CONCLUSIONES Y RECOMENDACIONES

2014 US$ million 2013 US$ million Revenue 4,308 5,454

Net cash generated from operating activities 355 919

Underlying earnings/(loss) (210) 33

Capital expenditure 224 732

Net operating assets 3,794 4,872

Strategy and strategic priorities

The Energy product group aimed to safely deliver superior margins and growth from a strong existing resource base to serve growing global energy demand. Its strategic priorities were:

– Extract full value from the group’s assets.

– Leverage technology and deliver competitive projects. – Maintain the group’s licence to operate.

– Build and steer a resilient, high-return portfolio.

Safety

The Energy product group’s 2014 all injury frequency rate was 0.74 compared to 0.67 in 2013 with a large number of hand injuries recorded during the year. Energy strives to foster a culture of shared and personal accountability for health and safety, and to create a workplace where everyone goes home safe and well at the end of every shift. Throughout 2014, the group’s health and safety efforts focused on:

– Strengthening the management of critical risks, specifically in areas of process safety, underground operations, and vehicles and driving. – Improving contractor safety performance through active engagement and

interaction with contract partners.

– Comprehensively refreshing the safety culture and systems at all sites to raise personal awareness and commitment to improve hazard

management processes, and to strengthen the implementation of lessons arising from incidents.

– Reducing high frequency incidents such as hand injuries.

Greenhouse gas emissions

The Energy group’s greenhouse gas emissions decreased to approximately 3.3 million tonnes of carbon dioxide equivalent in 2014, compared with 3.6 million tonnes in 2013. This reduction was mainly due to the divestment of the Clermont Mine and the closure of the Blair Athol Mine, and the continued efforts of the group to increase the energy efficiency of its operations through a range of initiatives including equipment optimisation and engine improvements. Over the past 15 years, Rio Tinto has spent more than US$100 million on research and development into technologies that will reduce emissions from coal-fired power plants. In 2014, the Energy product group continued its sponsorship of The Otway Project, Australia’s first industrial-scale demonstration of geological carbon dioxide capture and storage.

Review of operations

2014 was another challenging year for the Energy product group as the business environment for both coal and uranium remained very difficult. The group’s underlying loss of US$210 million compared with underlying earnings of US$33 million in 2013.

Annual site production records at Hail Creek, Hunter Valley Operations and Bengalla, cost improvements and benefits from a weaker Australian dollar were more than offset by lower prices, which reduced earnings by

US$434 million, and lower uranium production. Energy continued to focus on positioning its assets further down the cost curve through a range of cost, productivity and revenue enhancements. An aggressive programme of cost and productivity improvements delivered US$795 million of pre-tax cash

Energy’s focus has been on safely creating value, reducing costs, eliminating waste and improving asset and labour productivity. This work coupled with the agility to adjust production mix in response to changing market conditions, is protecting value in very challenging times.

The product group’s extensive operational and marketing expertise enabled further volume, cost and margin improvements to be secured. Energy retains deep and enduring relationships with its customers, built upon a foundation of high-quality products supplied reliably and consistently, over long periods of time. On average over the past three years, Energy’s marketing team has delivered a price premium to spot market benchmarks of approximately eight per cent for coking coal, ten per cent for thermal coal and 35 per cent for uranium.

In April 2014, the group’s two uranium operations – Rössing and Energy Resources of Australia – each entered into a new marketing and sales agreement with Rio Tinto Uranium (RTU). Under the new agreements, RTU will purchase uranium oxide from both operations and market the combined pool directly to customers. This new arrangement provides Energy’s uranium customers with the benefit of multi-sourced supply.

In 2014 Rio Tinto sold its 50.1 per cent share in the Clermont coal mine in Queensland to GS Coal Pty Ltd for US$1.015 billion, and its coal operations in Mozambique to International Coal Ventures Private Limited for US$50 million, both before net debt and working capital adjustments.

Rio Tinto Coal Australia (Rio Tinto: 100 per cent)

In Queensland, Rio Tinto Coal Australia (RTCA) manages the Hail Creek (Rio Tinto: 82 per cent) and Kestrel (80 per cent) coal mines. As stated above, Rio Tinto sold its interest in the Clermont Mine in May 2014.

In New South Wales, RTCA manages Coal & Allied’s coal mines which include Hunter Valley Operations (80 per cent), Bengalla (32 per cent), Mount Thorley (64 per cent) and Warkworth (44.5 per cent).

Lower prices for all types of coal saw RTCA’s net earnings decline from US$367 million in 2013 to US$21 million in 2014. In very difficult markets RTCA has worked hard to improve its operational performance. Its coal mines remain cash flow positive with the majority placed in the lowest quartile of the cost curve.

Significant productivity gains across the Australian coal business delivered annual site production records at Hail Creek, Hunter Valley Operations and Bengalla. Excluding production from the Clermont Mine which was divested during the year, thermal coal production increased by 15 per cent (Rio Tinto share) in 2014 compared with 2013.

The product group declared a significant increase in its Hunter Valley managed thermal coal reserves in November 2014, compared with the previous estimates reported in Rio Tinto’s 2013 Annual report.

RTCA is using technology and innovation to boost its competitive edge. The Rio Tinto Processing Excellence Centre located in Brisbane is helping improve yields at its sites; an Integrated Operations Centre planned to open in 2015 in Singleton is supporting the optimisation of mine performance; and automated drilling is being piloted at Hunter Valley Operations.

RTCA is also demonstrating operational and commercial excellence by adjusting semi-soft coal production to deliver improved margins at its Hunter Valley sites. In response to deteriorating coking coal markets its Hail Creek Mine began producing a thermal coal product for targeted customers. RTCA has been working for nearly five years to secure a long-term future for Mount Thorley Warkworth mine. In 2014, it continued to seek approvals to maintain operations at the 30 year old mine, on land it owns within the footprint of existing mining leases. Approval is critical for the future of the operation and its 1,300 employees and contractors as existing approvals only allow the mine to maintain production and employment at current levels until the end of 2015. Two separate planning applications have been submitted for the integrated operation and the NSW Department of Planning and Environment has recommended approval. A decision on both applications

Zululand Anthracite Colliery (Rio Tinto: 74 per cent)

ZAC is an anthracite coal mine in South Africa which was held for sale until 1 April 2014 when it became a Rio Tinto managed operation.

Rio Tinto Coal Mozambique (formerly Rio Tinto: 100 per cent)

In October 2014, Rio Tinto completed the sale of RTCM, which includes the Benga coal mine in the Tete province of Mozambique, to International Coal Ventures Private Limited.

Energy Resources of Australia (Rio Tinto: 68.4 per cent)

ERA is a publicly-listed company which operates the Ranger Mine in the Northern Territory of Australia. No uranium oxide was produced in the first half of 2014 due to a leach tank failure on 7 December 2013 which triggered the suspension of processing operations and a series of investigations. A Government-appointed taskforce was established to oversee the regulatory response to the leach tank failure. A progressive restart of the Ranger processing plant began on 5 June 2014, with the mill processing lower- grade stockpiled material, following receipt of written approval from the Commonwealth Minister for Industry and the Northern Territory Department of Mines and Energy.

ERA produced a total of 1,757 thousand pounds (Rio Tinto share) of uranium oxide in 2014. Its 2014 full-year earnings were unfavourably impacted by costs associated with the leach tank failure and subsequent suspension of processing plant operations. Uranium oxide was purchased to fulfil higher price contracted sales, partly mitigating effects of the suspension.

Progressive rehabilitation over the Ranger Project Area advanced during 2014. A total of more than 33 million tonnes of material has been returned to Pit 3, and rehabilitation of Pit 1 is well advanced.

The Ranger 3 Deeps project remains in prefeasibility. On 3 October 2014 ERA lodged a Draft Environmental Impact Statement for the proposed Ranger 3 Deeps underground mine with the Northern Territory Environmental Protection Authority and the Commonwealth Department of the Environment. During 2014 ERA achieved cash savings of more than A$23 million, surpassing its objective of saving a cumulative A$150 million in operating costs during the period 2011-2014.

Rössing Uranium Limited (Rio Tinto: 68.6 per cent)

Rio Tinto’s share of uranium production at Rössing was 2,333 thousand pounds in 2014. Production was impacted by a leach tank failure in late 2013 and the introduction of a new operating model in mid-2014. Under this new model Rössing is tailoring production to meet only existing long-term customer requirements.

In June, a planned shutdown of the processing plant allowed for major maintenance work to be carried out. The work was completed without any safety incidents and plant operations were successfully restarted on 1 July 2014.

In light of continued low prices for uranium, Rössing embarked on an aggressive cash generation programme in 2014. The business exceeded its savings target for the year, delivering US$14 million against a target of US$12 million from a range of initiatives.

Rio Tinto Canada Uranium (Rio Tinto: 100 per cent)

Rio Tinto Canada Uranium’s Roughrider project is an exploration site located in Canada’s Athabasca Basin in north-east Saskatchewan. The basin supplies approximately 20 per cent of the world’s uranium.

In 2014, the Canadian Government and the European Union signed a Comprehensive Economic Trade Agreement which provides an exemption to eligible companies from the Non-Resident Ownership Policy as it applies to foreign ownership of uranium mines. Once ratified, this change means Rio Tinto could, if economical to do so, develop a uranium operation without the need to first find a Canadian majority partner.

Exploration and development studies on the project progressed during 2014.

Development projects

Rio Tinto’s premium coal assets in Australia’s Hunter Valley present a number of low-capital, high-quality growth options.

The Mount Pleasant project is the largest undeveloped deposit in the Hunter Valley and has high quality coal, a low strip ratio, existing consents and committed rail and port facilities. Located adjacent to Bengalla mine, Mount Pleasant is an attractive, low-capital expansion option and is in the advanced stages of study. It has a capital intensity of between A$100 and A$150 per saleable tonne with an expected capacity of 8.5 million tonnes per annum of saleable product.

In late 2014, the Hunter Blend project was launched. The project aims to enable Rio Tinto to operate its Hunter Valley coal mines, plants and logistics infrastructure as one integrated system to deliver greater value and synergies than through the present standalone operations.

The Mount Pleasant and Hunter Blend projects are both opportunities to further improve the overall efficiency of Rio Tinto’s operations in the Hunter Valley and to maximise the synergies that exist across the business. Whilst the group’s world class resource base offers a range of further brownfield opportunities, these two projects, when combined with the existing business transformation programme, effectively deliver 67 per cent volume growth and a 40 per cent cost reduction against 2012 levels.

Rio Tinto is continuing to assess options for open cut mining on the eastern side of Hail Creek Mine in Queensland. It is also exploring the potential for underground mining. Government approvals and a prefeasibility study are in progress. A decision on the timing and nature of future development at Hail Creek will be made once these are complete.

Other options in the Australian coal portfolio include the Valeria and Winchester South projects. Valeria is a large, predominantly semi-soft and thermal coal deposit in central Queensland. It is close to existing infrastructure, with 40km of rail needed to reach Kestrel Mine. Winchester South is a coking coal deposit in central Queensland.

Outlook

Whilst the short-term outlook for coal and uranium remains challenging, the long-term outlook is more positive. Energy demand continues to grow. Globally, it grew by 50 per cent between 1990 and 2011 and the International Energy Agency expects it to grow by a further 40 per cent to 2035.

All energy sources will be needed to meet increased demand. However, much of it is expected to be met by coal – the cheapest and most readily available source of energy. High quality thermal coal is likely to be in demand for efficiency and air quality reasons, which aligns with Rio Tinto’s premium resource and product profile.

Demand for uranium is expected to grow steadily in the longer term, and nuclear power remains the only base-load energy source that does not produce greenhouse gases.

Geologically, coking coal remains a relatively scarce commodity found in a small number of discrete locations of which the Bowen Basin in Australia is one of the most significant. Long-term demand appears to be firm, underpinned by urbanisation and industrialisation in the major developing economies of China and India, causing steady growth in steel output.

Rio Tinto is ideally positioned to continue supplying premium energy products to traditional markets in Japan, Taiwan and Korea, which are dependent on imports for all of their primary energy needs, while capturing growth opportunities in emerging markets. India’s coal imports have been increasing and are rapidly becoming as significant as China, while a number of ASEAN (Association of Southeast Asian Nations) countries are also looking to secure reliable international coal supplies.

STRATEGI C R EPORT DIRECT ORS’ REPORT F INANCIAL S T A T E MENT S P RODUCT ION, RESERV ES AND O PERATIONS ADDITIONAL INFORMATION

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