Get more information online Find out more about our business and performance: riotinto.com View our 2016 Annual report: riotinto.com/ar2016 View our 2016 Sustainable development online report: riotinto.com/sd2016 2016 Annual report riotinto.com/ar2016 Contents Strategic report Directors’ report Financial statements 01 44 109 Performance highlights 1 Contents 44 Contents 109 Group overview 2 Directors’ report 45 Group income statement 110 Chairman’s letter 4 Board of directors 50 Group statement of Chief executive’s statement 5 Executive Committee 53 comprehensive income 111 Market environment 7 Corporate governance 55 Group cash flow statement 112 Group strategy 8 Remuneration Report Group balance sheet 113 Business model 10 Annual statement by the Group statement of changes in equity 114 Key performance indicators 12 Remuneration Committee chairman 67 Notes to the 2016 financial statements 116 Risk management 14 Remuneration Policy Report 70 Rio Tinto plc Company balance sheet 195 Principal risks and uncertainties 16 Remuneration Implementation Report 78 Rio Tinto financial information by Portfolio management 22 business unit 199 Sustainable development 24 Australian Corporations Act Independent limited assurance report 31 – summary of ASIC relief 204 Product groups Directors’ declaration 205 Iron Ore 32 Auditor’s independence declaration 206 Aluminium 34 Independent auditors’ report 207 Copper & Diamonds 36 Financial summary 2007-2016 215 Energy & Minerals 38 Summary financial data 217 Growth & Innovation 40 Five year review 42 Production, reserves Additional information and operations To be more environmentally friendly, Rio Tinto is reducing the print run of all publications. We encourage you to visit the website to learn more about the Group’s performance in 2016 and to 218 244 view all available PDFs of this Annual report and the Strategic report. Contents 218 Shareholder information 244 Metals and minerals production 219 UK Listing Rules cross reference table 250 riotinto.com/ar2016 Ore reserves 223 Financial calendar 251 Mineral resources 228 Contact details 252 Competent Persons 234 Mines and production facilities 236 Key Page reference for more information within this report KPI Denotes key performance indicators This Annual report, which includes the Group’s 2016 Cautionary statement about forward-looking statements Strategic report, complies with Australian and UK reporting This document contains certain forward-looking statements with respect to the financial condition, results of operations and requirements. business of the Rio Tinto Group. These statements are forward-looking statements within the meaning of Section 27A of the Copies of Rio Tinto’s shareholder documents – the 2016 US Securities Act of 1933, and Section 21E of the US Securities Exchange Act of 1934. The words “intend”, “aim”, “project”, Annual report and 2016 Strategic report, along with the “anticipate”, “estimate”, “plan”, “believes”, “expects”, “may”, “should”, “will”, “target”, “set to” or similar expressions, 2017 Notices of annual general meeting – are available commonly identify such forward-looking statements. to view on the Group’s website at: riotinto.com/ar2016 Examples of forward-looking statements in this Annual report include those regarding estimated ore reserves, anticipated and riotinto.com/agm2017 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 STRATEGIC REPORT Cash generation of US$8.5 billion and US$3.6 billion of shareholder returns Rio Tinto’s 2016 results show that it has kept 2016 highlights – Returning cash to shareholders with its commitment to deliver superior shareholder – Generating strong operating cash flow of US$3.6 billion announced for 2016: returns, and maximise cash and productivity. US$8.5 billion. – full year dividend of 170 US cents per Atthesametime,theGroupstrengthenedits – Delivering underlying earnings of share, equivalent to US$3.1 billion. portfolio and advanced its high-value US$5.1 billion. – share buy-back of US$0.5 billion in growth projects. – Achieving US$1.6 billion of pre-tax Rio Tinto plc shares over the course Rio Tinto enters 2017 in good shape and will sustainable operating cash of 2017. (1) deliver US$5 billion of extra free cash flow over cost improvements. – in total, representing 70 per cent of DIRECTORS’ REPORT FINANCIAL STATEMENTS PRODUCTION, RESERVES thenextfiveyearsfromitsmine-to-market – Investing in three major growth projects in 2016 underlying earnings. productivity programme. The Group’s value bauxite, copper and iron ore. –Generatingfreecashflow(2) of over volume approach, coupled with a robust – Optimising the portfolio with disposals of US$5.8 billion which included US$0.3 billion balance sheet and world-class assets, places US$1.3 billion announced or completed in of sales of property, plant and equipment. Rio Tinto in a strong position to deliver superior 2016 and up to US$2.45 billion announced – Receiving US$0.8 billion in net proceeds shareholder returns through the cycle. to date in 2017. from disposals in 2016, with up to – Strengthening the balance sheet further US$2.6 billion expected in 2017, including with net debt reduced to US$9.6 billion. the Coal & Allied transaction for up to US$2.45 billion. Results at a glance Year to 31 December 2016 2015 Change KPI 112 Net cash generated from operating activities (US$ 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/a KPI 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/a Ordinary 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% AND OPERATIONS 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 which management 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 underlying business 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 earnings on 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 at underlying 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. ADDITIONAL INFORMATION 2016 Annual report riotinto.com 1 Group overview Introduction to Rio Tinto Iron Ore Aluminium At Rio Tinto, as pioneers in mining and Rio Tinto operates a world-class iron ore Building on more than a century of experience metals, we produce materials essential to business, supplying the global seaborne iron and expertise, Rio Tinto is a global leader in the human progress. oretrade.Wearewellpositionedtobenefit aluminium industry. Our business includes from continuing demand across China and the high-quality bauxite mines, large-scale alumina We have been in business for more than developing world. The Iron Ore product group’s refineries, and some of the world’s lowest-cost, 140 years and remain focused on the long operations are located in the Pilbara region of most technologically-advanced term. Our approach is driven by a clear Western Australia, where it has aluminium smelters. strategy, with the goal of delivering superior industry-leading margins, and in 2016 marked value for our shareholders through the cycle Products 50 years since their first contracted shipment. (see page 8). Our strategy plays to our Bauxite strengths: world-class assets, talented Products Bauxite is the ore used to make aluminium. It is employees, a strong balance sheet and Iron ore refined into alumina which is smelted into operating excellence. Iron ore is the key ingredient in the production aluminium metal.