dividend amountsreceived will be calculated by converting thedeclared dividend using the exchange ratesapplicable to sterling and Australian dollars –five days prior to the dividend payment date.

Shareholders who wish to receive theirdividends in any other currencies shouldcontact the Companies’ share registrars, whooffer payment services in other currencies,subject to a fee.

2016 dividends

The 2016 interim and final dividends weredetermined at 45 US cents and at 125 US cents

per share respectively and the applicableconversion rates for the interim and finaldividend were US$1.33135 and US$1.2365 tothe pound sterling and US$0.76105 andUS$0.7611 to the Australian dollarrespectively. For those Rio Tinto plcshareholders who elected to receive theirinterim dividend in Australian dollars theapplicable conversion rate was A$1.75850 tothe pound sterling and for Rio Tinto Limitedshareholders who elected to receive theirdividend in sterling the applicable conversionrate was £0.56867 to the Australian dollar.

Final dividends of 100.56 pence or163.62 Australian cents per share will be paidon 6 April 2017. For those Rio Tinto plcshareholders requesting the 2016 finaldividend be paid in Australian dollars, thoseholders of Rio Tinto plc ADRs (eachrepresenting one share) and those Rio TintoLimited shareholders requesting the 2016 finaldividend be paid in pounds sterling, theapplicable conversion rates will be determinedon 30 March 2017.

Dividend reinvestment plan (DRP)

Rio Tinto offers a DRP to registeredshareholders, which provides the opportunityto use cash dividends to purchase Rio Tintoshares in the market.

Contact detailsRegistered offices

Rio Tinto plc

6 St James’s SquareLondonSW1Y 4ADRegistered in England No. 719885

Telephone: +44 (0) 20 7781 2000Website: riotinto.com

Rio Tinto Limited

Level 33120 Collins StreetMelbourneVictoria 3000ABN 96 004 458 404

Telephone: +61 (0) 3 9283 3333Fax: +61 (0) 3 9283 3707Website: riotinto.com

Rio Tinto’s agent in the US is Cheree Finan,who may be contacted atRio Tinto Services Inc.80 State Street Albany,NY 12207-2543

ShareholdersPlease refer to the Investor Centre of therespective registrar if you have any queriesabout your shareholding.

Rio Tinto plc

Computershare Investor Services PLCThe PavilionsBridgwater RoadBristolBS99 6ZZ

Telephone: +44 (0) 370 703 6364Fax: +44 (0) 370 703 6119UK residents only,Freephone: 0800 435021Website: computershare.com

Holders of Rio Tinto American DepositaryReceipts (ADRs)Please contact the ADR administrator if youhave any queries about your ADRs.

ADR administratorJPMorgan Chase & CoPO Box 64504St. Paul, MN 55164-0854

Telephone: +1 (651) 453 2128US residents only, toll free general:(800) 990 1135US residents only, toll free Global invest direct:(800) 428 4267Website: adr.comEmail: [email protected]

Rio Tinto Limited

Computershare Investor ServicesPty LimitedGPO Box 2975MelbourneVictoria 3000

Telephone: +61 (0) 3 9415 5000Fax: +61 (0) 3 9473 2500Australian residents only, toll free:1800 813 292New Zealand residents only, toll free:0800 450 740Website: computershare.com

Former Alcan Inc. shareholders

Computershare Investor Services Inc.8th Floor100 University AvenueToronto, ON M5J 2Y1Ontario

Telephone: +1 416 263 9200North American residents only,toll free: +1 (866) 624-1341Website: computershare.com

Investor CentreInvestor Centre is Computershare’s free,secure, self service website, whereshareholders can manage their holdings online.The website enables shareholders to:

– View share balances– Change address details– View payment and tax information– Update payment instructions

In addition, shareholders who register theiremail address on Investor Centre can benotified electronically of events such as annualgeneral meetings, and can receive shareholdercommunications such as the Annual report orNotice of meeting electronically online.

Rio Tinto plc shareholdersWebsite: investorcentre.co.uk/riotinto

Rio Tinto Limited shareholdersWebsite: investorcentre.com/rio

vi riotinto.com 2016 Strategic report

Financial calendar

2017

16 January Fourth quarter 2016 operations review (Sydney 17 January)

8 February Announcement of unaudited results for 2016

22 February Rio Tinto Limited shares and Rio Tinto plc ADRs quoted “ex-dividend” for 2016 �nal dividend

23 February Rio Tinto plc shares quoted “ex-dividend” for 2016 �nal dividend

24 February Record date for 2016 �nal dividend for Rio Tinto plc and Rio Tinto Limited shares and Rio Tinto plc ADRs

2 March Publication of 2016 Annual report, 20-F and Notices of annual general meetings

16 March Plan notice date for election under the dividend reinvestment plans and date for electing dividends paid inalternate currency for the 2016 �nal dividend

30 March Dividend currency conversion date (Rio Tinto plc holders electing to receive Australian dollars and Rio TintoLimited holders electing to receive pounds sterling)

6 April Payment date for 2016 �nal dividend to holders of ordinary shares and ADRs

12 April Annual general meeting for Rio Tinto plc, London

19 April First quarter 2017 operations review (Sydney 20 April)

4 May Annual general meeting for Rio Tinto Limited, Sydney

17 July Second quarter 2017 operations review (Sydney 18 July)

2 August Announcement of half year results for 2017

9 August Rio Tinto plc ADRs quoted “ex-dividend” for 2017 interim dividend

10 August Rio Tinto plc shares and Rio Tinto Limited shares quoted “ex-dividend” for 2017 interim dividend

11 August Record date for 2017 interim dividend for Rio Tinto plc and Rio Tinto Limited shares and Rio Tinto plc ADRs

31 August Plan notice date for election under the dividend reinvestment plans and date for electing dividends paid inalternate currency for the 2017 interim dividend for Rio Tinto plc and Rio Tinto Limited

14 September Dividend currency conversion date (Rio Tinto plc holders electing to receive Australian dollars and Rio TintoLimited holders electing to receive pounds sterling)

21 September Payment date for 2017 interim dividend to holders of ordinary shares and ADRs

16 October Third quarter 2017 operations review (Sydney 17 October)

2018

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Park is an EMAS-certified company and its Environmental Management System is certified to ISO 14001.

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View our 2016 Annual report:riotinto.com/ar2016

View our 2016 Sustainable development online report:riotinto.com/sd2016

2016 Strategic report - Rio Tinto · PDF fileContents Navigating through Rio Tinto’s...

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