UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

(Mark One)

or

For the fiscal year ended: 31 December 20152016

or

For the transition period from:                    to                    

or

Date of event requiring this shell company report                    

Julie Parent, T: 514-848-8519, E: julie.parent@riotinto.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Indicate by check mark if the registrants are well-known seasoned issuers, as defined in rule 405 of the Securities Act.    Yes  x☒    No  ¨☐

If this report is an annual or transition report, indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨☐    No  x☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days:    Yes  x☒    No  ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨☐    No  ¨☐

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, or non-accelerated filers. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  x☒                Accelerated Filer¨  ☐                Non-Accelerated Filer  ¨☐

Indicate by check mark which basis of accounting the registrants have used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrants have elected to follow:    Item 17  ¨☐    Item 18  ¨☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  x☒

TABLE OF CONTENTS

This document comprises the annual report on Form 20-F and the annual report to shareholders for the year ended December 31, 20152016 of Rio Tinto plc and Rio Tinto Limited (“20152016 Form 20-F”). Pursuant to Rule 12b-23(a) of the Securities Exchange Act of 1934, as amended, the information for the 20152016 Form 20-F of Rio Tinto set out below is being incorporated by reference from the “Annual Report 2015”2016” included as exhibit 15.2 to this 20152016 Form 20-F (“Annual Report 2015”2016”).

Only (i) the information set out below with the reference to specific pages of the Annual Report 2015,2016, including any page references incorporated in the incorporated material unless specifically noted otherwise (ii) the cautionary statement concerning forward-looking statements on the inside cover, and (iii) the Exhibits, shall be deemed to be filed with the Securities and Exchange Commission for any purpose, including incorporation by reference into the Registration Statement on Form F-3 File No. 333-196694, and Registration Statements on Form S-8 File Nos. 333-184397, 333-147914, 333-156093, 333-198655, 333-202546 and 333-202547 and any other documents, including documents filed by Rio Tinto plc and Rio Tinto Limited pursuant to the Securities Act of 1933, as amended, which purport to incorporate by reference the 20152016 Form 20-F. Any information herein which is not referenced in the 20152016 Form 20-F or the Exhibits themselves, shall not be deemed to be so incorporated by reference. The Annual Report 20152016 contains references to our website. Information on our website or any other website in the Annual Report 20152016 is not incorporated into this document and should not be considered part of this document. We have included any website as an inactive textual reference only.

All reference in the 20152016 Form 20-F to “we”, “our”, the “company” or the “Group” mean Rio Tinto plc and Rio Tinto Limited.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

3.A Selected financial data

The information set forth under the headings:

of the Annual Report 20152016 is incorporated herein by reference.

1

Exchange rates

The following tables show, for the periods and dates indicated, certain information regarding the exchange rates for the pound sterling and Australian dollar, based on the Noon Buying Rates for pounds sterling and Australian dollars expressed in US dollars per £1.00 and per A$1.00.

Pounds sterling

As at 1517 February 2016,2017, the Noon Buying Rate was 1.451.24 per £1.00.

Australian dollars

As at 1517 February 2016,2017, the Noon Buying Rate was 0.720.77 per A$1.00.

20152

2016 dividends

The following chart sets out the amounts of interim and final dividends paid or payable on each share or American Depositary Shares (ADS) in respect of each financial year, but before deduction of any withholding tax.

3.B Capitalization and indebtedness

Not applicable.

3.C Reasons for the offer and use of proceeds

Not applicable.

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3.D Risk factors

Risk management

Rio Tinto is exposed to a variety of risks that can have financial, operational and compliance impacts on our business performance, reputation and licence to operate. The board recognises that creating shareholder returnsvalue is the reward for taking and accepting risk. The effective management of risk is therefore critical to supporting the delivery of the Group’s strategic objectives.

Risk management framework

Rio Tinto’s risk management framework reflects our belief that managing risk effectively is an integral part of how the Group creates value, and fundamental to the Group’s business success. The responsibility for identifying and managing risks lies with all of Rio Tinto’s managersemployees and business leaders. They operate within the Group-wide framework to manage risks within understood thresholds.approved limits.

The framework includes clearly defined oversight responsibilities for the board and the Executive Committee, who are supported by the Risk Management Committee (an executive management committee chaired by the chief executive) and central support functions including Group Risk and Group Internal Audit, & Assurance, to enable effective risk identification, evaluation and management across Rio Tinto.

This approach reflects a “three lines of defence” model for the management of risks and controls:

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The key risk management responsibilities throughout the Group are outlined below.

Approach

The Group’s approach to risk management, underpinned by the Risk policy and standard, is aimed at embedding a risk-aware culture in all decision-making, and a commitment to managing risk in a proactive and effective manner. This includes the early identification and evaluation of risks, the management and mitigation of risks before they materialise, and dealing with them effectively in the event they do materialise. Accountability for risk management is clear throughout the Group and is a key performance area of line managers.

To support risk understanding and management at all levels, the Group Risk function provides the necessary infrastructure to support the management and reporting of material risks within the Group, and escalates key issues through the management team and ultimately to the board where appropriate. Group Risk also supports the Risk Management Committee in its review of risk.

Risk management framework
		Board		–  Determine the nature and extent of risk that is acceptable in pursuit of strategic objectives –  Confirm that management’s risk thresholdslimits reflect the level of risk the board is willing to accept in pursuit of strategic objectives –  Provide oversight across the risk management process
		Board committees		–  The Audit Committee monitors and reviews at least annually the maturity and effectiveness of management processes and controls designed to identify, assess, monitor and manage risk –  The Audit and Sustainability Committees review periodic reports from management: identifying the Group’s material business risks within the committees’ scope; and the risk management strategies and controls applied
		Group Internal Audit & Assurance		–  Provide reasonable assurance that the systems of risk management, internal control and governancecontrols are adequate and effective
		Executive Committee		–  Set risk strategy and assess risks inherent in key investments and in strategic, business or annual plans
		Risk Management Committee		–  Oversee the risk management framework to facilitate the identification of significant risks to Group-level objectives and ensure effective risk management processes are in place
		Group Risk		–  Provide co-ordination and support of Group-level risk management activity and reporting –  Embed risk management into core business processes, such as planning and capital allocation –  Build risk management capability and a risk culture throughout the Group
		Other central support functions and management committees		–  Provide targeted expertise and support to risk owners –  Develop and maintain specific controls, including policies, standards and procedures, to support the effective management of material Group-level risk within the agreed thresholdslimits –  Assure first line of defence compliance with controls
		Product groups and central functions, executive / executive/audit forums		–  Monitor material risks and track activities to manage risk within their business activities, and escalate where appropriate –  Consider risk and uncertainty in strategic and business planning and capital allocation proposals
		Product groups and business units		–   Identify, assess and manage risks in operations, functions and projects, utilising risk registers and our Group-wide risk data system: RioRisk
		Risk managers and Risk Forum		–  Provide technical expertise and risk management for line leaders and the product group executive management teams –  The Risk Forum (risk managers across the Group) supports alignment, consistency and continuous improvement of risk management

Approach

The Group’s approach to risk management, underpinned by the Risk policy and standard, is aimed at embedding a risk-aware culture in all decision-making, and a commitment to managing risk in a proactive and effective manner. This includes the early identification and evaluation of risks, the management and mitigation of risks before they materialise, and dealing with them effectively in the event they do materialise. Accountability for risk management is clear throughout the Group and is a key performance area of line managers.

To support risk understanding and management at all levels, the Group Risk function provides the necessary infrastructure to support the management and reporting of material risks within the Group, and escalates key issues through the management team and ultimately to the board where appropriate. Group Risk also supports the Risk Management Committee in its review of risk.

The process for identifying, evaluating and managing the material business risks is designed to manage, rather than eliminate, risk and where appropriate accept risk to generate returns. Certain risks, for example natural disasters, cannot be managed using internal controls. Such major risks are transferred to third parties in the international insurance markets, to the extent considered appropriate or possible.

The Group has material investments in a number of jointly controlled entities. Where Rio Tinto does not have managerial control, it is not always able to ensure that management will comply with Rio Tinto standards.

5

Principal risks and uncertainties

The principal risks and uncertainties outlined in this section reflect the inherent risks that could materially affect Rio Tinto or its ability to meet its strategic objectives, either directly or by triggering a succession of events that in aggregate become material to the Group. Rio Tinto’s business units and functions assess the potential economic and non-economic consequences of their respective risks using the framework defined by the Group’s Risk policy and standard. Once identified, each principal risk or uncertainty is reviewed and monitored by the relevant internal experts and by the Risk Management Committee, the relevant board committees and the board.

There may be additional risks unknown to Rio Tinto and other risks currently not believed to be material which could turn out to be material. In previous years the Group has reported risks related to climate change, community disputes, discount rates, short-term cash generation initiatives, technology and innovation, supply chain and third party exposure, industrial relations, availability of skilled resources, and closure. The Group remains exposed to these risks but does not consider them to be principal risks currently (as defined below). Therefore they are not discussed in detail in this section. A number of them are, however, referred to in the sustainable development section of the Annual Report 2015Effects on pages 22 to 28.

The principal risks and uncertainties listed in this section may materialise individually, simultaneously or in combination and could significantly threaten the Group in the following respects:respects may be positive or negative:

Business model

The basis on which the Group generates or preserves value over the longer term, given its market positioning as a global diversified mining and processing business.

Future performance

The Group’s ability to deliver its financial plan in the short to medium term.

Solvency

The Group’s ability to maintain an appropriate capital structure and to meet its financial liabilities in full.

Liquidity

The Group’s ability to meet its financial liabilities as they fall due.

Health, safety, environment and communities (HSEC)

The Group’s ability to send our employees and contractors home safe and healthy every day and to work with our communities and partners to achieve our sustainable development goals.

Group reputation

The Group’s ability to maintain investor confidence and our social licence to operate.

Rio Tinto’s business units and functions assess the potential economic and non-economic consequences of their respective risks using the framework defined by the Group’s Risk standard. Once identified, each principal risk or uncertainty is reviewed and monitored by the relevant internal experts and by the Risk Management Committee, the relevant board committees and the board.

There may be additional risks unknown to Rio Tinto and other risks currently not believed to be material which could turn out to be material. A number of them, particularly those with longer-term potential impacts, are referred to in the sustainable development section of the Annual Report 2016 on pages 24 to 30.

2016 movements

As illustrated in the summary table below, the Group’s exposure to a number of principal risks and uncertainties has changed through 2016. Market uncertainties were greater than planned, with greater upside movement in commodity prices and demand than forecast. With greater than planned cash flow, our balance sheet strengthened, decreasing our liquidity risk. Geopolitical uncertainty increased, as did the threat of greater rent-seeking and resource nationalism. Uncertainty regarding the performance and outlook of our joint venture operations also increased. Further detail on movements and monitoring of these exposures is provided in the relevant section of the Strategic report, including the Market environment, Group strategy, product group overviews, the Directors’ report and the Notes to the 2016 financial statements.

Principal risks and uncertainties exposure at a glance (2015(2016 trend)
				External		Internal		Internal and external
Increasing risk or uncertainty				Commodity prices   China development pathway Strategic partnerships Jurisdictional risk		None		NoneRegulation and regulatory intervention
No change in risk or uncertainty				Strategic partnerships Jurisdictional risk		Attracting and retaining talent Execution of acquisitions and divestments   Capital project development HSEC   Business misconductHSEC		Liquidity Exploration and resources   Business interruptionOperational excellence
Decreasing risk or uncertainty				None		None		NoneLiquidity

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7

Operational risks
Inherent risk and uncertainty		Potential downside impact (threats)
HSEC risks:risks
Our operations and projects are inherently hazardous with the potential to cause illness or injury, damage to the environment, disruption to a community or a threat to personal security.   Internal risk		Failure to manage our health, safety, environment or community risks, could result in a catastrophic event or other long-term damage which could in turn harm the Group’s socialfinancial performance and licence to operate.   Recognised hazards include, among others, underground operations, aviation, pit slope instability, tailings facilities, vector-borne and pandemic disease, chemicals, gases, vehicles and machinery, extreme natural environments, endangered flora or fauna, areas of cultural heritage significance, water supply stress and climate change.
Resources risks:risks
The success of the Group’s exploration activity may vary. In addition, estimates of ore reserves are based on uncertain assumptions that, if changed, could result in the need to restate ore reserves. External risk Internal riskreserves and mine plans.		A failure to discover new viable orebodies could undermine future growth prospects.   The risk that new information comes to light or operating conditions change means that the economic viability of some ore reserves can change and thus the reserves need tomine plans can be restated downwards. As a result, projects may be less successful and of shorter duration than initially anticipated, and/or the asset value may be impaired.

8

Attracting and retaining talent as the company and industry evolves presents a constant challenge.		The inability to attract or retain key talent will constrain the Group’s ability to reach its goals within planned timeframes.
Compliance risks
Inherent risk and uncertainty		Potential downside impact (threats)
Stakeholder risks:risks
Strategic partnerships and third parties influence the Group’s supply, operations and reputation. The Group’s ability to control the actions of these parties varies. External risk		Joint venture partners may hinder growth by not agreeing to support investment decisions. For non-managed operations, controlling partners may take action contrary to the Group’s interests or standards and policies, resulting in adverse impact to health and safety, performance, cyber integrity, reputation or legal liability.
The Group’s operations are located across a number of jurisdictions, which exposes the Group to a wide range of economic, political, societal and regulatory risks. External riskenvironments.		Adverse actions by governments and others can result in operational/project delays or loss of licence to operate. Other potential consequencesactions can include expropriation, nationalisation, changes in taxation, as well as currency and export or foreign investment restrictions.restrictions, which may threaten the investment proposition. Legal frameworks with respect to policies such as energy, climate change and mineral law and taxation may also change in a way that increases costs.
Governance risks:risks
The Group’s reputation and regulatory licences are dependent upon appropriate business conduct and are threatened by a public allegation or regulatory investigation. External risk Internal risk		Fines may be imposed against Group companies for breaching antitrust rules, anti-corruption legislation, sanctions or human rights violations or other inappropriate business conduct.   A serious allegation or formal investigation by increasingly connected regulatory authorities (regardless of ultimate decision) could result in a loss in share price value, and/or loss of business. Other consequences could include the criminal prosecution of individuals, imprisonment and/or personal fines, and reputational damage to the Group. There may also be considerable cost and disruption in responding to allegations or investigations and taking remedial action.

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ITEM 4. INFORMATION ON THE COMPANY

4.A History and development of the company

The information set forth under the headings:

of the Annual Report 20152016 is incorporated herein by reference.

In 20152016 and 2014,2015, the Group did not receive any public takeover offers by third parties in respect of Rio Tinto plc shares or Rio Tinto Limited shares or make any public takeover offers in respect of other companies’ shares.

4.B Business overview

The information set forth under the headings:

of the Annual Report 20152016 is incorporated herein by reference.

Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934

Section 13(r) to the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires an issuer to disclose in its annual reports, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with the Government of Iran during the period covered by the report. Disclosure is required even where the activities, transactions or dealings are conducted outside the United States by non-U.S. persons in compliance with applicable law, and whether or not the activities are sanctionable under US law. Pursuant to Section 13(r) of the Exchange Act, the company notes the following in relation to activities that took place in 2016, or in relation to activities the company became aware of in 2016 relating to disclosable activities prior to the reporting period.

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The company routinely takes action to protect its intellectual property rights in many countries throughout the world, including Iran. In connection with such protection efforts, the company has used, directly or indirectly, patent agent firms with an agent or branch office in Iran to assist with the filing of patent and trade-mark applications, prosecution activities and maintenance in Iran. Contact with the firms has been minimal and solely limited to these activities. Certain transactions related to patents, trademarks and copyright are authorised activities under U.S sanctions against Iran (including the filing of an application to obtain a patent or trade-mark in Iran), and although the company is not a U.S person, it believes its limited activities in this regard are consistent with this authorisation.

Rio Tinto acquired its interest in Namibia-based Rössing Uranium Limited (Rössing) in 1970. The Iranian Foreign Investments Company (IFIC) acquired its original minority shareholding in Rössing in 1975. IFIC’s interest predates the establishment of the Islamic Republic of Iran and the U.S. economic sanctions targeting Iran’s nuclear, energy and ballistic missile programs. IFIC acquired and continues to own a minority shareholding in Rössing in accordance with Namibian law.

Rössing is neither a business partnership nor joint venture between Rio Tinto and IFIC. Rössing is a Namibian limited liability company with a large number of shareholders, including Rio Tinto with 68.62 per cent, IFIC with 15.29 per cent, the Industrial Development Corporation of South Africa with 10.22 per cent, local individual shareholders with a combined interest of 2.45 per cent and the Government of the Republic of Namibia with 3.42 per cent but with an additional 50.07 per cent vote at a general meeting of Rössing on matters of national interest.

As a shareholder in Rössing, Rio Tinto has no power or authority to divest IFIC’s holding in Rössing. However, Rössing and the Namibian Government have taken several recent steps to limit IFIC’s future involvement in Rössing.

On 1 October 2010, Namibia reported to the United Nations, pursuant to Article 31 of the United Nations Security Council Resolution 1929 (UN SCR 1929), that it had reached an agreement with the Islamic Republic of Iran that IFIC will not participate in any future investments nor will it acquire any further shares in Rössing. It was also agreed that the Government of Iran will not acquire interests in any commercial activity in Namibia involving uranium mining, production, or use of nuclear materials and technology, as required under UN SCR1929, until such time as the United Nations Security Council determines that the objectives of the Resolution have been met.

The Rössing board also took steps in 2012 to terminate IFIC’s involvement in the governance of Rössing. As a shareholder in Rössing, IFIC was entitled under Namibian law to attend annual general meetings of Rössing, which they do attend. IFIC was previously represented on the board of Rössing by two directors. While this level of board representation did not provide IFIC with the ability to influence the conduct of Rössing’s business on its own, the Rössing board nonetheless determined that, in light of international economic sanctions, it would be in the best interest of Rössing to terminate IFIC’s involvement in board activity. Therefore, on 4 June 2012, at the annual general meeting of Rössing, the shareholders of the company, including Rio Tinto, voted not to re-elect the two IFIC board members. This ended IFIC’s participation in Rössing board activities. IFIC accordingly is not represented on the Rössing board, nor does it have the right to attend board meetings or receive any board information

While IFIC is entitled to its pro rata share of any dividend that the majority of the board may declare for all shareholders in Rössing, IFIC has not received such monies since early 2008. Simply by maintaining its own shareholding in Rössing, Rio Tinto is not engaging in any activity intended or designed to confer any direct or indirect financial support for IFIC. A dividend was declared for 2015 in March 2016 and an interim 2016 dividend declared in August 2016 with amounts payable to Skeleton Coast Diamonds Limited on 31 March 2016 and 15 September 2016 respectively. On 16 January 2016 the International Atomic Energy Authority (IAEA) confirmed that Iran has carried out its commitments under the Joint Comprehensive Plan of Action (JCPOA, also called the “Iran Deal”) limiting its nuclear program. This date is called “Implementation Day” under the JCPOA and renders effective (i) the relevant EU regulations terminating Iranian sanctions measures; and (ii) U.S. waivers of certain statutory sanctions provisions applicable to non-US persons. As a result, US$18.8 million of previously withheld dividends were paid to IFIC during 2016.

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Rössing is one of the world’s largest and longest-operating uranium mines. All of the uranium produced by Rössing is sold to Rio Tinto Marketing Pte. Ltd, (doing business as Rio Tinto Uranium), which re-sells this product to electric utilities in North America, Asia and Europe. As a minority shareholder, IFIC has no uranium product off-take rights. Neither IFIC nor other Government of Iran entities have any supply contracts in place with Rössing and nor receive any uranium from Rössing. IFIC also does not have access to any technology through its investment in Rössing or rights to such technology.

While Rio Tinto does not view itself as actively transacting or entering into business dealings with an instrumentality of the Government of Iran, this information has been provided to ensure transparency regarding the passive, minority shareholding in Rössing currently held by IFIC. Rio Tinto has disclosed the IFIC shareholding matter to the United States Government and has periodically updated the U.S. Department of State as to the same.

See below Item 5.A, “Additional financial information-Sales revenue” (Iron Ore, Aluminium, Copper & Coal, Diamonds, Energy & Minerals).

4.C Organizational structure

The information set forth under the headings:

of the Annual Report 20152016 is incorporated herein by reference.

4.D Property, plant and equipment

The information set forth under the headings:

of the Annual Report 20152016 is incorporated herein by reference.

ITEM 4A. UNRESOLVED STAFF COMMENTS

As far as the Group is aware, there are no unresolved written comments from the SEC staff regarding its periodic reports under the Exchange Act received more than 180 days before 31 December 2015.2016.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5.A Operating results

The information set forth under the headings:

12

of the Annual Report 20152016 is incorporated herein by reference.

5A13

5.A Operating results continued

Additional Financial Information

20152016 financial performance compared with 20142015

In order to provide additional insight into the performance of our business, Rio Tinto presents underlying earnings, which is defined in financial“Financial statements Note 2 “Operating2-Operating segments” on pages 125128 to 127130 of the Annual Report 2016.

2016 underlying earnings of US$5,100 million and net earnings of US$4,617 million were US$560 million above and US$5,483 million above the comparable measures for the previous year respectively (2015 underlying earnings of US$4,540 million and net losses of US$866 million were US$4,765 million below and US$7,393 million below the comparable measures for the previous year respectively). Both net earnings and underlying earnings represent amounts attributable to owners of Rio Tinto. International Financial Reporting Standards (IFRS) requires that the profit/(loss) for the period reported in the income statement should also include earnings/(losses) attributable to non-controlling interests in subsidiaries. Underlying earnings is reconciled to net earnings/(losses) in the table below, which also lists the principal factors driving the movement in underlying earnings between periods.

14

Prices

Most commodity prices increased for the first time in a number years in the second half of 2016, despite numerous political and macro shocks to the global economy. However, the effect of all price movements on the Group’s commodities in 2016 was to decrease underlying earnings by US$460 million compared with 2015.

Major positive price variances were seen in iron ore (US$185 million), coal (US$121 million) and gold (US$32 million).

Iron ore prices started 2016 at US$43 per dry metric tonne cost and freight (CFR) and ended the year around US$80 per tonne. The average realised price for iron ore was up approximately 2% to US$49.3 per wet metric tonne (FOB), from US$48.4 per wet metric tonne (FOB) in 2015.

Hard coking coal benchmark prices were 12 per cent higher on average compared with 2015 and thermal coal spot prices averaged seven per cent higher. Hard coking coal prices almost quadrupled to US$310 per tonne from January to November 2016. The thermal coal market was also affected, with prices doubling to US$110 per tonne FOB Newcastle. Prices have since moderated.

These commodity price gains were more than offset by lower average prices for copper and aluminium which were down 11 and three per cent respectively year-on-year, and a significant drop in market premia for aluminium in all regions, which fell from their record highs in early 2015.

Aluminium had a negative price variance of US$507 million. Average London Metal Exchange (LME) prices decreased three per cent year on year, and lower market and product premia resulted in the average realised price per tonne decreasing from US$2,058 in 2015 to US$1,849 in 2016.

Copper contributed US$105 million to the negative price variance. Additionally lower prices across industrial mineral and Molybdenum contributed US$128 million to the negative price variance.

Exchange rates

Compared with 2015, the US dollar, on average, strengthened by three per cent against the Canadian dollar, by one per cent against the Australian dollar and by 14 per cent against the South African rand. The effect of all currency movements was to increase underlying earnings relative to 2015 by US$49 million.

Volumes

Movements in sales volumes increased earnings by US$19 million compared with 2015. There were volume gains in iron ore, following the increase in capacity at the Pilbara ports and mines, in bauxite, from increased production at all four mines, and in aluminium following record production at ten smelters. These were mostly outweighed by lower sales volumes in copper, gold and molybdenum.

Energy

Lower input energy prices during the year improved underlying earnings by US$25 million compared with 2015 in part related to oil, where the price fell approximately 16 per cent year-on-year, averaging US$44 per barrel during 2016.

Cash costs, exploration and evaluation

Rio Tinto continued to realise considerable savings from its cost reduction programme, delivering US$1.6 billion pre-tax (US$1.2 billion post tax) in operating cash cost savings and reductions in exploration and evaluation expenditure in 2016.

The Group continued to optimise its expenditure on exploration and evaluation, progressing the highest value projects. In 2016, approximately 41 per cent of this expenditure was incurred by central exploration, 25 per cent by Copper & Diamonds, 25 per cent by Energy & Minerals and the remainder by Aluminium and Iron Ore.

15

Tax / non-cash / interest / other

The 2016 effective corporate income tax rate on underlying earnings, excluding equity accounted units, was 22 per cent compared with 27 per cent in 2015. The lower effective tax rate in 2016 was largely due to the recognition of a deferred tax asset in Mongolia. Excluding this item, the effective tax rate in 2016 was 26 per cent. The effective tax rate in Australia remained at 30 per cent.

The Group interest charge (net of tax) of US$576 million increased by US$187 million compared with 2015, following completion of some major capital projects in 2015 (interest is capitalised during the construction period of a project) and US$237 million of early redemption costs from bond repurchases in 2016. In 2016, US$111 million of interest was capitalised, compared with US$254 million in 2015.

2015 financial performance compared with 2014

2015 underlying earnings of US$4,540 million and net losses of US$866 million were US$4,765 million below and US$7,393 million below the comparable measures for the previous year respectively (2014 underlying earnings of US$9,305 million and net earnings of US$6,527 million were US$912 million below and US$2,862 million above the comparable measures for the previous year respectively). Both net earnings and underlying earnings represent amounts attributable to owners of Rio Tinto. International Financial Reporting Standards (IFRS)IFRS requires that the (loss)/profit for the period reported in the income statement should also include (losses)/earnings attributable to non-controlling interests in subsidiaries. Underlying earnings is reconciled to net (losses)/earnings in the table below, which also lists the principal factors driving the movement in underlying earnings between periods.

16

Prices

The effect of price movements on all major commodities in 2015 was to decrease underlying earnings by US$7,695 million compared with 2014. The Plattsaverage realised price for 62 per cent iron Pilbara finesore was approximately 43 per cent lower on average compared withthan 2014, whiledown from US$84.3 per wet metric tonne (FOB) to US$48.4 per wet metric tonne (FOB). In addition, hard coking coal benchmark prices were 19 per cent lower on average at US$102 per tonne (FOB) compared with US$126 per tonne (FOB) in 2014 and thermal coal spot prices averaged 16 per cent lower. lower, US$53 per tonne (FOB) compared with US$63 per tonne (FOB) in the prior year.

Average copper and gold prices were down 20 and eight per cent respectively, while London Metal Exchange (LME)with benchmark prices averaging US$2.49 per pound for copper and US$1,160 per ounce for gold. The LME aluminium prices averaged 11 per cent lower.lower at US$1,663 per tonne.

Exchange rates

Compared with 2014, the US dollar, on average in 2015, was stronger by 14 per cent against the Canadian dollar and South African rand and by 16 per cent against the Australian dollar. The effect of all currency movements was to increase underlying earnings relative to 2014 by US$2,007 million.

Volumes

Volumes improved earnings by US$132 million compared with 2014. Increased volumes were achieved primarily in iron ore, following the increase in capacity at the Pilbara ports and mines (favourable US$398 million) and in bauxite, from record production at Weipa and the ramp-up at Gove. These offset volume declines in copper (unfavourable US$276 million), mainly at Rio Tinto Kennecott where the focus on de-weighting and de-watering the east wall of Bingham Canyon continued, and in titanium dioxide feedstocks, where production was aligned with market demand.

Energy

Lower input energy prices during the period improved underlying earnings by US$359 million compared with 2014 mainly related to oil, where the price fell approximately 50 per cent year on year to an average US$52 per barrel during 2015.

Cash costs, exploration and evaluation

Rio Tinto made further strong progress on its cost reduction programme and had, as of 31 December 2015, achieved US$6.2 billion pre-tax (US$4.3 billion post-tax) in total operating cash cost improvements and reductions in exploration and evaluation expenditure compared with the 2012 base.

In 2015, the Group realised US$1.3 billion pre-tax (US$1.0 billion post-tax) in operating cash cost savings and reductions in exploration and evaluation expenditure. This was in addition to the US$4.8 billion pre-tax (US$3.3 billion post-tax) achieved in aggregate in 2013 and 2014.

The Group continued to refine its exploration and evaluation expenditure, building on the savings achieved in 2014 whilst progressing the highest priority projects. In 2015, approximately six per cent of this expenditure was incurred by Iron Ore, two per cent by Aluminium, 38 per US cent by Copper & Coal, 23Diamonds, 24 per cent by DiamondsEnergy & Minerals and the remainder by central exploration on greenfield programmes.

Tax / non-cash / interest / other

The 2015 effective corporate income tax rate on underlying earnings, excluding equity accounted units, was 27 per cent compared with 28 per cent in 2014. The decreased rate was principally attributable to the absence of the Australian Minerals Resource Rent Tax (MRRT) which was repealed in the second half of 2014.

The Group interest charge (net of tax) of US$389 million increased by US$228 million compared with 2014, following completion of some major capital projects in the first half of 2015. Interest is capitalised during the construction period. In 2015, US$254 million of interest was capitalised, compared with US$470 million in 2014.

2014 financial performance compared with 2013

Prices17

The effect of price movements on all major commodities in 2014 was to decrease underlying earnings by US$4,146 million compared with 2013. The average Platts price for 62 per cent iron Pilbara fines was 31 per cent lower compared with 2013, and hard coking coal benchmark prices 21 per cent lower, and thermal coal spot prices 17 per cent lower. Average copper and gold prices were down six and ten per cent respectively, whilst London Metal Exchange (LME) aluminium prices averaged one per cent higher.

Exchange rates

Compared with 2013, the US dollar, on average in 2014, was stronger by seven per cent against both the Australian and Canadian dollars and by 13 per cent against the South African rand. The effect of all currency movements was to increase underlying earnings relative to 2013 by US$691 million.

Volumes

Volumes enhanced earnings by US$1,431 million compared with 2013. These were achieved primarily in iron ore, where, for a second consecutive year, a new annual sales volume record was achieved following the increase in capacity at the Pilbara ports and mines, combined with productivity improvements. Volumes also rose in copper, following the recovery at Rio Tinto Kennecott from the Bingham Canyon pit wall slide, in addition to higher ore grades and increased throughput, and at Oyu Tolgoi as shipments outpaced production.

Cash costs, exploration and evaluation

Rio Tinto made further strong progress on its cost reduction programme and had, as at 31 December 2014, achieved US$4.8 billion pre-tax (US$3.3 billion post-tax) in total operating cash cost improvements and reductions in exploration and evaluation expenditure compared with the 2012 base.

In 2014, the Group realised US$1.2 billion post tax in operating cash cost savings and reductions in exploration and evaluation spend. This was in addition to the US$2.1 billion post-tax achieved in 2013.

Tax / non-cash / interest / other

The 2014 effective corporate income tax rate on underlying earnings, excluding equity accounted units, was 28 per cent compared with 35 per cent in 2013. The decreased rate was primarily attributable to the repeal of MRRT in the second half of 2014 and the absence of prior year tax provisions.

The Group interest charge was US$81 million lower than in 2013, mainly reflecting the reduction in net debt during 2014.

In 2013, there was a US$128 million charge to earnings from an iron ore royalty payable to joint venture partners following a court decision. There was no such charge in 2014.

Exclusions from underlying earnings 2013-20152014-2016

Earnings contributions from Group businesses and business segments are based on underlying earnings. Amounts excluded from net earnings in arriving at underlying earnings are summarised in the discussion of year-on-year results below.

2016

Impairment charges during the year ended 31 December 2016 primarily relate to the Argyle diamond mine in Western Australia. An impairment trigger assessment at the Argyle diamond mine cash-generating unit resulted in the identification of impairment indicators as a result of lower production volumes compared with forecast and the lower prices achieved for bulk diamonds. The reduction in the recoverable amount resulted in a pre-tax impairment charge of US$241 million to property, plant and equipment and intangible assets.

Net gains on disposal of interests in businesses in 2016 related mainly to the sale of Rio Tinto’s 40 per cent interest in the Bengalla Joint Venture on 1 March 2016 and the sale of the Lochaber assets in Scotland on 23 November 2016. This was partially offset by a loss on disposal of the 100 per cent interest in Carbone Savoie on 31 March 2016.

Net exchange gains in 2016 comprise post-tax foreign exchange gains of US$123 million principally on external US dollar denominated net debt in non-US dollar functional currency companies (on borrowings of approximately US$17.6 billion), and US$393 million of gains on intragroup balances mainly as the Canadian dollar strengthened against the US dollar compared to 31 December 2015. The Group took further steps during 2016 to reduce the income statement exposure on retranslation of intragroup balances. The remaining US$20 million related to valuation changes on commodity, currency and interest rate derivatives which are ineligible for hedge accounting.

A review of the infrastructure capacity requirements in Queensland, Australia, has confirmed that it is no longer likely that Rio Tinto will utilise the Abbot Point Coal Terminal and associated rail infrastructure capacity contracted under take or pay arrangements. On 31 October 2016, an agreement was reached with Adani, the owner of the port, to relinquish that capacity. Accordingly, an onerous contract provision has been recognised based on the net present value of expected future cash flows for the port and rail capacity discounted at a post-tax real rate of two per cent, resulting in a post-tax onerous contract charge of US$329 million.

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Tax provision includes amounts provided for specific tax matters for which the timing of resolution and potential economic outflow are uncertain. In particular, the Group is currently in discussions with the Australian Taxation Office (ATO) in relation to the transfer pricing of certain transactions between Rio Tinto entities based in Australia and the Group’s commercial centre in Singapore for the period since 2009. These matters were raised by Rio Tinto with the ATO through advance ruling requests or are under discussions pursuant to our co-operative compliance agreement.

The increase in closure provision (non-operating sites) relates to the Gove alumina refinery in Northern Territory, Australia where operations have been curtailed since May 2014. The provision has been updated based on the current cost estimates from the studies which are expected to be finalised mid-2017. Future revisions to the closure cost estimate during the study periods (including the next stage of feasibility study) are expected to be excluded from underlying earnings as the site operating assets have been fully impaired.

2015

Total impairment charges of US$1,802 million (post-tax) were recognised in 2015. On 26 May 2014, Rio Tinto and its Simandou project partners signed an Investment Framework with the Government of Guinea which provided the legal and commercial foundation for the project and formally separated the infrastructure and mine development plan. The Simandou project partners are currentlywere finalising an integrated Bankable Feasibility Study (BFS) for the mine, port and infrastructure elements of the project, which iswas scheduled to be submitted to the Government of Guinea in May 2016. As a result of current market conditions and uncertainty over infrastructure ownership and funding at that time, the Group has determined that it would bewas appropriate to record a non-cash impairment charge of US$1,118 million (net of non-controlling interests and tax).

On 11 June 2015, Rio Tinto announced that it supported Energy Resources of Australia Ltd’s (ERA) decision not to proceed with the final Feasibility Study of the Ranger 3 Deeps project. Rio Tinto also determined it did not support any further study or future development of Ranger 3 Deeps due to the project’s economic challenges. This resulted in a write down to property, plant and equipment, intangible assets and deferred tax assets to fully write off these long-term assets. TotalThe total impairment charge recognised was a non-cash charge of US$262 million (net of non-controlling interestinterests and tax).

In late 2015, Rio Tinto completed an Order of Magnitude study on the Roughrider uranium project in Canada. This led to the Group recognising a post-tax impairment charge of US$199 million relating to goodwill and intangible assets.

Other impairment charges during the year reflect challenging economic conditions at business units in the Group’s Aluminium and Copper & CoalDiamonds product groups.

Non-cash exchange and derivative losses of US$3,282 million (post-tax) arose primarily on US dollar debt in non-US dollar functional currency Group companies, intragroup balances, and on the revaluation of certain derivatives which do not qualify for hedge accounting.

During 2015, the Group incurred US$258 million (post-tax) of restructuring costs associated with its ongoing costs reduction programme.

A post-tax charge of US$233 million has been recognised for the remediation of legacy properties, including the Holden Mine in Washington State.

2014

Impairment charges of US$1,187 million (net of tax and non-controlling interests) were recognised in 2014 and related to the Group’s aluminiumAluminium business, US$840 million, and the Group’s copperCopper businesses, US$347 million.

The Group’s copperCopper business impairment charge resulted from a review of the investment case for the Molybdenum Autoclave Process project in Utah USA which concluded that the project, which had been on care and maintenance since early 2013, would be terminated. The recoverable amount was determined based on anticipated net disposal proceeds. As a result, a post-tax impairment charge of US$347 million was recorded against property, plant and equipment.

19

During the first half of 2014, further revisions to future capital required to complete the modernisation project atand expansion of the Kitimat aluminium smelter in British Columbia, and related impacts on the project, led to a reduction in the recoverable value of the Kitimat cash-generating unit. Additional capital of US$1.5 billion was approved by the Board in August 2014, taking the total approved capital cost of the project to US$4.8 billion. The reduction in the recoverable amount resulted in a post-tax impairment charge of US$800 million to property, plant and equipment. Other post-tax impairment charges during 2014, related to the Group’s Aluminium business, were US$40 million.

The above impairment charges were largely offset by the reversal of previously booked impairments on other non-current assets in the Group’s aluminiumAluminium business, due to significant cost improvements and high regional and product premiums.premia. This resulted in a post-tax impairment reversal of US$460 million recorded against the property, plant and equipment of Tomago, Bell Bay and Gladstone Power Station and a post-tax impairment reversal of US$589 million relating to Boyne Smelters recorded against investments in equity accounted units. The recoverable amount of the assets is greater than the amount at which these assets would have been carried, net of depreciation, had no impairment loss been recognised in prior periods and therefore the impairment reversal is based on the latter amount.

Net losses on disposal and consolidation of interests in businesses during 2014 mainly related to the Group’s divestment of Rio Tinto Coal Mozambique, the Clermont Joint Venture and the transfer of Alucam to the Government of Cameroon.

Non-cash exchange and derivative losses of US$1,850 million arose primarily on US dollar debt in non-US dollar functional currency Group companies, and on intragroup balances.

The remaining MRRT starting base deferred tax asset was derecognised on repeal of the tax in Australia, effective 30 September 2014.

A gain of US$356 million net of tax was recognised on the disposal of the Group’s St James’s Square properties in London, UK.

2013

Total impairment charges of US$3,428 million (net of tax and non-controlling interests) were recognised in 2013, of which US$2,125 million related to the Group’s copper and coal businesses. This included a charge of US$1,565 million related to the impairment of certain assets of Turquoise Hill (including Oyu Tolgoi). On 29 July 2013, Rio Tinto announced that funding and work on the underground development would be delayed pending resolution of outstanding shareholder issues, including finalising project finance. The consequent impact of updates to timing of revenues and expenditure resulted in the carrying value being higher than fair value less costs of disposal (FVLCD).

Impairments to the Group’s copper businesses also included adjustments to reduce the carrying value of the Eagle nickel-copper project to FVLCD prior to divestment on 17 July 2013.

A post-tax impairment charge of US$470 million relating to Rio Tinto Coal Mozambique (RTCM) was recognised. An assessment of FVLCD derived from future cash flows, which included a reassessment of the development plan and review of the discount rate and associated country risk premium, resulted in the recoverable value being below carrying value. Other impairments included the impact of medium and long-term coking and thermal coal prices on non-cash fair value acquisition adjustments to undeveloped projects at SouthGobi Resources, and adjustment to the carrying value of Inova Resources, which was sold on 1 November 2013.

In addition, there was a post-tax impairment of US$1,293 million relating to the Group’s aluminium businesses. This included US$555 million for the Gove refinery, following an announcement on 29 November 2013 to suspend alumina production and focus on the bauxite operation. As a result of this decision, the timing and scope of site restoration and environmental rehabilitation cash flows were revised, together with the write-off of operating assets not fully depreciated. The remaining post-tax charge of US$738 million related to the Group’s Canadian aluminium operations, primarily at Kitimat in British Columbia, resulting from a change in assumptions about future capital required to complete the modernisation project, which diminished the value of the associated intangible assets, and another site closure within the Aluminium portfolio.

Net gains on disposal of interests in businesses during 2013 mainly related to the Group’s divestment of its remaining interest in Constellium (formerly Alcan Engineered Products) and the Northparkes mine.

Non-cash exchange and derivative losses of US$2,731 million arose primarily on US dollar debt in non-US dollar functional currency Group companies, and on intragroup balances.

Rio Tinto Kennecott’s Bingham Canyon mine experienced a slide along a geological fault line of its north-eastern wall in April 2013. Charges relating to the slide, which were excluded from underlying earnings, primarily comprised the write-off of certain deferred stripping assets and damaged equipment. Adjustments for settlement of insurance claims were made to the amount excluded from underlying earnings, and were forecast to continue as insurance claims settled.

Adjustments in relation to Clermont and Blair Athol arose following reclassification to disposal groups held for sale, and reflected contractual obligations for product sales and funding of closure activities, which would remain with the Group following completion of the divestments.

Group financial results by product group 2013-20152014-2016

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Sales Revenue

Prices

The above table shows published prices for Rio Tinto’s commodities for the last three years where these are publicly available, and where there is a reasonable degree of correlation between the published prices and Rio Tinto’s realised prices.

Group sales revenue will not necessarily move in line with these published prices for a number of reasons which are discussed below.

The discussion of revenues below relates to the Group’s gross revenue from sale of commodities, as included in the financial“Financial information by business unitunit” on pages 194199 to 198203 of the Annual Report 2015.2016.

Iron Ore

2016 sales revenue compared with 2015

Gross sales revenue increased by US$653 million (approximately five percent) to US$14,605 million. Sales volumes were three per cent higher in 2016, attributable to the newly expanded infrastructure and minimal disruption from weather events. The average realised price for iron ore was also up approximately 2% to US$49.3 per wet metric tonne (FOB), from US$48.4 per wet metric tonne (FOB) in 2015.

Approximately 20 per cent of sales in 2016 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. Index prices are adjusted for product characteristics and iron and moisture content.

2015 sales revenue compared with 2014

Higher sales volumes (approximately 11 per cent) in the Pilbara partially mitigated the impact of lower iron ore prices,prices. The average realised price was down 43 per cent on average, year on year. from US$84.3 per wet metric tonne (FOB) to US$48.4 per wet metric tonne.

In 2015, approximately 22 per cent of sales were priced with reference to a quarterly average index set at the prior quarter’s average lagged by one month. The remainder was sold via pricing mechanisms priced closer to the index price at the time of shipment, such as current quarter average, current month average or spot index prices. Index prices are adjusted for product characteristics and iron and moisture content.

2014

21

Aluminium

2016 sales revenue compared with 20132015

Record sales volumes in the Pilbara for a second year partially mitigated the impact of lower iron ore prices, down 30 per cent on average year on year. In 2014, approximately 25 per cent of sales were priced with reference to a quarterly average index set at the prior quarter’s average lagged by one month. The remainder was sold via pricing mechanisms priced closer to the index price at the time of shipment, such as current quarter average, current month average or spot index prices. Index prices are adjusted for product characteristics and iron and moisture content.

Aluminium

2015 sales revenue compared with 2014

The Aluminium product group’sAluminium’s sales revenues are from aluminium and related products such as alumina and bauxite.

There was an overall decrease in gross sales revenue of US$659 million (approximately seven per cent) to US$9,458 million in 2016. Average LME prices decreased three per cent year on year, and lower market and product premia resulted in the average realised price per tonne decreasing from US$2,058 in 2015 to US$1,849 in 2016. This realised price included premia for value-added products (VAP), which generated attractive product premia averaging US$223 per tonne of VAP sold (2015: US$251 per tonne) on top of the physical market premia. In the US, the Mid-West market premium averaged US$162 per tonne in 2016, compared with an average US$271 per tonne in 2015, a 40 per cent decrease.

Gross sales revenues for bauxite in 2016 decreased seven per cent to US$1,913 million. Declines in bauxite pricing compared with 2015 were partially offset by continued increase in third party bauxite sales. There was a ten per cent increase in third party bauxite shipments.

2015 sales revenue compared with 2014

The decline in prices in 2015 was the main driver of the 17 per cent drop in revenues compared with 2014. The 2015 cash LME aluminium price averaged US$1,661 per tonne, a decrease of 11 per cent on 2014. Market premia across all regions fell an average of 36 per cent in 2015, down from US$404 per tonne in 2014 to US$257 per tonne in 2015.

Bauxite prices were stable in 2015, underpinned by growing import demand from China. Rio Tinto’s share of third party bauxite sales increased by 14 per cent in 2015 compared with 2014.

2014Copper & Diamonds

2016 sales revenue compared with 20132015

A oneOverall gross sales revenue declined by 19 per cent to US$4,524 million in 2016.

Copper sales revenue was lower than 2015 as a result of lower sales volumes along with an 11 per cent decline in prices to 221 US cents per pound in 2016. Gold revenue was lower than 2015 due mainly to lower grade and volumes. This was partially offset by an eight per cent increase in LMEthe gold price to US$1,250 per ounce.

At 31 December 2016, the Group had an estimated 235 million pounds of unsettled copper sales (2015: 252 million pounds) that were provisionally priced at 250 US cents per pound (2015: 217 US cents per pound). The final price of these sales will be determined during the first half of 2017.

The overall decline in diamonds revenue was attributable to lower sales volumes. Diamond prices realised by Rio Tinto depend on the size and stronger regional andquality of diamonds in the product premia were not sufficient to offset the impact of reduced sales volumes of bauxite and aluminium compared with 2013, resulting in a three percent reduction in sales revenue. The reduction in aluminium sales volumes was mainly due to the closure of the Shawinigan smelter in December 2013 and the divestment of the Søral and Alucam smelters during 2014.

Copper & Coalmix.

2015 sales revenue compared with 2014

Gross sales revenue decreased by 2322 per cent in 2015 compared with 2014. Average prices in 2015 were lower than 2014 for the Copper & Coal product group commodities.

Copper price declined 20 per cent to 249 US cents per pound and gold decreased 8 per cent to US$1,160 per ounce, which were the main drivers for the decline in gross sales revenue from copper operations (down 22 per cent compared with 2014).

At 31 December 2015, the Group had an estimated 252 million pounds of copper sales (2014: 331 million pounds) that were provisionally priced at 217 US cents per pound (2014: 288 US cents per pound). The final price of these sales will be determined during the first half of 2016.

Sales volumes of diamonds were higher due to the ramp up of the Argyle underground mine, but industry rough diamond prices were weaker, driven by lower demand from India and China, higher rough diamond and polished diamond inventory and lower trade manufacturer margins. Diamond prices realised by Rio Tinto depend on the size and quality of diamonds in the product mix.

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Energy & Minerals

2016 sales revenue compared with 2015

Gross sales revenues decreased by six per cent compared with 2015, down US$406 million to US$6,734 million.

An increase in iron ore sales volumes from Iron Ore Company of Canada (IOC) of two per cent and stronger realised prices had a favourable impact on sales revenues. This was offset by the impact of lower freight revenue.

Hard coking coal benchmark prices were 12 per cent higher on average compared with 2015 and thermal coal spot prices averaged seven per cent higher. The favourable impact of price changes was offset by the impact of the Coal & Allied restructure and the divestment of Bengalla.

A significant proportion of Rio Tinto’s coal production is sold under long-term contracts. In Australia, the prices applying to sales under the long-term contracts are generally renegotiated annually for thermal coal, but prices are fixed at different times of the year and on a variety of bases. Coking coal prices for 2016 have been negotiated on a quarterly basis consistent with 2015. For these reasons, average realised prices will not necessarily reflect the movements in any of the publicly available prices.

Titanium dioxide feedstock demand remained subdued throughout 2016 as the industry continued to absorb excess inventories, resulting in continued price pressure, although there are signs of underlying demand improvement for both sulphate and chloride feedstock. The market for zircon has recently stabilised following an initial period of weak demand in China. Demand for borates has remained stable globally, with robust demand in the Americas and India partly offset by weaker growth in China and weather-related demand constraints in south-east Asia.

Uranium prices fell through the latter half of 2016, due to lacklustre demand growth and oversupply. The uranium spot price index ended the year 41 per cent below 2015 at US$20.25 per pound, while the long-term price indicators lost 32 per cent to end the year at US$30.00 per pound. Rio Tinto Uranium also sells predominantly on a longer-term contract basis.

2015 sales revenue compared with 2014

Gross sales revenues decreased by 23 per cent compared with 2014, with lower revenues driven by lower prices and a reduction in sales volumes.

A significant year over year reduction in iron ore prices negatively impacted IOC’s sales revenue. This was partially offset by a 26 per cent increase in sales volume.

There was a decline in gross sales revenue from coal operations of 24 per cent compared with 2014. Thermal and coking coal prices declined further in 2015, averaging US$62 and US$102 per tonne respectively. In addition to lower thermal and coking coal prices, there was also a decline in sales volumes mainly due to the divestment of the Clermont mine in May 2014.

A significant proportion of Rio Tinto’s coal production is sold under long-term contracts. In Australia, the prices applying to sales under the long-term contracts are generally renegotiated annually for thermal coal, but prices are fixed at different times of the year and on a variety of bases. Coking coal prices for 2015 have been negotiated on a quarterly basis consistent with 2014. For these reasons, average realised prices will not necessarily reflect the movements in any of the publicly available prices.

2014 sales revenue compared with 2013

Gross sales revenue decreased by fiveThe uranium spot price index ended the year four per cent inbelow 2014 compared with 2013, as a result ofat US$34.23 per pound, while the increase in copper operations (six percent increase year-on-year) offset by reductions from coal operations (18.5 per cent year-on-year).

The six per cent increase in copper operations gross sales revenue compared with 2013 arose from increased sales volumes, primarily attributable to a full year of production at Oyu Tolgoi, which was partially offset by a seven per cent decline in average copper prices and anlong-term price indicators lost 11 per cent decline into end the average gold price during the period.year at US$44.00 per pound. Rio Tinto Uranium also sells predominantly on a longer-term contract basis.

The 18.5 per cent decline in coal operations gross sales revenue was predominantly attributable to lower prices, with 21 per cent and 17 per cent reductions in the average coking coal benchmark and thermal coal prices respectively. Price reductions were partially offset by higher sales volumes at Kestrel and Hail Creek, offset by the loss of tonnes from Clermont with the divestment completed on 29 May 2014.

Diamonds & Minerals

2015 sales revenue compared with 2014

Gross sales revenues decreased by 23 per cent compared with 2014, with lower revenues driven by lower prices and a reduction in sales volumes. Sales volumes were lower across most products,the minerals businesses, including the impact of softer markets, most notably in titanium dioxide feedstocks. In addition, prices for Rio Tinto Iron & Titanium’s metallic co-products fell in response to market trends and titanium dioxide feedstock prices remained under pressure as the industry continued to absorb inventories.

Sales volumes of diamonds were higher due to the ramp up of the Argyle underground mine, but industry rough diamond prices were weaker, driven by lower demand from India and China, higher rough diamond and polished diamond inventory and lower trade manufacturer margins. Diamond prices realised by Rio Tinto depend on the size and quality of diamonds in the product mix.

The uranium spot price index ended the year 4 per cent below 2014 at US$34.23 per pound, while the long-term price indicators lost 11 per cent to end the year at US$44.00 per pound. Rio Tinto Uranium also sells predominantly on a longer-term contract basis.

23

Sales volumes of all products will vary during the year and the timing of shipments will also result in differences between average realised prices and published prices.

2014 sales revenueCash flow

2016 compared with 2013

Gross sales revenues decreased by seven per cent compared with 2013. Excluding the impact of Uranium, gross sales revenues decreased by one per cent, mainly driven by lower prices for titanium dioxide feedstocks, borates and zircon, and a decline in volume of diamond sales which were partially offset by higher realised prices on diamonds, and higher sales volumes of titanium dioxide feedstocks, borates and zircon.

Diamond prices realised by Rio Tinto depend on the size and quality of diamonds in the product mix. Gross sales revenues from Uranium declined 32 per cent compared with 2013. The uranium spot price index ended the year three per cent above 2013 at US$35.50 per pound, while the long-term price indicators lost one per cent to end the year at US$49.50 per pound.

Cash flow

2015 compared with 2014

A full consolidated cash flow statement is contained in the financial statements on page 109112 of the Annual Report 2016.

Net cash generated from operating activities of US$8.5 billion was ten per cent lower than 2015. 2015 cash flows benefited from a significant working capital reduction. 2016 saw a rebound in receivables, driven by higher year-end prices. In addition, there was an increase in interest paid to US$1.3 billion, of which US$0.5 billion related to early redemption costs associated with the bond repurchase programmes. These were partly offset by cash cost improvements and lower tax payments, in line with lower underlying profits.

Purchases of property, plant and equipment and intangible assets were US$3.0 billion in 2016, a decline of 36 per cent compared with 2015. Some major capital projects were completed in 2015, including expansion of the Pilbara iron ore infrastructure and the modernisation and expansion of the Kitimat aluminium smelter. Major capital projects in 2016 included the development of the Oyu Tolgoi copper/gold underground mine in Mongolia, construction of key infrastructure at the Amrun bauxite project in Queensland and development of the Silvergrass iron ore mine in the Pilbara.

Dividends paid in 2016 of US$2.7 billion reflected the final 2015 dividend paid in April 2016 and the 2016 interim dividend paid in September 2016.

In 2016, net proceeds from the disposal of subsidiaries, joint ventures and associates of US$0.8 billion related primarily to amounts received following the disposal of the Group’s 40 per cent interest in the Bengalla Joint Venture and the first tranche from the sale of the Lochaber aluminium assets. In addition, the Group realised US$0.4 billion from the sale of property, plant and equipment and intangibles, which included the Mount Pleasant thermal coal assets in New South Wales, undeveloped land in Utah and some office buildings in North America.

2015 compared with 2014

Net cash generated from operating activities of US$9.4 billion was 34 per cent lower than 2014, mainly due to the impact of lower prices, reflecting cash cost improvements and lower tax payments in line with lower profits.

Total working capital cash inflows of US$1.5 billion in 2015 arose from continued efforts to reduce inventories and receivables, which were partly offset by a reduction in payables, mostly from actions taken to reduce capital and operating expenditures during the year.

Purchases of property, plant and equipment and intangible assets declined by US$3.5 billion or 43 per cent to US$4.7 billion in 2015. Major capital projects included the completion of the expansion of the Pilbara iron ore infrastructure and the modernisation and expansion of the Kitimat aluminium smelter in British Columbia, where first metal was poured in June 2015.

Dividends paid in 2015 of US$4.1 billion reflected the increase in the final 2014 dividend paid in April 2015 and the 2015 interim dividend paid in September 2015. Share repurchases totalled US$2.0 billion in 2015.

2014 compared with 2013

Net cash generated from operating activities was US$14.3 billion, five per cent lower than 2013, reflecting the negative impact of lower prices partially offset by the positive impact of higher volumes, cash costs improvements and favourable current trade working capital movements.

Purchase of property, plant and equipment and intangible assets declined by US$4.8 billion or 37 per cent to US$8.2 billion in 2014. This was driven by the completion of five major capital projects during 2013 and continued capital discipline.

Net proceeds from disposals of subsidiaries, joint ventures and associates totalled US$0.9 billion in 2014, primarily reflecting the sale of the Group’s interests in the Clermont Joint Venture and Rio Tinto Coal Mozambique.

Other investing cash flows resulted in an improvement of US$647 million, mainly due to the disposal of the Group’s properties at St James’s Square.

Dividends paid in 2014 of US$3.7 billion reflect the 12 per cent increase to the 2013 dividends paid.

Repayments of borrowings increased from US$1.8 billion to US$3.5 billion during 2014.

Balance sheet at 31 December 20152016

Net debt increaseddecreased from US$12.5 billion at 31 December 2014 to US$13.8 billion at 31 December 2015 with free cash flow partly funding theto US$2.09.6 billion share buy-back. Net debt as at 31 December 2015 was made up principally from adjusted total borrowing (as defined in financial statements Note 24 “Consolidated net debt” of the Annual Report 2015) of US$23.1 billion, offset by US$9.4 billion in cash and cash equivalents.2016. Net debt to total capital (gearing ratio) was 24declined to 17 per cent at 31 December 20152016 (31 December 2014: 192015: 24 per cent). The increase in the gearing ratio and interest cover was mainly driven by the US$10.5 billion decline in shareholders’ equityseven times, unchanged from 31 December 2014 to 31 December 2015, which was largely attributable to weaker Australian and Canadian currencies along with the share buy-back and dividend payments.2015.

Adjusted total borrowings at 31 December 20152016 were US$23.118.0 billion. TheAt 31 December 2016, approximately 80 per cent of Rio Tinto’s total borrowings were at floating interest rates, the weighted average cost of total borrowings was approximately 3.54.0 per cent and the weighted average maturity was around eightten years. The maximum nominal amount, within non-current borrowings, maturing in any one calendar year was US$3.31.7 billion, which matures in 2018. At2025.

24

In 2016, the Group repaid US$9.4 billion of borrowings, including US$9.0 billion of bonds, and drew down US$4.4 billion of funds, mainly from the Oyu Tolgoi project financing. Cash and cash equivalents plus other short-term cash investments at 31 December 2015, approximately half of Rio Tinto’s total borrowings2016 were at fixed interest rates.US$8.5 billion (31 December 2015: US$9.4 billion).

Financial instruments and risk management

The Group’s policies with regard to financial instruments and risk management are clearly defined and consistently applied. They are a fundamental part of the Group’s long-term strategy covering areas such as foreign exchange risk, interest rate risk, commodity price risk, credit risk, and liquidity risk and capital management. Further details of our Financial instruments and risk management are disclosed in financial“Financial statements Note 30 “Financial30-Financial instruments and risk management” on pages 149 to 157 of the Annual Report 2015.2016.

The Annual Report 20152016 shows the full extent of the Group’s financial commitments, including debt. The risk factors to which the Group is subject are summarised above in Item 3.D, “Risk factors”.

The effectiveness of internal controls continues to be a high priority in the Rio Tinto Group. The board’s statement on internal control is set out in the Risk management section.

Dividend

The 20152016 interim dividend was 107.545.0 US cents (2014: 96.0(2015: 107.5 US cents) and the final dividend was determined as 107.5125.0 US cents (2014: 119.0(2015: 107.5 US cents). Dividends paid on Rio Tinto plc and Rio Tinto Limited shares are equalised on a net cash basis; that is, without taking into account any associated tax credits. Dividends are determined in US dollars. Rio Tinto plc dividends are paid and declared in pounds

sterling and Rio Tinto Limited dividends are declared and paid in Australian dollars, converted at exchange rates on 97 February 2016.2017. Details relating to the dividend policy, determination and payment of dividends in sterling, Australian dollars and other currencies and on the payment of dividends to holders of American Depositary Receipts (ADRs) are included in the Shareholder information“Shareholder information” section on page 240248 of the Annual Report 2015.2016.

Capital and liquidity risk management

The Group’s total capital is defined as equity attributable to owners of Rio Tinto plus equity attributable to non-controlling interests and net debt, as shown below:

Total capital

The Group’s major capital and evaluation projects are listed in the Capital allocation“Portfolio management” section on pages 3022 and 3123 of the Annual Report 2015.2016.

We expect that contractual commitments for expenditure, together with other expenditure and liquidity requirements, will be met from internal cash flow and, to the extent necessary, from the existing facilities described in financial“Financial statements Note 30 “Financial30-Financial instruments and risk management”, part A(b)(v) on pages 152 and 153 of the Annual Report 2015.2016. This Note also provides further details of our liquidity and capital risk management.

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Treasury management and financial instruments

Details of our Treasury management and financial instruments are contained within the introductory paragraphs of financialdisclosed in “Financial statements Note 30 “Financial30-Financial instruments and risk management” on pages 149 to 157 of the Annual Report 2015.2016.

Foreign exchange

The following sensitivities give the estimated effect on underlying earnings assuming that each exchange rate moved in isolation. The relationship between currencies and commodity prices is a complex one and movements in exchange rates can cause movements in commodity prices and vice versa. Where the functional currency of an operation is that of a country for which production of commodities is an important feature of the economy, such as the Australian dollar, there is a certain degree of natural protection against cyclical fluctuations, in that the currency tends to be weak, reducing costs in US dollar terms, when commodity prices are low, and vice versa.

Earnings sensitivities – Exchange rate

The exchange rate sensitivities quoted above include the effect on net operating costs of movements in exchange rates but exclude the effect of the revaluation of foreign currency financial assets and liabilities. They should therefore be used with caution. Further details of our exposure to foreign currency fluctuations and currency derivatives, and our approach to currency hedging, are contained within financial“Financial statements Note 30 “Financial30-Financial instruments and risk management”, part A(b)(i), on pages 150 and 151 of the Annual Report 2015.2016.

Interest rates

Details of our exposure to interest rate fluctuations are contained within financial“Financial statements Note 30 “Financial30-Financial instruments and risk management”, part A(b)(ii), on page 151 of the Annual Report 2015.2016.

Commodity prices

The approximate effect on the Group’s underlying and net earnings of a ten per cent change from the full year average market price in 20152016 for the following products would be: