Rio Tinto Regulatory News (RIO)

Rio Tinto releases first quarter production results

20 April 2017

Rio Tinto chief executive J-S Jacques said "Despite challenging weather conditions at our West Australian and Queensland operations, we delivered solid production in the first quarter of 2017. Our strategy is unchanged. Our number one priority is safety. We maintain our disciplined approach to capital management and maximising cash flow, with a focus on managing costs and enhancing productivity across the business. These actions support the delivery of strong cash returns to shareholders in the short, medium and long term."

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 2016 have been excluded from Rio Tinto share of production data but assets sold in 2017 remain in comparisons.

IRON ORE

Rio Tinto share of production (million tonnes)

Pilbara operations

Pilbara operations produced 77.2 million tonnes (Rio Tinto share 63.6 million tonnes) in the first quarter of 2017, three per cent lower than the same quarter of 2016. Sales of 76.7 million tonnes (Rio Tinto share 63.2 million tonnes) were in line with the same period of last year.

Production and sales were both impacted by significant weather disruptions, which resulted in heavy flooding across several sites including the rail network, along with the suspension of ship loading on a number of occasions. All operations across the mine and infrastructure network have now recovered and are operating to plan.

Approximately 20 per cent of sales in the quarter were priced with 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 62 per cent of sales in the quarter were made on a cost and freight (CFR) basis, with the remainder sold free on board (FOB).

Pilbara projects

The Silvergrass Project incrementally increases the Nammuldi operation by ten million tonnes a year, delivering high grade, low phosphorus ore into the Pilbara Blend. First ore is on target for the second half of 2017.

The AutoHaul® project is advancing well with commencement and ramp up of trains operating in automated mode. Drivers are remaining on board until all safety and reliability systems are thoroughly demonstrated.

2017 guidance

Rio Tinto's expected Pilbara shipments in 2017 remains at between 330 and 340 million tonnes (100 per cent basis).

ALUMINIUM

Rio Tinto share of production ('000 tonnes)

Production from Lochaber in 2016 has been excluded from the comparable percentages above.

Bauxite

Bauxite production of 11.3 million tonnes was two per cent higher than the first quarter of 2016. Gove production was eight per cent higher following the upgrade of the overland conveyor and export system in the fourth quarter of 2016. Stronger production at Weipa was offset by lower production, due to planned maintenance, at Sangaredi and MRN. Production decreased by seven per cent compared with the fourth quarter of 2016, due mainly to weather impacting the Weipa operations during the quarter.

6.9 million tonnes was shipped to third parties in the first quarter of 2017, two per cent higher than the first quarter of 2016.

Amrun

The Amrun Project is on schedule in both engineering and construction. All major contracts have been committed as planned. Site establishment continues with an additional 112 rooms added to the camp accommodation village, over 40km of main access road completed and clearing work commenced for the stockyard and tailings storage facility areas. The Hey River Terminal is complete and the facility at Humbug Wharf is operational.

Alumina

Alumina production for the quarter was in line with the corresponding period in 2016, reflecting the operating stability that has been achieved at the Yarwun and Queensland Alumina refineries.

Aluminium

Quarterly aluminium production was two per cent higher than the corresponding period last year. This was due largely to Kitimat, which reached nameplate capacity in April 2016, together with on-going production creep across the other smelting operations.

2017 guidance

Rio Tinto's share of production in 2017 is expected to be unchanged at 48 to 50 million tonnes of bauxite, 8.0 to 8.2 million tonnes of alumina and 3.5 to 3.7 million tonnes of aluminium.

COPPER & DIAMONDS

Rio Tinto share of production ('000 tonnes)

Rio Tinto Kennecott

Mined copper production in the first quarter of 2017 was 29 per cent higher than the first quarter of 2016, benefiting from higher throughput. The higher mined production for the quarter resulted in improved refined copper production of 29.8 thousand tonnes, 15 per cent higher than the first quarter of 2016. Refined production was significantly lower than the previous quarter due to the processing of third party concentrate received in 2016, smelted and returned to customers in the first quarter of 2017.

Kennecott tolls third party concentrate to optimise smelter utilisation, with 68 thousand tonnes of concentrate received in the first quarter of 2017. Tolled copper concentrate is excluded from reported production figures.

Notwithstanding the adverse weather conditions in the quarter, the south wall pushback continues to progress.

Escondida

Mined and refined copper production at Escondida in the first quarter was adversely impacted by a labour union strike for 43 days that commenced on 9 February and finished on 24 March. The current labour agreement has been extended for 18 months. It is expected that the operations will ramp-up to normal production levels by July 2017.

Oyu Tolgoi

Mined copper production for the quarter was 34 per cent lower than the same period in 2016, with record quarterly mill throughput being offset by lower ore grades.

Oyu Tolgoi Underground Project

Contractor mobilisation has continued to ramp up, with a workforce of over 2,210 on site, 85 per cent of whom are Mongolian nationals. Works on underground mine development, the accommodation camp, conveyor to surface decline, sinking of shaft #2 and shaft #5 and critical facilities continue to progress.

Grasberg

Through a joint venture agreement with Freeport-McMoRan Inc. (Freeport), Rio Tinto is entitled to the cash flow associated with 40 per cent of material mined above an agreed threshold as a consequence of expansions and developments of the Grasberg facilities since 1998.

On 12 January 2017, the Government of Indonesia issued new mining regulations to address exports of unrefined metals, including copper concentrates, and other matters related to the mining sector. These regulations impact PT Freeport Indonesia's ('PT-FI') operating rights, including its right to continue to export concentrate without restriction, and, as a result, may have a significant impact on Rio Tinto's share of production in 2017. Rio Tinto's participation beyond 2021 is likely to be affected due to the application of force majeure provisions in the joint venture agreement between Rio Tinto and PT-FI.

In the absence of an export permit, PTFI has had to reduce production to around 40 per cent to match domestic smelting capacity. This has resulted in near-term actions to reduce its workforce, significantly reduce costs and reduce and/or suspend capital expenditure on its underground development projects and new smelter. PT-FI has indicated that it will consider legal action to enforce its contractual rights should it fail to reach a mutually satisfactory agreement with the Indonesian government.

As a consequence of the export ban, Rio Tinto is reporting its metal share for the first quarter as zero. Discussions are continuing between Freeport and the Indonesian government to reach a mutually satisfactory longer-term agreement.

Diamonds

At Argyle, first quarter carat production was 11 per cent lower than the first quarter of 2016 due to lower ore volumes processed and recovered grade.

At Diavik, carats recovered in the first quarter of 2017 were in line with the corresponding period in 2016 as lower ore throughput was offset by higher recovered grades. Development of the A21 pipe remains on schedule.

2017 guidance

In 2017, Rio Tinto's expected share of mined copper production has been revised to between 500 and 550 thousand tonnes (previously 525 to 665 thousand tonnes), as a result of industrial action at Escondida and the curtailment of production at Grasberg. Refined copper production guidance remains unchanged at 185 to 225 thousand tonnes.

Diamond production guidance for 2017 remains unchanged at 19 to 24 million carats.

ENERGY & MINERALS

Rio Tinto share of production

Production from Bengalla in 2016 has been excluded from the comparable percentages above.

Coal

Hard coking coal production in the quarter was 20 per cent below the first quarter of 2016 due to the timing of the longwall changeover at Kestrel as well as processing rates at Hail Creek. The damage to rail lines caused by Cyclone Debbie in Queensland is expected to impact the timing, and potentially volume, of shipments from Hail Creek over the course of the year. Kestrel, whilst impacted, is not expected to experience significant sales disruption. At this stage, guidance for coking coal remains unchanged.

First quarter semi-soft coking coal production was 18 per cent lower than the same quarter of 2016, reflecting mine production sequencing at Hunter Valley Operations (HVO) and Mount Thorley Warkworth.

Thermal coal production was 11 per cent higher than the same quarter of 2016, as HVO benefited from higher productivity.

On 24 January, Rio Tinto announced that it had reached a binding agreement for its sale of Coal & Allied to Yancoal Australia for up to $2.45 billion. The sale is subject to certain conditions being satisfied, and is expected to complete in the second half of 2017. Yancoal announced receipt of FIRB approval on 13 April 2017.

Iron Ore Company of Canada (IOC)

IOC pellet production of 2.5 million tonnes (Rio Tinto share 1.5 million tonnes) in the first quarter was 25 per cent higher than the same quarter of 2016, with pellet demand continuing to be strong and product mix being optimised to meet customer demand. Concentrate production of 1.9 million tonnes (Rio Tinto share 1.1 million tonnes) was 11 per cent lower.

The seven per cent improvement in total production led to sales of 4.4 million tonnes (Rio Tinto share 2.6 million tonnes), a ten per cent improvement compared to the first quarter of 2016.

Borates

Borates production in the quarter was three per cent lower than the first quarter of 2016, with production aligned to market demand

Iron and Titanium (RTIT)

Titanium dioxide slag production in the first quarter was 35 per cent higher than the corresponding quarter in 2016, reflecting improved market demand. Two of nine furnaces at Rio Tinto Fer et Titane (RTFT) and one of four furnaces at Richards Bay Minerals remained idle. The rebuild of a furnace at RTFT was completed in March 2017, with production expected in April 2017. Due to planned maintenance, RTFT expects to operate seven to eight furnaces during the year.

An explosion in one of the carbon monoxide gas service plants in Sorel-Tracy occurred on 30 March 2017. The immediate concern has been the safety and welfare of all employees on site and no physical injuries were sustained. The incident is not expected to have a material impact on full year production.

Salt

Salt production in the first quarter was 41 per cent lower than the same period in 2016 due to above average rainfall at the Pilbara operations in Western Australia.

Uranium

Energy Resources of Australia continues to process existing stockpiles. First quarter production in 2017 was slightly higher than the corresponding period in 2016.

Production at Rössing was two per cent lower than the first quarter in 2016 due to slightly lower grades and recoveries.

2017 guidance

In 2017, guidance for Rio Tinto's expected share of production remains unchanged at 7.8 to 8.4 million tonnes of hard coking coal, 3.3 to 3.9 million tonnes of semi-soft coking coal, 17 to 18 million tonnes of thermal coal, 11.4 to 12.4 million tonnes of iron ore pellets and concentrates, 0.5 million tonnes of boric oxide equivalent production, and 6.5 to 7.5 million pounds of uranium. Coal guidance may be adjusted depending on the timing of the completion of the Coal & Allied transaction. Production guidance for titanium dioxide slag has increased to between 1.2 and 1.3 million tonnes (previously 1.1 to 1.2 million tonnes).

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 2017 was $78 million, compared with $128 million in the same quarter of 2016. Approximately 58 per cent of this expenditure was incurred by central exploration, 27 per cent by Copper & Diamonds, eight 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 2017.

Exploration highlights

Rio Tinto has a strong portfolio of projects with activity in 14 countries across some eight commodities. The bulk of the exploration spend in this quarter was focused on copper targets in Australia, Botswana, Chile, Kazakhstan, Namibia, Peru, Serbia, United States and Zambia. Mine-lease exploration continued at a number of Rio Tinto managed businesses including Pilbara Iron, Rio Tinto Coal Australia, Richards Bay Minerals, Oyu Tolgoi, Kennecott 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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