Rio Tinto(RIO) - 2023 Q2 - Quarterly Report

About Rio Tinto Rio Tinto is a leading global mining group, headquartered in the UK, focused on mineral resource extraction and processing for global growth and decarbonization - Rio Tinto is a leading international mining group, headquartered in the UK, with listings on the London, New York, and Australian stock exchanges[4] - The core business involves finding, mining, and processing mineral resources to provide materials for global growth and decarbonization[5] - Major products include iron ore, aluminium, copper, diamonds, gold, industrial minerals (borates, titanium dioxide, salt), and lithium[5] - Operations span the world, with strong representation in Australia and North America, and significant businesses in Asia, Europe, Africa, and South America[5] Forward-looking statements This report contains forward-looking statements regarding Rio Tinto's future financial position and operations, subject to various known and unknown risks - This report includes 'forward-looking statements' regarding Rio Tinto's financial position, business strategy, future operations, and total cash returns to shareholders[7] - Actual results, performance, or achievements may differ materially due to known and unknown risks, including geopolitical impacts, climate change, operational execution, commodity price volatility, inflation, and regulatory changes[8] - Undue reliance should not be placed on forward-looking statements, and Rio Tinto disclaims any obligation to release public updates or revisions, except as required by applicable law[8] - Past performance cannot be relied on as a guide to future performance[9] Interim results 2023 Rio Tinto's H1 2023 interim results show a decline in key financial metrics due to softer market conditions, despite operational improvements in Pilbara iron ore and Oyu Tolgoi Key Financial Highlights (Six months ended 30 June) | Metric | 2023 (US$ millions) | 2022 (US$ millions) | Change (%) | | :------------------------------------------------ | :------------------ | :------------------ | :--------- | | Net cash generated from operating activities | 6,975 | 10,474 | (33)% | | Purchases of property, plant and equipment and intangible assets | 3,001 | 3,146 | (5)% | | Free cash flow | 3,769 | 7,146 | (47)% | | Consolidated sales revenue | 26,667 | 29,775 | (10)% | | Underlying EBITDA | 11,728 | 15,597 | (25)% | | Profit after tax attributable to owners (net earnings) | 5,117 | 8,943 | (43)% | | Underlying earnings per share (EPS) (US cents) | 352.9 | 534.9 | (34)% | | Ordinary dividend per share (US cents) | 177.0 | 267.0 | (34)% | | Underlying return on capital employed (ROCE) | 20% | 34% | | | Net debt (US$ millions) (At 30 June 2023 / At 31 December 2022) | 4,350 | 4,188 | | - Underlying EBITDA was $11.7 billion, free cash flow $3.8 billion, and underlying earnings $5.7 billion, despite softer market conditions[12] - An interim ordinary dividend of $2.9 billion was paid, representing a 50% payout, in line with company practice[12] - The Pilbara iron ore business consistently improved performance with five consecutive quarters of year-on-year growth[11] - First sustainable production was achieved from the Oyu Tolgoi underground copper mine, and exposure was doubled through the acquisition of Turquoise Hill Resources[11] Progress against our strategy and objectives Rio Tinto made progress on its strategic objectives in H1 2023, focusing on operational excellence, ESG, development, and social license Best operator Operational performance improved in Pilbara Iron Ore and Oyu Tolgoi, while safety remains a priority with ongoing investigations for process safety incidents - Pilbara Iron Ore business achieved sustained momentum with a 7% uplift in production and shipments in H1 2023; Gudai-Darri reached capacity[14] - Oyu Tolgoi underground copper mine is ramping up successfully, with 54 drawbells opened from Panel 0, ahead of schedule[14] - Aluminium smelters showed stable performance, with Kitimat ramping up as scheduled[14] - The Accident Frequency Rate (AIFR) remained stable at 0.36, but investigations are ongoing for significant process safety incidents at Rio Tinto Iron & Titanium and Kennecott[14] Impeccable ESG Rio Tinto maintained stable Scope 1 and 2 emissions, investing in decarbonization projects and advancing initiatives like BlueSmelting and renewable diesel ESG Performance (H1 2023 vs H1 2022) | Metric | H1 2023 | H1 2022 | | :------------------------------------ | :------ | :------ | | Scope 1 and 2 emissions (Mt CO2e) | 15.4 | 15.5 | | Capital expenditure on decarbonisation projects | $95 million | N/A | | Operational expenditure on decarbonisation | ~$100 million | N/A | - Started the BlueSmelting demonstration plant at Rio Tinto Iron and Titanium (RTIT) to validate technology aimed at decarbonizing Quebec Operations[14] - Boron, California operation successfully completed the full transition of its heavy machinery from fossil diesel to renewable diesel, a world-first for an open pit mine[14] - Signed a Memorandum of Understanding (MoU) with China Baowu to explore projects for decarbonizing the steel value chain[14] Excel in Development The company achieved milestones in project development, including Oyu Tolgoi underground production and new copper and aluminium investments, though the Rincon lithium project saw increased capital estimates - Achieved first sustainable production at the Oyu Tolgoi underground copper mine in Mongolia[15] - Entered into an agreement to form a joint venture with First Quantum Minerals to unlock development of the La Granja copper project in Peru[15] - Approved $498 million for development of the North Rim Skarn underground copper mine at Kennecott in Utah[15] - Investing $1.1 billion to expand the AP60 aluminium smelter in Quebec[15] - The Rincon lithium project's capital estimate increased to $335 million (from $140 million) due to project definition, scope changes, and higher inflation[15] - The Simandou iron ore project in Guinea is advancing at pace, with final approvals expected later this year[15] Social licence Rio Tinto continued efforts to rebuild trust and relationships, particularly with Indigenous peoples, and invested in community-supporting infrastructure - Signed an agreement with the Naskapi Nation of Kawawachikamach and Iron Ore Company of Canada to establish a mutually beneficial relationship[15] - Published an independent report based on a global audit of Cultural Heritage Management compliance and performance[15] - Announced plans to invest $395 million in a seawater desalination plant in the Pilbara, Western Australia, to support future water supply for coastal operations and communities[15] People and Culture Gender diversity increased, and initiatives are being implemented to foster a safe, respectful, and inclusive workplace culture - Increased gender diversity to 23.5% (from 22.9% at year-end), with female senior leaders increasing to 28.6%[16] - Expanding 'Purple Banner' communications and implementing village councils across sites to ensure a safe, respectful, and inclusive workplace[16] Financial performance Rio Tinto's H1 2023 financial performance was significantly impacted by lower commodity prices and rising costs, leading to declines in net earnings and free cash flow Income Statement Net earnings decreased by 43% due to lower commodity prices, increased operating costs, and impairment charges, despite some benefits from currency movements and sales volumes Underlying EBITDA Underlying EBITDA declined by $3.3 billion, primarily due to lower commodity prices, increased operating costs, and higher exploration expenditure Principal Factors Explaining Movements in Underlying EBITDA (US$bn) | Factor | Impact (US$bn) | | :------------------------------------ | :------------- | | 2022 first half underlying EBITDA | 15.6 | | Prices | (3.3) | | Exchange rates | 0.4 | | Volumes and mix | 0.4 | | General inflation | (0.2) | | Energy | — | | Operating cash unit costs | (0.9) | | Higher exploration and evaluation expenditure | (0.3) | | 2023 first half underlying EBITDA | 11.7 | - Commodity price movements resulted in a $3.3 billion decline in underlying EBITDA, primarily from lower iron ore ($1.6 billion) and aluminium ($1.4 billion) prices[21] - Weaker local currencies (AUD, CAD against USD) increased underlying EBITDA by $0.4 billion[23] - Higher sales volumes and improved product mix, especially in iron ore, increased underlying EBITDA by $0.4 billion[24] - General price inflation across global operations resulted in a $0.2 billion reduction in underlying EBITDA, and higher operating cash unit costs reduced it by $0.9 billion[26][27] - Exploration and evaluation expenditure increased by 94% to $0.7 billion, mainly for Simandou and Rincon projects, reducing underlying EBITDA by $0.3 billion[28] Net earnings Net earnings decreased to $5.1 billion, driven by lower underlying EBITDA and significant impairment charges related to Australian alumina refineries Principal Factors Explaining Movements in Net Earnings (US$bn) | Factor | Impact (US$bn) | | :------------------------------------------------ | :------------- | | 2022 first half net earnings | 8.9 | | Total changes in underlying EBITDA | (3.9) | | Increase in interest and finance items (pre-tax) in underlying earnings | (0.4) | | Decrease in tax on underlying earnings | 0.6 | | Decrease in underlying earnings attributable to outside interests | 0.7 | | Total changes in underlying earnings | (3.0) | | Changes in exclusions from underlying earnings: | | | Movement in impairment charges | (0.8) | | 2023 first half net earnings | 5.1 | - Net profit attributable to owners of Rio Tinto was $5.1 billion in H1 2023, down from $8.9 billion in H1 2022[17] - Recognized impairment charges of $0.8 billion (after tax) mainly related to alumina refineries in Queensland due to challenging market conditions and decarbonization capital requirements[13][37] - The effective corporate income tax rate on pre-tax earnings increased to 30.5% in H1 2023 from 24.2% in H1 2022[32] Underlying EBITDA and Underlying Earnings by Segment (Six months ended 30 June) | Segment | Underlying EBITDA 2023 (US$bn) | Underlying EBITDA 2022 (US$bn) | Change (%) | Underlying Earnings 2023 (US$bn) | Underlying Earnings 2022 (US$bn) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | :------------------------------- | :------------------------------- | :--------- | | Iron Ore | 9.8 | 10.4 | (6)% | 5.8 | 6.5 | (11)% | | Aluminium | 1.1 | 2.9 | (60)% | 0.3 | 1.6 | (83)% | | Copper | 1.1 | 1.5 | (29)% | 0.2 | 0.6 | (65)% | | Minerals | 0.7 | 1.3 | (45)% | 0.2 | 0.4 | (58)% | | Reportable segment total | 12.7 | 16.1 | (21)% | 6.4 | 9.0 | (29)% | | Simandou iron ore project | (0.3) | (0.1) | 489% | (0.1) | — | 245% | | Total | 11.7 | 15.6 | (25)% | 5.7 | 8.7 | (34)% | - Costs attributable to the Simandou iron ore project increased to $318 million (100% basis at EBITDA level) due to rising activity[42] - Other central costs increased by 25% to $0.5 billion, reflecting increased investment in decarbonization, technology, and R&D[45] Cash flow Operating cash flow decreased by 33% to $7.0 billion, and free cash flow declined by 47% due to lower commodity prices and increased working capital Cash Flow Highlights (Six months ended 30 June) | Metric | 2023 (US$bn) | 2022 (US$bn) | | :------------------------------------------ | :----------- | :----------- | | Net cash generated from operating activities | 7.0 | 10.5 | | Purchases of property, plant and equipment and intangible assets | (3.0) | (3.1) | | Free cash flow | 3.8 | 7.1 | | Dividends paid to equity shareholders | (3.7) | (7.6) | | Movement in net debt/cash | (0.2) | (1.3) | - Net cash generated from operating activities was $7.0 billion, a 33% decrease, driven by price movements for major commodities and a $0.9 billion rise in working capital[50] - Capital expenditure of $3.0 billion was comprised of $0.3 billion growth, $0.7 billion replacement, $1.9 billion sustaining, and $0.1 billion decarbonization capital[50] - $3.7 billion in dividends paid in H1 2023, representing the 2022 final ordinary dividend[50] Balance sheet Net debt increased by $0.2 billion to $4.4 billion at 30 June 2023, resulting in a net gearing ratio of 8%, while total financing liabilities and cash and cash equivalents also increased Net Debt and Gearing Ratio | Metric | At 30 June 2023 (US$ millions) | At 31 December 2022 (US$ millions) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net debt | 4,350 | 4,188 | | Net gearing ratio | 8% | 7% | - Total financing liabilities were $14.1 billion (31 December 2022: $12.3 billion) with a weighted average maturity of around 12 years[51] - Priced $650 million of 10-year fixed rate SEC-registered debt securities and $1.1 billion of 30-year fixed rate SEC-registered debt securities in March 2023[52] - Cash and cash equivalents plus other short-term cash investments were $10.4 billion at 30 June 2023 (31 December 2022: $8.8 billion)[52] Provision for closure costs Provisions for close-down and restoration costs decreased by $1.1 billion due to a revision of the closure discount rate, partially offset by amortization and utilization Provision for Closure Costs | Metric | At 30 June 2023 (US$ billions) | At 31 December 2022 (US$ billions) | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Provisions for close-down and restoration costs | 14.8 | 15.8 | - A revision of the closure discount rate to 2.0% (from 1.5%) resulted in a $1.1 billion reduction to the provision[53] - The reduction was partly offset by the amortisation of discount ($0.6 billion) and utilisation of the provision through spend ($0.3 billion)[53] Shareholders returns policy The Board aims to balance shareholder returns with business investment, targeting 40% to 60% of underlying earnings in aggregate through the cycle - The Board is committed to maintaining an appropriate balance between cash returns to shareholders and investment in the business, with the intention of maximising long-term shareholder value[55] - Total cash returns to shareholders over the longer term are expected to be in a range of 40% to 60% of underlying earnings in aggregate through the cycle[57] - The Board intends to supplement the ordinary dividend with additional returns to shareholders in periods of strong earnings and cash generation[57] Ordinary Dividend Declared | Metric | 2023 (US$bn) | 2022 (US$bn) | | :-------------------- | :----------- | :----------- | | Interim* | 2.9 | 4.3 | | Payout ratio on ordinary dividend | 50% | 50% | Ordinary Dividend Per Share Declared | Metric | 2023 (US cents per share) | 2022 (US cents per share) | | :------------------------------------ | :------------------------ | :------------------------ | | Interim - US cents per share | 177.00 | 267.00 | Capital projects Rio Tinto is investing in ongoing and future capital projects across its commodities to sustain and grow production and advance decarbonization efforts Ongoing Key ongoing capital projects include Western Range iron ore, AP60 aluminium smelter expansion, and Kennecott copper mine life extension, with Oyu Tolgoi underground progressing ahead of schedule Approved Capital Projects (Ongoing) | Project | Total Approved Capital Cost (100% unless stated) | Approved Capital Remaining to be Spent from 1 July 2023 | Status/Milestones | | :------------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | | Western Range iron ore project (Rio Tinto 54%) | $1.3bn (Rio Tinto share) | $1.0bn (Rio Tinto share) | Construction continued, site facilities completed, first production anticipated 2025 | | AP60 aluminium smelter expansion (Quebec) | $1.1bn | $1.1bn | Approved June 2023, adds 160,000 tonnes/year, commissioning expected H1 2026 | | Kennecott south wall pushback (Utah) | $1.8bn | $1.3bn | Extends mine life by six years, $0.3bn approved to mitigate geotechnical instability | | Kennecott North Rim Skarn (NRS) underground copper mine | $0.5bn | $0.5bn | Approved June 2023, production from 2024, ~250,000 tonnes additional copper over 10 years | | Oyu Tolgoi underground copper/gold mine (Rio Tinto 66%) | $7.06bn | $1.4bn | First sustainable underground production from Panel 0 in March 2023, shafts 3 & 4 commissioning expected H2 2024 | Future options Rio Tinto is advancing studies for Pilbara iron ore, Simandou, and various lithium and copper projects, while also developing inert anode technology for aluminium smelting - Progressing studies for Pilbara brownfield iron ore mines (Hope Downs 1, Brockman 4, Greater Nammuldi, West Angelas) to sustain production[64] - An Order of Magnitude study is underway for the Rhodes Ridge iron ore project (5.8 billion tonnes high-grade Mineral Resources), targeting an operation before the end of the decade with initial plant capacity of up to 40 million tonnes annually[64] - The Simandou iron ore project in Guinea is advancing, with negotiations for co-development of rail and port infrastructure[64] - The Jadar lithium-borates project in Serbia is focused on consultation with stakeholders following the cancellation of the Spatial Plan[64] - The Rincon lithium project starter plant capital estimate increased to $335 million (from $140 million) due to project definition, scope adjustments, and cost escalation[64] - Formed a joint venture with First Quantum Minerals for the La Granja copper project in Peru, with First Quantum acquiring a 55% stake for $105 million and committing up to $546 million for development[65] - ELYSIS, a joint venture with Alcoa, is developing breakthrough inert anode technology to eliminate direct greenhouse gases from aluminium smelting, with first commercial-scale prototype cells underway[65][66] Review of operations Rio Tinto's H1 2023 operational review shows mixed performance, with increased iron ore and aluminium production but financial impacts from lower commodity prices and higher costs Iron Ore Pilbara iron ore production and shipments increased by 7%, but underlying EBITDA decreased by 6% due to lower prices, despite improved unit costs Iron Ore Operational & Financial Performance (Six months ended 30 June) | Metric | 2023 | 2022 | Change | | :------------------------------------------------ | :----- | :----- | :----- | | Pilbara production (million tonnes — 100%) | 160.5 | 150.3 | 7% | | Pilbara shipments (million tonnes — 100%) | 161.7 | 151.4 | 7% | | Segmental revenue (US$ millions) | 15,600 | 16,610 | (6)% | | Average realised price (US$ per dry metric tonne, FOB) | 107.2 | 120.5 | (11)% | | Underlying EBITDA (US$ millions) | 9,792 | 10,395 | (6)% | | Pilbara underlying FOB EBITDA margin | 69% | 70% | | | Unit costs (US$ per tonne) | 21.2 | 21.8 | (3)% | | Net cash generated from operating activities (US$ millions) | 6,782 | 8,512 | (20)% | | Free cash flow (US$ millions) | 5,639 | 7,023 | (20)% | - Gudai-Darri mine reached nameplate capacity on a sustained basis during the second quarter, contributing to record first quarter shipments and the highest first half shipments since 2018[75] - Strong demand for portside product in China, with sales totaling 11.9 million tonnes in H1 2023[76] Aluminium Aluminium production increased by 9%, but underlying EBITDA significantly decreased by 60% due to lower LME prices and market premiums, with bauxite production down Aluminium Operational & Financial Performance (Six months ended 30 June) | Metric | 2023 | 2022 | Change | | :------------------------------------------------ | :----- | :----- | :----- | | Bauxite production ('000 tonnes — Rio Tinto share) | 25,581 | 27,757 | (8)% | | Alumina production ('000 tonnes — Rio Tinto share) | 3,720 | 3,765 | (1)% | | Aluminium production ('000 tonnes — Rio Tinto share) | 1,598 | 1,467 | 9% | | Segmental revenue (US$ millions) | 6,263 | 7,796 | (20)% | | Average realised aluminium price (US$ per tonne) | 2,866 | 3,808 | (25)% | | Underlying EBITDA (US$ millions) | 1,140 | 2,866 | (60)% | | Underlying EBITDA margin (integrated operations) | 21% | 41% | | | Net cash generated from operating activities (US$ millions) | 777 | 2,088 | (63)% | | Free cash flow (US$ millions) | 165 | 1,450 | (89)% | - Underlying EBITDA decreased by 60% to $1.1 billion due to a 24% reduction in the LME price and lower market and product premiums[80] - Aluminium production increased by 9% due to the continued ramp-up of the Kitimat smelter[86] - Bauxite production was 8% lower due to higher-than-average rainfall during the wet season and equipment downtime[83] - Alumina production was 1% lower, with improved operational stability at Yarwun and Vaudreuil offset by unplanned plant downtime at Queensland Alumina Limited (QAL)[84] Copper Mined copper production was stable at 290 thousand tonnes in H1 2023, benefiting from the Oyu Tolgoi underground mine ramp-up, but refined copper decreased due to Kennecott challenges, leading to a 29% drop in underlying EBITDA Copper Operational & Financial Performance (Six months ended 30 June) | Metric | 2023 | 2022 | Change | | :------------------------------------------------ | :----- | :----- | :----- | | Mined copper production ('000 tonnes — consolidated) | 290 | 292 | (1)% | | Refined copper production ('000 tonnes — Rio Tinto share) | 95 | 104 | (9)% | | Segmental revenue (US$ millions) | 3,487 | 3,547 | (2)% | | Average realised copper price (US cents per pound) | 396 | 447 | (11)% | | Underlying EBITDA (US$ millions) | 1,082 | 1,534 | (29)% | | Underlying EBITDA margin (product group operations) | 43% | 54% | | | Copper unit costs (cents per pound) | 184 | 148 | 24% | | Net cash generated from operating activities (US$ millions) | 409 | 1,094 | (63)% | | Free cash flow (US$ millions) | (512) | (354) | (45)% | - Underlying EBITDA was down 29% to $1.1 billion due to lower LME prices, higher unit costs (up 36 cents to 184 cents per pound), and increased exploration and evaluation expenditure[89][90] - Mined copper production was stable, benefiting from the Oyu Tolgoi underground mine ramp-up, but offset by Kennecott's concentrator operating at reduced rates due to a conveyor failure[92][94] - Refined copper production decreased by 9% due to the largest rebuild of Kennecott's smelter and refinery, expected to conclude in September 2023[93] - The Oyu Tolgoi underground mine remains on track to ramp up to deliver average mined copper production of ~500ktpa between 2028 and 2036[96] Minerals The Minerals segment experienced a 45% decrease in underlying EBITDA to $0.7 billion in H1 2023, primarily due to lower iron ore prices, reduced volumes for Iron & Titanium and diamonds, and higher costs Minerals Operational & Financial Performance (Six months ended 30 June) | Metric | 2023 | 2022 | Change | | :------------------------------------------------ | :----- | :----- | :----- | | Iron ore pellets and concentrates production (million tonnes — Rio Tinto share) | 4.6 | 5.0 | (8)% | | Titanium dioxide slag production ('000 tonnes — Rio Tinto share) | 589 | 566 | 4% | | Borates production ('000 tonnes — Rio Tinto share) | 257 | 260 | (1)% | | Diamonds production ('000 carats — Rio Tinto share) | 1,924 | 2,140 | (10)% | | Segmental revenue (US$ millions) | 2,889 | 3,403 | (15)% | | Underlying EBITDA (US$ millions) | 689 | 1,259 | (45)% | | Underlying EBITDA margin (product group operations) | 30% | 40% | | | Net cash generated from operating activities (US$ millions) | 89 | 636 | (86)% | | Free cash flow (US$ millions) | (229) | 353 | (165)% | - Underlying EBITDA was 45% lower than H1 2022, primarily due to lower iron ore prices, lower volumes for Iron & Titanium and diamonds, and higher costs[100] - Production of iron ore pellets and concentrate at IOC was 8% lower, impacted by ~3.5 weeks of lost production due to wildfires in Northern Quebec[101] - Titanium dioxide production was 4% higher due to improved operational performance at smelters[101] Footnotes This section provides important contextual footnotes regarding non-IFRS measures, accounting restatements, and key project details - Financial performance indicators are non-IFRS measures, reconciled to IFRS, and used internally by management to assess business performance[105] - Comparative information has been restated to reflect the adoption of narrow scope amendments to IAS12 'Income Taxes'[105] - Production targets for Oyu Tolgoi underground and open pit mines are ~500ktpa copper and 350kozpa gold from 2028 to 2036[105] - The Rhodes Ridge project contains 5.8 billion tonnes of high-grade Mineral Resources at an average grade of 62.3% Fe[105] - The Simandou iron ore project operates under the Simfer joint venture, where Rio Tinto has a 45.05% indirect interest in Simfer S.A[105] Directors' report for the half year ended 30 June 2023 The Directors' Report covers key financial, operational, and governance events, including an SEC settlement, new debt issuance, and strategic investments Financial Rio Tinto resolved an SEC investigation with a $15 million penalty, issued $1.75 billion in new debt, and made significant investments in environmental projects - Resolved a previously self-disclosed SEC investigation into contractual payments related to the Simandou project, paying a $15 million civil penalty for violations of books and records and internal controls provisions of the Foreign Corrupt Practices Act[107] - Priced $650 million of 10-year fixed rate and $1.1 billion of 30-year fixed rate SEC-registered debt securities in March 2023[108] - Published its 2022 Taxes and Royalties Paid Report, detailing $10.8 billion of global taxes and royalties paid during the year[109] - Subscribed for its full entitlements under Energy Resources of Australia Ltd's Interim Entitlement Offer, at a cost of A$319 million, for the Ranger Rehabilitation Project[110] - Announced plans to invest $395 million in a seawater desalination plant in the Pilbara, Western Australia, to support future water supply[112] Operations Operational highlights include new joint ventures for copper and aluminium, expansion of the AP60 smelter, and local rail car manufacturing partnerships - Entered into an agreement with First Quantum Minerals to form a joint venture for the La Granja copper project in Peru; First Quantum will acquire a 55% stake for $105 million and commit up to $546 million for development[113] - Signed a Memorandum of Understanding with China Baowu to explore a range of industry-leading new projects to help decarbonise the steel value chain[115] - Announced an investment of $1.1 billion to expand the AP60 aluminium smelter equipped with low-carbon technology at Complexe Jonquière in Canada[116] - Announced $498 million of funding for underground development and infrastructure for the North Rim Skarn (NRS) area at Kennecott, expected to deliver ~250 thousand tonnes of additional mined copper over the next 10 years[118] - Partnered with Gemco Rail to bring local iron ore rail car manufacturing and bearing maintenance to the Pilbara region[117] People This section details recent non-executive director appointments and a key executive departure - Dean Dalla Valle and Susan Lloyd-Hurwitz were appointed as non-executive directors effective 1 June 2023[119] - Ivan Vella, Chief Executive Aluminium, will leave Rio Tinto in December 2023[119] Rio Tinto 2023 Annual General Meetings (AGMs) Resolution 21 at the Rio Tinto plc AGM passed with less than 80% approval, highlighting Chinalco's increasing stake - At Rio Tinto plc's AGM on 6 April 2023, Resolution 21 (Authority to purchase Rio Tinto plc shares) was passed with less than 80% of votes in favour, with Shining Prospect (a subsidiary of Chinalco) voting against it[121] - Chinalco's holding in Rio Tinto plc is now over 14%, nearing the 14.99% holding threshold agreed with the Australian Government[121] Risk factors Risk factors remain consistent with the prior year, including labor market tightness, rising costs, supply chain disruptions, and geopolitical uncertainties - Risk factors remain broadly consistent with the 2022 Annual Report on Form 20-F, including high unplanned absences, tight labour markets, rising input costs, and supply chain disruptions[122][123] - The company continues to monitor areas of uncertainty in the short to medium term, including the evolving situation with the war in Ukraine and potential further Russian sanctions and elevated inflation[123] Rio Tinto financial information by business unit This section provides detailed financial performance data by business unit, including underlying EBITDA, earnings, and capital expenditure Segmental Financial Performance (Six months ended 30 June) | Segment | Underlying EBITDA 2023 (US$m) | Underlying EBITDA 2022 (US$m) | Underlying Earnings 2023 (US$m) | Underlying Earnings 2022 (US$m) | Capital Expenditure 2023 (US$m) | Capital Expenditure 2022 (US$m) | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Iron Ore | 9,792 | 10,395 | 5,787 | 6,473 | 1,094 | 1,472 | | Aluminium | 1,140 | 2,866 | 260 | 1,570 | 597 | 625 | | Copper | 1,082 | 1,534 | 198 | 571 | 917 | 730 | | Minerals | 689 | 1,259 | 179 | 423 | 304 | 268 | | Reportable segments total | 12,703 | 16,054 | 6,424 | 9,037 | 2,912 | 3,095 | | Simandou iron ore project | (318) | (54) | (114) | (33) | — | — | | Total | 11,728 | 15,597 | 5,720 | 8,662 | 2,993 | 3,145 | - Costs attributable to the Simandou iron ore project in Guinea increased to $318 million (100% basis at EBITDA level) due to the rise in activity[126] - Operating assets of the Group were $55,975 million at 30 June 2023, up from $54,822 million at 31 December 2022[128] - The Simandou iron ore project's management responsibility changed from Copper to the Chief Technical Officer, and it is now included in 'Other Operations'[130] - Rio Tinto now directly holds a 66% investment in Oyu Tolgoi LLC, following the purchase of Turquoise Hill Resources[130] Alternative performance measures This section defines and reconciles alternative performance measures used by management to assess Rio Tinto's underlying financial and operational performance APMs derived from the income statement This sub-section details APMs derived from the income statement, including segmental revenue, underlying EBITDA, various EBITDA margins, underlying earnings, and payout ratio Segmental revenue Segmental revenue includes consolidated sales revenue plus the proportional sales revenue of equity accounted units, adjusted for inter-subsidiary sales - Segmental revenue includes consolidated sales revenue plus the equivalent sales revenue of equity accounted units in proportion to Rio Tinto's equity interest, after adjusting for sales to/from subsidiaries[136] Underlying EBITDA Underlying EBITDA represents profit before tax, finance items, depreciation, and amortization, adjusted for non-underlying performance items - Underlying EBITDA represents profit before taxation, net finance items, depreciation and amortisation, adjusted to exclude the EBITDA impact of items that do not reflect the underlying performance of reportable segments[137] Underlying EBITDA margin This metric measures the overall efficiency of the Group's underlying operations in generating profit relative to total adjusted sales revenue Underlying EBITDA Margin | Metric | 2023 (US$m) | 2022 (US$m) | | :------------------------------------------------ | :---------- | :---------- | | Underlying EBITDA | 11,728 | 15,597 | | Consolidated sales revenue + Share of equity accounted unit sales (adjusted) | 28,182 | 31,314 | | Underlying EBITDA margin | 42% | 50% | Pilbara underlying FOB EBITDA margin This margin specifically assesses the profitability of the Pilbara iron ore business, excluding freight revenue Pilbara Underlying FOB EBITDA Margin | Metric | 2023 (US$m) | 2022 (US$m) | | :------------------------------------ | :---------- | :---------- | | Pilbara Underlying EBITDA | 9,541 | 10,119 | | Pilbara segmental revenue, excluding freight revenue | 13,792 | 14,407 | | Pilbara underlying FOB EBITDA margin | 69% | 70% | Underlying EBITDA margin from Aluminium integrated operations This margin evaluates the profitability of Rio Tinto's integrated aluminium operations relative to their segmental revenue Aluminium Integrated Operations Underlying EBITDA Margin | Metric | 2023 (US$m) | 2022 (US$m) | | :------------------------------------------------ | :---------- | :---------- | | Underlying EBITDA - integrated operations | 1,217 | 2,941 | | Segmental revenue - integrated operations | 5,801 | 7,162 | | Underlying EBITDA margin from integrated operations | 21% | 41% | Underlying EBITDA margin (product group operations) This metric provides a profitability assessment for specific product group operations, such as Copper and Minerals, relative to their segmental revenue Copper Product Group Operations Underlying EBITDA Margin | Metric | 2023 (US$m) | 2022 (US$m) | | :------------------------------------------------ | :---------- | :---------- | | Underlying EBITDA - product group operations | 1,322 | 1,721 | | Segmental revenue - product group operations | 3,085 | 3,189 | | Underlying EBITDA margin - product group operations | 43% | 54% | Minerals Product Group Operations Underlying EBITDA Margin | Metric | 2023 (US$m) | 2022 (US$m) | | :------------------------------------------------ | :---------- | :---------- | | Underlying EBITDA - product group operations | 858 | 1,362 | | Segmental revenue - product group operations | 2,883 | 3,394 | | Underlying EBITDA margin - product group operations | 30% | 40% | Underlying earnings Underlying earnings represent net earnings adjusted to exclude items that do not reflect the Group's core operational performance - Underlying earnings represent net earnings attributable to the owners of Rio Tinto, adjusted to exclude items that do not reflect the underlying performance of the Group's operations[147] - Exclusions from underlying earnings include net gains/losses on disposal of interests in subsidiaries, impairment charges and reversals, profit/loss from discontinued operations, and exchange and derivative gains and losses[150] Reconciliation of Net Earnings to Underlying Earnings | Metric | 2023 (US$m) | 2022 (US$m) | | :------------------------------------------------ | :---------- | :---------- | | Net earnings | 5,117 | 8,943 | | Items excluded from underlying earnings | 603 | (281) | | Underlying earnings | 5,720 | 8,662 | - Impairment charges of $828 million (post-tax) were excluded from underlying earnings in H1 2023[152] Basic underlying earnings per share This metric provides a per-share measure of the Group's underlying profitability, excluding non-recurring or non-operational items Basic Underlying Earnings Per Share | Metric | 2023 (cents) | 2022 (cents) | | :------------------------------------ | :----------- | :----------- | | Basic earnings per ordinary share | 315.7 | 552.3 | | Items excluded from underlying earnings per share | 37.2 | (17.4) | | Basic underlying earnings per ordinary share | 352.9 | 534.9 | Interest cover Interest cover indicates the company's ability to meet its interest obligations from its calculated earnings Interest Cover | Metric | 2023 (US$m) | 2022 (US$m) | | :------------------------------------ | :---------- | :---------- | | Calculated earnings | 7,976 | 12,247 | | Total net finance costs before capitalisation | (411) | (246) | | Interest cover | 19 | 50 | Payout ratio The payout ratio reflects the proportion of underlying earnings distributed to shareholders as dividends Payout Ratio | Metric | 2023 (cents) | 2022 (cents) | | :------------------------------------ | :----------- | :----------- | | Interim dividend declared per share | 177.0 | 267.0 | | Underlying earnings per share | 352.9 | 534.9 | | Payout ratio | 50% | 50% | APMs derived from cash flow statement This section outlines APMs derived from the cash flow statement, including capital expenditure, Rio Tinto's share of capital investment, and free cash flow Capital expenditure Capital expenditure includes net sustaining and development investments in property, plant, and equipment, and intangible assets - Capital expenditure includes the net sustaining and development expenditure on property, plant and equipment and on intangible assets[163] - This measure is used to support management's objective of effective and efficient capital allocation to maintain and improve productive capacity, and to grow the business[164] Rio Tinto share of capital investment This measure represents Rio Tinto's economic investment in capital projects, adjusted for non-controlling interest financing and equity accounted unit contributions - Rio Tinto's share of capital investment represents its economic investment in capital projects, adjusted for non-controlling interest financing and Group contributions to Equity Accounted Units[165][166] - In the current and prior periods, the Capital expenditure APM and Rio Tinto share of capital investment are identical[167] Free cash flow Free cash flow measures the net cash generated by the business after sustaining and development capital, available for shareholder returns and debt reduction - Free cash flow measures the net cash returned by the business after the expenditure of sustaining and development capital, available for shareholder returns, debt reduction, and other investing/financing activities[170] Free Cash Flow | Metric | 2023 (US$m) | 2022 (US$m) | | :------------------------------------------------ | :---------- | :---------- | | Net cash generated from operating activities | 6,975 | 10,474 | | Less: Purchase of property, plant and equipment and intangible assets | (3,001) | (3,146) | | Less: Lease principal payments | (213) | (183) | | Add: Sales of property, plant and equipment and intangible assets | 8 | 1 | | Free cash flow | 3,769 | 7,146 | APMs derived from the balance sheet This section covers APMs derived from the balance sheet, including net debt, net gearing ratio, and underlying return on capital employed (ROCE) Net debt Net debt represents total borrowings and lease liabilities less cash and liquid investments, adjusted for related derivatives, indicating capital structure management - Net debt is total borrowings plus lease liabilities less cash and cash equivalents and other liquid investments, adjusted for derivatives related to net debt[172] - Net debt measures how the company is managing its balance sheet and capital structure[172] Net Debt (Closing Balance) | Metric | At 30 June 2023 (US$m) | At 31 December 2022 (US$m) | | :------------------------------------ | :--------------------- | :--------------------- | | Borrowings excluding overdrafts | (12,844) | (11,070) | | Lease liabilities | (1,229) | (1,200) | | Net debt related derivatives | (664) | (690) | | Cash and cash equivalents including overdrafts | 9,174 | 6,774 | | Other investments | 1,213 | 1,998 | | Closing balance (Net debt) | (4,350) | (4,188) | Net gearing ratio The net gearing ratio indicates the proportion of the company's operations funded by debt versus equity - Net gearing ratio is defined as net debt divided by the sum of net debt and total equity at the end of each period, demonstrating the degree to which operations are funded by debt versus equity[175] Net Gearing Ratio | Metric | 30 June 2023 (US$m) | 31 December 2022 (US$m) | | :------------------------------------ | :------------------ | :----------------------- | | Net debt | (4,350) | (4,188) | | Total equity | (53,357) | (52,741) | | Net debt plus total equity | (57,707) | (56,929) | | Net gearing ratio | 8% | 7% | Underlying return on capital employed Underlying ROCE measures the efficiency with which the company generates profits from its invested capital - Underlying return on capital employed ('ROCE') is defined as underlying earnings excluding net interest divided by average capital employed (operating assets)[177] - Underlying ROCE measures how efficiently the company generates profits from investment in its portfolio of assets[177] Underlying Return on Capital Employed | Metric | 30 June 2023 (US$m) | 30 June 2022 (US$m) | | :------------------------------------ | :------------------ | :------------------ | | Annualised adjusted underlying earnings | 11,278 | 17,114 | | Average operating assets | 55,399 | 50,575 | | Underlying return on capital employed | 20% | 34% | Unaudited condensed consolidated interim financial statements This section presents the unaudited condensed consolidated interim financial statements for the six months ended 30 June 2023, including core statements and selected explanatory notes Interim financial statements This sub-section contains the core unaudited condensed consolidated interim financial statements, providing a snapshot of Rio Tinto's financial position and performance for H1 2023 Group income statement This statement presents the Group's revenues, costs, and profit after tax for the six months ended 30 June 2023 Group Income Statement Highlights (Six months ended 30 June) | Metric | 2023 (US$m) | 2022 (US$m) (Restated) | | :------------------------------------------------ | :---------- | :----------------------- | | Consolidated sales revenue | 26,667 | 29,775 | | Net operating costs (excluding items disclosed separately) | (17,535) | (17,202) | | Impairment charges | (1,175) | — | | Exploration and evaluation expenditure | (710) | (367) | | Operating profit | 7,247 | 12,206 | | Profit before taxation | 6,930 | 12,315 | | Taxation | (1,983) | (2,867) | | Profit after tax for the period | 4,947 | 9,448 | | Attributable to owners of Rio Tinto (net earnings) | 5,117 | 8,943 | | Basic earnings per share | 315.7c | 552.3c | Group statement of comprehensive income This statement details the Group's profit after tax and other comprehensive income items, including currency translation adjustments Group Statement of Comprehensive Income Highlights (Six months ended 30 June) | Metric | 2023 (US$m) | 2022 (US$m) (Restated) | | :------------------------------------ | :---------- | :----------------------- | | Profit after tax for the period | 4,947 | 9,448 | | Total other comprehensive loss for the period, net of tax | (423) | (938) | | Total comprehensive income for the period | 4,524 | 8,510 | | Attributable to owners of Rio Tinto | 4,698 | 8,078 | - Currency translation adjustment resulted in a loss of $387 million in H1 2023[185] Group cash flow statement This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for the period Group Cash Flow Statement Highlights (Six months ended 30 June) | Metric | 2023 (US$m) | 2022 (US$m) | | :------------------------------------------------ | :---------- | :---------- | | Cash flows from consolidated operations | 9,435 | 13,912 | | Net cash generated from operating activities | 6,975 | 10,474 | | Net cash used in investing activities | (2,236) | (4,022) | | Net cash used in financing activities | (2,280) | (7,822) | | Equity dividends paid to owners of Rio Tinto | (3,691) | (7,595) | | Net increase/(decrease) in cash and cash equivalents | 2,400 | (1,396) | | Closing cash and cash equivalents less overdrafts | 9,174 | 11,409 | - Proceeds from additional borrowings were $1,858 million in H1 2023, including $1.75 billion from SEC-registered bonds[186][189] Group balance sheet This statement presents the Group's assets, liabilities, and equity at 30 June 2023 and 31 December 2022 Group Balance Sheet Highlights | Metric | 30 June 2023 (US$m) | 31 December 2022 (US$m) (Restated) | | :------------------------------------ | :------------------ | :----------------------- | | Total assets | 97,556 | 96,774 | | Total liabilities | (44,199) | (44,033) | | Net assets | 53,357 | 52,741 | | Equity attributable to owners of Rio Tinto | 51,625 | 50,634 | | Cash and cash equivalents | 9,179 | 6,775 | | Borrowings | (12,849) | (11,071) | | Property, plant and equipment | 63,101 | 64,734 | Group statement of changes in equity This statement details the movements in the Group's equity attributable to owners of Rio Tinto for the period Group Statement of Changes in Equity Highlights | Metric | 30 June 2023 (US$m) | 31 December 2022 (US$m) (Restated) | | :------------------------------------ | :------------------ | :----------------------- | | Restated opening balance (Total equity) | 52,741 | 57,096 | | Total comprehensive income for the year | 4,524 | 8,510 | | Currency translation arising on Rio Tinto Limited's share capital | (66) | (185) | | Dividends | (3,691) | (7,584) | | Closing balance (Total equity) | 53,357 | 57,636 | Selected explanatory notes to the interim financial statements This section provides detailed explanatory notes to the interim financial statements, covering the basis of preparation, accounting policy changes, and specific financial items 1. Basis of preparation These interim financial statements are prepared in accordance with IAS 34 and IFRS, adopting the going concern basis of accounting - The unaudited condensed consolidated interim financial statements are prepared in accordance with International Accounting Standards (IAS) 34 'Interim Financial Reporting' and International Financial Reporting Standards (IFRS)[197][199] - The directors considered it appropriate to adopt the going concern basis of accounting, supported by detailed cash flow forecasts and sufficient liquid resources[201] 2. Changes in accounting policies Rio Tinto adopted narrow-scope amendments to IAS 12 'Income Taxes' effective January 1, 2023, impacting deferred tax assets and liabilities - Effective 1 January 2023, Rio Tinto adopted narrow-scope amendments to IAS 12 'Income Taxes', requiring separate recognition of deferred tax assets and liabilities for transactions giving rise to equal and offsetting temporary differences[204][205] Impact of IAS 12 Amendments on Equity | Metric | At 1 January 2023 (US$m) | At 1 January 2022 (US$m) | At 1 January 2021 (US$m) | | :------------------------------------ | :----------------------- | :----------------------- | :----------------------- | | Equity attributable to owners of Rio Tinto (previously reported) | 50,175 | 51,415 | 47,054 | | Impact of IAS 12 amendments | 459 | 515 | 516 | | Restated equity attributable to owners of Rio Tinto | 50,634 | 51,930 | 47,570 | - The most significant impact was from temporary differences related to close-down and restoration provisions and lease obligations[206] - The impact of restatement on net earnings for the six months ended 30 June 2022 was a net credit of $35 million[208] - Other amendments (IFRS 17 'Insurance Contracts', IAS 1 'Presentation of Financial Statements', and IAS 8 'Accounting Policies') did not have a material impact on the Group[209][210][211] 3. Segmental information This note provides detailed financial information by principal product groups, with adjustments for the Simandou iron ore project's management change - Rio Tinto's management structure is based on principal product groups (Iron Ore, Aluminium, Copper, Minerals), with the Chief Executive as the chief operating decision maker (CODM)[213][214] - The Simandou iron ore project's management responsibility was moved from the Copper reportable segment to 'Other Operations', and prior period comparatives were adjusted accordingly[214][215] Segmental Financial Performance (Six months ended 30 June) | Segment | Segmental Revenue 2023 (US$m) | Underlying EBITDA 2023 (US$m) | Capital Expenditure 2023 (US$m) | Segmental Revenue 2022 (US$m) | Underlying EBITDA 2022 (US$m) | Capital Expenditure 2022 (US$m) | | :-------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Iron Ore | 15,600 | 9,792 | 1,094 | 16,610 | 10,395 | 1,472 | | Aluminium | 6,263 | 1,140 | 597 | 7,796 | 2,866 | 625 | | Copper | 3,487 | 1,082 | 917 | 3,547 | 1,534 | 730 | | Minerals | 2,889 | 689 | 304 | 3,403 | 1,259 | 268 | | Reportable segments total | 28,239 | 12,703 | 2,912 | 31,356 | 16,054 | 3,095 | | Other Operations | 97 | (395) | 32 | 107 | (125) | 9 | | Consolidated sales revenue/Purchases of property, plant and equipment and intangible assets | 26,667 | 11,728 | 3,001 | 29,775 | 15,597 | 3,146 | - Underlying EBITDA is reconciled from profit after tax by adding back taxation, finance items, depreciation, and amortisation, and excluding specific items that do not reflect underlying business performance[218][221] 4. Segmental information - additional information This note provides additional segmental information, including consolidated sales revenue broken down by destination and product type Consolidated Sales Revenue by Destination (Six months ended 30 June) | Destination | 2023 (%) | 2022 (%) (Adjusted) | 2023 (US$m) | 2022 (US$m) (Adjusted) | | :------------------------------------ | :------- | :-------------------- | :---------- | :----------------------- | | Greater China | 58.1% | 54.6% | 15,482 | 16,261 | | United States of America | 14.6% | 16.3% | 3,885 | 4,848 | | Asia (excluding Greater China and Japan) | 7.3% | 6.6% | 1,957 | 1,958 | | Japan | 6.7% | 6.8% | 1,791 | 2,039 | | Europe (excluding UK) | 5.8% | 6.7% | 1,537 | 1,995 | | Canada | 2.9% | 3.1% | 785 | 933 | | Australia | 1.7% | 2.0% | 451 | 596 | | UK | 0.2% | 0.4% | 66 | 133 | | Other countries | 2.7% | 3.5% | 713 | 1,012 | | Consolidated sales revenue | 100.0% | 100.0% | 26,667 | 29,775 | Consolidated Sales Revenue by Product (Six months ended 30 June) | Product | 2023 (US$m) | 2022 (US$m) | | :------------------------------------------------ | :---------- | :---------- | | Iron ore | 16,331 | 17,638 | | Aluminium, alumina and bauxite | 6,149 | 7,619 | | Copper | 1,689 | 1,664 | | Industrial minerals (comprising titanium dioxide slag, borates and salt) | 1,245 | 1,230 | | Gold | 239 | 331 | | Diamonds | 250 | 465 | | Other products | 764 | 828 | | Consolidated sales revenue | 26,667 | 29,775 | 5. Impairment charges A significant pre-tax impairment charge of $1,175 million was recognized, primarily related to Australian alumina refineries due to market conditions and decarbonization costs Impairment Charges (Six months ended 30 June) | Item | 2023 (US$m) | 2022 (US$m) | | :------------------------------------ | :---------- | :---------- | | Aluminium – Alumina refineries | (1,175) | — | - A pre-tax impairment charge of $1,175 million (post-tax $828 million) was recognized, mainly related to Australian alumina refineries (Yarwun and Queensland Alumina Limited)[230][232] - The impairment was triggered by challenging market conditions, improved understanding of decarbonization capital requirements, and recently legislated cost escalation for carbon emissions[231] - The impairment reflects a full impairment of property, plant and equipment at Yarwun alumina refinery ($948 million) and $227 million for Queensland Alumina Limited (QAL)[232] - A 10% increase in carbon credit unit costs would reduce QAL's pre-tax value by $99 million, largely mitigated by decarbonization projects[234] 6. Taxation This note details the taxation charge, effective tax rate, and potential impacts from new mining royalties and global minimum tax rules Taxation Charge (Six months ended 30 June) | Metric | 2023 (US$m) | 2022 (US$m) (Restated) | | :------------------------------------ | :---------- | :----------------------- | | Profit before taxation | 6,930 | 12,315 | | Prima facie tax payable at UK rate of 23.5% (2022: 19%) | 1,628 | 2,340 | | Higher rate of taxation of 30% on Australian earnings | 373 | 924 | | Recognition of previously unrecognised deferred tax assets | (62) | (209) | | Unrecognised current period operating losses | 259 | 71 | | Total taxation charge | 1,983 | 2,867 | - The weighted average statutory corporate tax rate on profit before tax was approximately 30% (30 June 2022: 29%)[237] - Recognition of previously unrecognised deferred tax assets, particularly at Oyu Tolgoi, contributed to the tax charge[237] - The company is evaluating the cash tax implications of the OECD's Pillar Two global minimum tax rules, which were substantively enacted by the UK on 20 June 2023, with application from 1 January 2024[239][240] - A new mining royalty in Chile, which will impact Escondida, was approved by the Chamber of Deputies and will be effective as of 1 January 2024[241] 7. Acquisitions There were no material acquisitions in H1 2023, with the prior period noting the acquisition of the Rincon lithium project - There were no material acquisitions during the six months to 30 June 2023[242] - In H1 2022, Rio Tinto completed the acquisition of Rincon Mining Pty Limited (a lithium project in Argentina) for $825 million, treated as an asset purchase with $822 million capitalised as exploration and evaluation costs[243] 8. Cash and cash equivalents This note reconciles cash and cash equivalents between the balance sheet and cash flow statement, including bank overdrafts Cash and Cash Equivalents | Metric | 30 June 2023 (US$m) | 31 December 2022 (US$m) | | :------------------------------------ | :------------------ | :----------------------- | | Balance per Group balance sheet | 9,179 | 6,775 | | Bank overdrafts repayable on demand | (5) | (1) | | Balance per Group cash flow statement | 9,174 | 6,774 | 9. Provisions including post-retirement benefits Total provisions decreased, primarily due to a revision of the closure discount rate for close-down, restoration, and environmental liabilities Total Provisions | Metric | 30 June 2023 (US$m) | 31 December 2022 (US$m) | | :------------------------------------ | :------------------ | :----------------------- | | Opening balance as previously reported | 18,715 | 18,053 | | Adjustment on currency translation | (98) | (841) | | Change in discount rate (reduction) | (960) | — | | Amortisation of discount | 592 | 1,519 | | Utilised in the period | (492) | (1,039) | | Closing balance | 17,792 | 18,715 | - Close-down, restoration and environmental liabilities decreased to $14,846 million, primarily due to a revision of the closure discount rate to 2% (from 1.5%)[246][248] - The amortisation of discount was $578 million in H1 2023, used to systematically uplift cash-flows including a forecast of full year inflation[248] 10. Financial instruments This note details financial instruments carried at fair value, including cash, investments, derivatives, and borrowings, across different valuation levels Financial Instruments Carried at Fair Value (Selected Items) | Item | Valuation Level | 30 June 2023 (US$m) | 31 December 2022 (US$m) | | :------------------------------------ | :-------------- | :------------------ | :----------------------- | | Cash and cash equivalents (FVPL) | Level 1 | 2,455 | 2,725 | | Other investments (Level 1) | Level 1 | 1,232 | 2,018 | | Trade and other financial receivables (Level 2) | Level 2 | 1,242 | 1,306 | | Derivatives embedded in electricity contracts (Level 3) | Level 3 | (79) (net liability) | (208) (net liability) | | Royalty receivables (Level 3) | Level 3 | 191 | 209 | | Borrowings (Fair Value) | Level 1/3/2 | 13,048 | 11,192 | - $2,455 million of cash and cash equivalents are in money market funds, treated as fair value through profit or loss (FVPL)[254] - Level 3 derivatives, primarily embedded in electricity purchase contracts linked to LME, midwest premium, and billet premium, had a net liability of $79 million[259] - Royalty receivables from divested coal businesses had a carrying value of $191 million, valued using Level 3 unobservable inputs (long-term coal price)[260][263] - Oyu Tolgoi project finance ($3.8 billion carrying value, $4.1 billion fair value) uses Level 3 valuation inputs and was refinanced in February 2023, resulting in a **$123 m