Rio Tinto Regulatory News (RIO)

Rio Tinto releases first quarter production results

18 April 2018

Rio Tinto chief executive J-S Jacques said "We delivered a solid operational performance across most commodities in the first quarter of 2018. Our world-class Pilbara iron ore assets continue to demonstrate flexibility and the benefits of increased productivity, and production at our bauxite and copper assets was also higher. We announced $5 billion of divestments in the quarter, highlighting our ongoing drive to strengthen the portfolio and raise return on assets. By continuing to advance our mine-to-market productivity programme, whilst maintaining our focus on the disciplined allocation of cash, we will continue to deliver superior returns to our shareholders."

All figures in this report are unaudited. All currency figures in this report are US dollars, and comments refer to Rio Tinto's share of production, unless otherwise stated. To allow production numbers to be compared on a like-for-like basis, production from asset divestments completed in 2017 is excluded from Rio Tinto share of production data but assets sold in 2018 remain in comparisons.IRON ORE

Rio Tinto share of production (million tonnes)

Pilbara operations

Pilbara operations produced 83.1 million tonnes (Rio Tinto share 69.1 million tonnes) in the first quarter of 2018, eight per cent higher than the same quarter of 2017. Sales of 80.3 million tonnes (Rio Tinto share 66.6 million tonnes) were five per cent higher than the same period of last year.

Production benefitted from fewer weather disruptions than the first quarter of 2017, along with the ramp up of Silvergrass and the ongoing implementation of productivity improvements across the integrated system. Rail productivity continues to improve, with 85.0 million tonnes railed in the first quarter. Sales were 2.8 million tonnes below production due to disruptions at the ports resulting from Tropical Cyclone Marcus in March.

Approximately 18 per cent of sales in the quarter were priced by reference to the prior quarter's average index lagged by one month. The remainder was sold either on current quarter average, current month average or on the spot market.

Approximately 34 per cent of sales in the quarter were made free on board (FOB), with the remainder sold including freight.

Pilbara projects

The automation of the Pilbara train system (AutoHaulTM) continues to advance, with approximately 65 per cent of trains at the end of the quarter in autonomous mode with a driver on board for supervision and more than three million kilometres now completed in this mode of operation. The project continues to progress with the Regulator approval process and is on schedule to be completed by the end of 2018.

The Koodaideri feasibility study is on track for completion in 2018.

2018 guidance

Rio Tinto's Pilbara shipments in 2018 are still expected to be between 330 and 340 million tonnes (100 per cent basis). This is subject to market conditions and any weather constraints.

ALUMINIUM

Rio Tinto share of production ('000 tonnes)

Bauxite

Bauxite production of 12.7 million tonnes was 12 per cent higher than the first quarter of 2017, primarily driven by operational improvements. Gove production was notably 31 per cent higher due to the debottlenecking of the materials handling system, whilst stronger production was also achieved at Weipa (eight per cent higher) and Sangaredi (five per cent higher). Production was lower than the fourth quarter of 2017 due to seasonal wet weather.

8.2 million tonnes was shipped to third parties in the first quarter of 2018, 19 per cent higher than the first quarter of 2017 due to firm demand and higher port availability.

Amrun

The Amrun project is advancing to plan and has completed the installation of beneficiation modules and the process water dam. The project remains on schedule for first shipment in the first half of 2019.

Alumina

Alumina production for the quarter was three per cent lower than the corresponding period in 2017 due primarily to maintenance at QAL.

Aluminium

Quarterly aluminium production was five per cent lower than the corresponding period last year. This was due largely to an ongoing lock-out at the Becancour smelter, which began on 11 January 2018, as well as a power incident at the Dunkerque smelter which occurred on 6 February 2018.

On 10 January 2018, Rio Tinto announced it had received a binding offer for the sale of the Aluminium Dunkerque smelter in France for $500 million, subject to final adjustments. The sale is expected to complete in the second quarter of 2018, subject to satisfactory consultations with key stakeholders and completion of other conditions.

On 26 February 2018, Rio Tinto announced it had received a binding offer of $345 million for the sale of its ISAL smelter in Iceland, its 53.3 per cent share in the Aluchemie anode plant in the Netherlands and its 50 per cent share in the Aluminium fluoride plant in Sweden. The sale is expected to complete in the second quarter of 2018, subject to satisfactory consultations with key stakeholders and completion of other conditions.

Following the announcement by the United States Treasury Department on 6 April, 2018, that it was implementing sanctions on various Russian individuals and companies, Rio Tinto announced on 13 April 2018 that it has reviewed arrangements it has with impacted entities. The arrangements include Rusal's 20 per cent interest in Queensland Alumina Limited in Australia, including Rusal's associated supply and offtake arrangements, bauxite sales to Rusal's refinery in Ireland and offtake contracts for alumina that are used at Rio Tinto's smelters, mainly in France and Iceland.

As a result of the imposition of these sanctions, Rio Tinto is in the process of declaring force majeure on certain contracts and is working with its customers to minimise any disruption in supplies.

2018 guidance

Rio Tinto's share of production in 2018 is expected to be between 49 and 51 million tonnes of bauxite and 8.0 to 8.2 million tonnes of alumina. Aluminium guidance of 3.5 to 3.7 million tonnes will be adjusted following completion of the sale of the Aluminium Dunkerque and ISAL smelters. Adjustments may also be made as a consequence of the U.S. sanctions.

COPPER & DIAMONDS

Rio Tinto share of production ('000 tonnes)

Rio Tinto Kennecott

Mined copper production in the first quarter of 2018 was 20 per cent lower than the first quarter of 2017 due primarily to temporarily lower head grades, although refined copper production was 19 per cent higher due to the draw down in concentrate inventories that were built up during the smelter shutdown following the fatality in October 2017.

Rio Tinto Kennecott tolls third party concentrate to optimise smelter utilisation, with 41 thousand tonnes of concentrate received in the first quarter of 2018. Tolled copper concentrate is excluded from reported production figures.

The pushback of the south wall progressed during the quarter. It will extend the life of mine and remains on track for completion in 2020.

Escondida

Mined copper production at Escondida in the first quarter of 2018 was significantly higher than the first quarter of 2017, due to the labour union strike that impacted production in the first half of last year. This second consecutive quarter of strong production reflects the operational capacity following commissioning and ramp up of the Los Colorados concentrator in the second half of 2017.

Oyu Tolgoi

Mined copper production from the open pit in the first quarter of 2018 was two per cent higher than the corresponding period of 2017, but 14 per cent lower than the previous quarter due to a planned plant shutdown in January 2018.

Due to protests by coal transporters that obstructed the main access road at the Ganquimaodu Border Zone, Oyu Tolgoi declared force majeure in connection with customer contracts for concentrate between 17 January 2018 and 1 March 2018. Safe and normal operations, including underground development, were maintained during the force majeure period, and there was no production impact.

Oyu Tolgoi Underground Project

New contractors continue to mobilise with the total project workforce at over 6,700 at the end of March, of which 89 per cent were Mongolian. Lateral development is tracking on plan, and sinking of shafts two and five is complete. Eight accommodation buildings in the Oyut II camp are now complete and occupancy of these buildings has begun. Construction of the first drawbell is still expected in mid-2020.

Grasberg

Through a joint venture agreement with Freeport-McMoRan Inc. ("Freeport"), Rio Tinto is entitled to a 40 per cent share of production above an agreed threshold until the end of 2021 and 40 per cent of all production thereafter. Rio Tinto's full participation has been delayed due to the application of force majeure provisions in the joint venture agreement. The first full year in which Rio Tinto will participate to the full extent of 40 per cent of production is now expected to be 2023.

In February 2018, PF Freeport Indonesia ("PT-FI") received an extension of its export permit to February 2019. PT-FI continues to engage with the Indonesian Government in relation to the basis upon which operations at Grasberg will continue beyond 2021 with regard to the rights conferred by its Contract of Work.

Rio Tinto is reporting its metal share for the first quarter as zero.

Diamonds

At Argyle, first quarter carat production was 18 per cent higher than the first quarter of 2017 due to relatively fewer weather disruptions and the additional processing of higher grade alluvial tailings.

At Diavik, carats recovered in the first quarter of 2018 were six per cent lower than the corresponding period in 2017 due to lower recovered grades. Development of the A21 project is ahead of schedule with first ore uncovered in March and the mine is expected to be at full production capacity during the fourth quarter of 2018.

2018 guidance

Rio Tinto's expected share of mined copper production for 2018 is unchanged at between 510 and 610 thousand tonnes. Refined copper production is expected to be between 225 to 265 thousand tonnes.

Diamond production guidance for 2018 is between 17 and 20 million carats.

ENERGY & MINERALS

Rio Tinto share of production

(a) Production from Coal & Allied in 2017 has been excluded from the comparable percentages above.

Coal

Quarterly hard coking coal production was 30 per cent lower than the first quarter in 2017 and 53 per cent lower than the fourth quarter of 2017 due to the longwall changeover and maintenance works at Kestrel, as well as lower yield at Hail Creek impacted by coal scheduling.

Semi-soft and thermal coal production for 2017 have been restated for comparability, and exclude production from the Coal & Allied assets following divestment in the second half of 2017. First quarter thermal coal production was 12 per cent higher than the corresponding quarter of 2017 due to production sequence changes at Hail Creek.

In March 2018, Rio Tinto announced it had entered into binding agreements for the sale of its remaining coal assets for total consideration of $4.15 billion, as follows:

· On 20 March, it was announced that an agreement was signed with Glencore for the sale of Rio Tinto's entire 82 per cent interest in the Hail Creek coal mine and 72.1 per cent interest in the Valeria coal development project, both in Queensland, Australia, for $1.7 billion;

· On 22 March, it was announced that an agreement was signed with Whitehaven Coal Limited for the sale of Rio Tinto's 75 per cent interest in the Winchester South coal development project in Queensland, Australia, for $200 million; and

· On 27 March, it was announced that an agreement was entered into with a consortium comprising private equity manager EMR Capital and PT Adaro Energy Tbk, an Indonesian listed coal company, for the sale of Rio Tinto's entire 80 per cent interest in the Kestrel underground coal mine in Queensland, Australia, for $2.25 billion.

Subject to all regulatory approvals and other conditions precedent being satisfied, completion for the Winchester South project is expected to occur in the second quarter of 2018, whilst completion of the remaining transactions is expected to occur in the second half of 2018.

Rio Tinto anticipates that Australian income tax will be payable on sale proceeds which are in excess of the cost base of the assets at completion. The currently estimated total tax payable for these transactions is in the order of $0.8 billion, however the quantum of tax payable will depend on the final proceeds (after taking into account working capital adjustments), the tax cost base at completion and the total of capital gains and losses realised by the Rio Tinto Australian tax consolidated group at 31 December 2018.

Iron Ore Company of Canada (IOC)

IOC pellet production of 2.7 million tonnes (Rio Tinto share 1.6 million tonnes) was seven per cent higher than the first quarter of 2017, with strong pellet demand continuing to be strong and product mix being optimised to meet customer demand. Concentrate production for sale of 1.4 million tonnes (Rio Tinto share 0.8 million tonnes) was 28 per cent lower than the same period in 2017, mainly attributable to increased ore hardness and an unplanned shutdown of the Parallel Ore Delivery System. As a result, total sales in the first quarter of 4.0 million tonnes (Rio Tinto share 2.3 million tonnes), were 11 per cent lower than the corresponding period of 2017.

Collective bargaining negotiations at IOC's Labrador City operation were suspended on 27 March 2018 without an agreement being reached. The local union workforce voted to strike and operations were suspended from that date. Progress has been made to reach a new labour agreement, and a vote is imminent. The priority remains to reach a mutually beneficial agreement with employees and a safe return to operations.

Borates

Borates production was one per cent higher than the first quarter of 2017, with production aligned to market demand.

Iron and Titanium (RTIT)

Titanium dioxide slag production for the quarter was 12 per cent lower compared to the first quarter of 2017, due to a roaster failure at RBM resulting in a force majeure declaration, as well as the unplanned shutdown of a furnace at Rio Tinto Fer et Titane (RTFT).

Slag production at RBM for the second quarter of 2018 will be impacted by a labour dispute between contractors and their employees, which halted both mine and smelter operations. As a result, RBM has declared a separate force majeure on deliveries to its titanium dioxide feedstock customers, which will be lifted once the operation returns to normal operating capacity. Operations at RBM were restarted on 11 April 2018, and the mine is expected to return to previous operating capacity later this year.

One of nine furnaces at RTFT remains idle, along with one of four furnaces at RBM. The focus remains on maximising the productivity of the furnaces currently in operation, and a decision to re-start idle furnaces will be based on maximising value over volume.

Salt

Salt production in the first quarter of 2018 was significantly higher than the first quarter of 2017 as a result of fewer weather events experienced compared to last year.

Uranium

Energy Resources of Australia continues to process existing low grade stockpiles. 2018 first quarter production was 26 per cent lower than the same period of 2017 due to mill maintenance and declining grades as laterite stocks are largely exhausted.

Production at Rössing in the first quarter of 2018 was 26 per cent higher than the corresponding quarter of 2017 due to higher grades.

2018 guidance

Coal production guidance remains at 7.5 to 8.5 million tonnes of hard coking coal and 3.8 to 4.5 million tonnes of thermal coal. This assumes continued ownership of the coal assets until the end of 2018, and will be adjusted subject to the timing of completion of the asset disposals.

At IOC, the revised guidance for 2018 production is 10.3 to 11.3 million tonnes of iron ore pellets and concentrates (previously 11.5 to 12.5 million tonnes). This adjustment assumes a vote in favour of the new collective bargaining agreement and represents the loss of about one month's production.

Guidance for Rio Tinto's expected share of titanium dioxide slag production in 2018 has been revised to 1.1 to 1.3 million tonnes (previously 1.2 to 1.4 million tonnes) following the operational and labour disruptions at RBM.

Guidance for Rio Tinto's expected share of boric oxide equivalent production in 2018 is unchanged at 0.5 million tonnes and guidance for uranium production in 2018 is unchanged at 6.2 to 7.2 million pounds.

EXPLORATION AND EVALUATION

Pre-tax and pre-divestment expenditure on exploration and evaluation charged to the profit and loss account in the first quarter of 2018 was $101 million, compared with $78 million in the first quarter of 2017. Approximately 47 per cent of this expenditure was incurred by central exploration, 37 per cent by Copper & Diamonds, seven per cent by Energy & Minerals and the remainder by Iron Ore and Aluminium.

There were no significant divestments of central exploration properties in the first quarter of 2018.

Exploration highlights

Rio Tinto has a strong portfolio of projects with activity in 16 countries across some eight commodities. The bulk of the exploration expenditure in this quarter was focused on copper targets in Australia, Chile, Kazakhstan, Mongolia, Papua New Guinea, Peru, Serbia, United States and Zambia. Mine-lease exploration continued at a number of Rio Tinto managed businesses including Pilbara Iron, Richards Bay Minerals, Oyu Tolgoi and Weipa.

A summary of activity for the quarter is as follows:

Forward-looking statements

This announcement may include "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding Rio Tinto's production forecast or guidance, financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to Rio Tinto's products and reserve and resource positions), are forward-looking statements. The words "intend", "aim", "project", "anticipate", "estimate", "plan", "believes", "expects", "may", "should", "will", "target", "set to", "assumes" or similar expressions, commonly identify such forward looking statements.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual production, performance or results of Rio Tinto to be materially different from any future production, performance or results expressed or implied by such forward-looking statements. Such forward-looking statements could be influenced by such risk factors as identified in Rio Tinto's most recent Annual Report and Accounts in Australia and the United Kingdom and the most recent Annual Report on Form 20-F filed with the United States Securities and Exchange Commission (the "SEC") or Form 6-Ks furnished to, or filed with, the SEC. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this announcement. Rio Tinto expressly disclaims any obligation or undertaking (except as required by applicable law, the UK Listing Rules, the Disclosure and Transparency Rules of the Financial Conduct Authority and the Listing Rules of the Australian Securities Exchange) to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Rio Tinto's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Nothing in this announcement should be interpreted to mean that future earnings per share of Rio Tinto plc or Rio Tinto Limited will necessarily match or exceed its historical published earnings per share.

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