Rio Tinto PLC — Annual Report 2014

Dec 31, 2014

2014 Strategic report

Delivering sustainable shareholder returns

Contents

Strategic report

Performance highlights	1
Group overview	2
Chairman's letter	4
Chief executive's statement	5
Strategic context	7
Group strategy	8
Business model	11
Key performance indicators	12
Principal risks and uncertainties	14
Capital allocation	18
Sustainable development	20
Independent limited assurance report	27
Product groups
Aluminium	28
Copper	30
Diamonds & Minerals	32
Energy	34
Iron Ore	36
Exploration	38
Technology & Innovation	39
Financial overview	40
Five year review	41
Summary Remuneration Report	i
Remuneration Summary	iii
Summary shareholder information	v
Contact details	vii

Navigating through Rio Tinto's Annual and Strategic report

As of 2013, the UK's regulatory reporting framework requires companies to produce a strategic report. The intention is to provide investors with the option of receiving a document which is more concise than the full annual report, and which is strategic in its focus.

The first 41 pages of Rio Tinto's 2014 Annual report constitute its 2014 Strategic report. References to page numbers beyond 41 are references to pages in the full 2014 Annual report. This is available online at riotinto.com/ar2014 or shareholders may obtain a hard copy free of charge by contacting Rio Tinto's registrars, whose details are set out at the back of this document.

Please visit Rio Tinto's website to learn more about the Group's performance in 2014.

This Annual report, which includes the Group's 2014 Strategic report, complies with Australian and UK reporting requirements.

Copies of Rio Tinto's shareholder documents – the 2014 Annual report and 2014 Strategic report, along with the 2015 Notices of annual general meeting – are available to view on the Group's website: riotinto.com

Directors' approval statement

This Strategic report is delivered in accordance with a resolution of the board, and has been signed on behalf of the board by:

Jan du Plessis Chairman

4 March 2014

The auditors' report on the Group's 2014 annual accounts was unqualified. Within that report, the auditors' statement under section 496 Companies Act 2006, confirming that the Strategic report and Directors' report are consistent with the accounts, was also unqualified.

A copy of the auditors' report on the Group's 2014 Annual report is contained on pages 186 to 191 of that document, which is available to shareholders free of charge on request, or to view online on our website, riotinto.com/ar2014

Cautionary statement about forward-looking statements

This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Rio Tinto Group. These statements are forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, and Section 21E of the US Securities Exchange Act of 1934. The words "intend", "aim", "project", "anticipate", "estimate", "plan", "believes", "expects", "may", "should", "will", "target", "set to" or similar expressions, commonly identify such forward-looking statements.

Examples of forward-looking statements in this Annual report include those regarding estimated ore reserves, anticipated production or construction dates, costs, outputs and productive lives of assets or similar factors. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors set forth in this document that are beyond the Group's control. For example, future ore reserves will be based in part on market prices that may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include the ability to produce and transport products profitably, demand for our products, changes to the assumptions regarding the recoverable value of our tangible and intangible assets, the effect of foreign currency exchange rates on market prices and operating costs, and activities by governmental authorities, such as changes in taxation or regulation, and political uncertainty.

In light of these risks, uncertainties and assumptions, actual results could be materially different from projected future results expressed or implied by these forward-looking statements which speak only as to the date of this Annual report. Except as required by applicable regulations or by law, the Group does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events. The Group cannot guarantee that its forward-looking statements will not differ materially from actual results.

Performance highlights

2014 results demonstrate clear delivery against our commitments

In 2014, Rio Tinto made a commitment to materially increase cash returns to shareholders. The Group delivered this through a 12 per cent increase in the full year dividend and announced a US\$2.0 billion share buy-back. These represent a total cash return to shareholders, in respect of 2014, of almost US\$6.0 billion.

During 2014, Rio Tinto's continued financial and operating discipline enabled the Group to offset much of the impact of lower commodity prices. By increasing volumes and reducing costs, Rio Tinto achieved underlying earnings(a) of US\$9.3 billion and maintained the EBITDA margin(b) at 39 per cent. Free cash flow was assisted by a further reduction in capital expenditure(c) and a successful programme to release working capital. As a consequence, net debt(d) reduced by US\$5.6 billion to US\$12.5 billion.

Decisive early action taken throughout the Group delivered the strong balance sheet, enabling the additional material cash return to shareholders.

With lower commodity prices and uncertain global economic trends, the operating environment remains tough. However, in these conditions Rio Tinto's qualities and competitive advantages deliver superior value. The Group's combination of world-class assets, disciplined capital allocation, balance sheet strength, operating and commercial excellence, and a culture of safety and integrity gives Rio Tinto confidence in its ability to continue generating sustainable returns for shareholders.

	Year to 31 December	2014	2013	Change
Pg 12	Underlying earnings (US\$ millions) (a) Net earnings (US\$ millions) (a)	9,305 6,527	10,217 3,665	-9% +78%
Pg 12	Net cash generated from operating activities (US\$ millions)	14,286	15,078	-5%
Pg 13	Capital expenditure (US\$ millions) (c) Underlying earnings per share (US cents) Basic earnings per share (US cents) Ordinary dividends per share (US cents)	8,162 503.4 353.1 215.0	13,001 553.1 198.4 192.0	-37% -9% +78% +12%
	At 31 December	2014	2013	Change
Pg 13	Net debt (US\$ millions) (d) Gearing ratio (e)	12,495 19%	18,055 25%	-31% -6%

The financial results are prepared in accordance with IFRS and are audited.

• (a) Underlying earnings is the key financial performance indicator which management uses internally to assess performance. It is presented here to provide greater understanding of the underlying business performance of the Group's operations. Net and underlying earnings relate to profit attributable to the owners of Rio Tinto. Underlying earnings is defined and reconciled to net earnings on pages 124 and 125.
• (b) EBITDA margin is defined as Group underlying EBITDA divided by product group total revenues as per the Financial information by business unit on pages 178 and 179 where it is reconciled to profit on ordinary activities before finance items and taxation.
• (c) Capital expenditure is presented gross, before taking into account any disposals of property, plant and equipment.
• (d) Net debt is defined and reconciled to the balance sheet on page 41.
• (e) Gearing ratio is defined as net debt divided by the sum of net debt and total equity at each period end.

Revenues and earnings

• Achieved consolidated sales revenues of US\$47.7 billion, as a US\$5.4 billion (pre-tax) decline in pricing was partially offset by US\$3.0 billion from higher volumes.
• Sustained the EBITDA margin at 39 per cent, unchanged from 2013, with volume gains and cost improvements offsetting the impact of lower prices.
• Achieved underlying earnings of US\$9.3 billion, nine per cent lower than 2013 despite the US\$4.1 billion (post-tax) impact of lower prices.
• Delivered underlying earnings per share of 503.4 US cents.
• Generated net earnings of US\$6.5 billion, reflecting non-cash exchange rate losses of US\$1.9 billion, a US\$0.4 billion charge following the repeal of the Minerals Resource Rent Tax and other charges of US\$0.5 billion. An impairment charge of US\$1.2 billion mainly related to the Kitimat project as reported at the half year was mostly offset by an impairment reversal of US\$1.0 billion in the second half of 2014 related to an uplift in carrying value for the Pacific Aluminium business.

Production

– Set production records for iron ore and Hunter Valley thermal coal, and delivered a strong operational performance in bauxite, copper and aluminium.

Cash flow and balance sheet

• Achieved US\$4.8 billion of sustainable operating cash cost improvements and exploration and evaluation savings since 2012, of which US\$1.5 billion were in 2014.
• Generated net cash from operating activities of US\$14.3 billion, including working capital improvements of US\$1.5 billion, principally from lower inventories and lower receivables.
• Reduced capital expenditure by US\$4.8 billion to US\$8.2 billion in 2014, reflecting completion of existing major projects and continued capital discipline.
• Decreased net debt by US\$5.6 billion in 2014 to US\$12.5 billion at 31 December 2014, with gearing of 18.6 per cent. This compares with US\$18.1 billion and 25.2 per cent gearing at 31 December 2013.

Capital returns

• Increased full year dividend by 12 per cent to 215 US cents per share.
• Announced an additional capital return of US\$2.0 billion, which comprises a A\$500 million (c. US\$0.4 billion) off-market share buy-back tender of Rio Tinto Limited shares and the balance of approximately US\$1.6 billion for an on-market buy-back of Rio Tinto plc shares.
• These represent a total cash return to shareholders, in respect of 2014, of almost US\$6.0 billion, an increase of approximately 64 per cent on 2013.

Group overview

Introduction to Rio Tinto

Rio Tinto is a leading global mining group that focuses on finding, mining and processing the Earth's mineral resources. Our goal is to deliver strong and sustainable shareholder returns from our portfolio of world-class assets and our compelling pipeline of projects.

We take a long-term, disciplined approach, developing and running long-life, low-cost, expandable operations that are capable of delivering value throughout the cycle. Supported by our Exploration and Technology & Innovation groups, our five product groups represent a diversity of commodities that give us exposure to demand across the economic development spectrum(a).

Supporting our world-class assets is a company of world-class people who are the foundation of our success. This 60,000-strong workforce, across more than 40 countries, pulls together as a powerful team committed to getting the best out of our operations. Their safety is always our first concern. We also foster a culture of innovation, where our people are proud to achieve and are always learning.

Our vision is to be a company that is admired and respected for delivering superior value, as the industry's most trusted partner. Our operations give us the opportunity to create mutual benefit with the communities, regions and countries in which we work, and our metals and minerals are transformed into end products that contribute to higher living standards. (Find out more on page 11.)

Underpinning everything we do are our values: respect, integrity, teamwork and accountability. They are fundamental to the way we operate and engage with those around us, and form the foundation of a long-term, reliable business that generates sustainable returns for shareholders.

Aluminium product group

Building on more than a century of experience and expertise, Rio Tinto is a global leader in the aluminium industry. Our business includes high-quality bauxite mines, large-scale alumina refineries, and some of the world's lowestcost, most technologically-advanced primary aluminium smelters.

Products

Bauxite

Bauxite is the natural ore used to make aluminium. It is refined into alumina which is smelted into aluminium metal. Our wholly- and partly-owned bauxite mines are located in Australia, Brazil and Guinea.

Alumina

Alumina (aluminium oxide) is extracted from bauxite via a refining process. Approximately four tonnes of bauxite are required to produce two tonnes of alumina, which in turn makes one tonne of aluminium metal. Our wholly- and partly-owned alumina refineries are located in Australia, Brazil and Canada.

Aluminium

Aluminium is a unique and versatile modern metal. Light, strong, flexible, corrosion-resistant and infinitely recyclable, aluminium is one of the most widely-used metals in the world. Its largest markets are transportation, machinery and construction. Our smelters are mainly concentrated in Canada. We also have plants in France, Australia, New Zealand, Iceland, the UK and Oman.

Strategic advantages

• Access to the largest and best-quality bauxite ore reserves in the industry, strategically located to serve growing Chinese bauxite demand.

• One of the lowest-cost bauxite producers.

• Unrivalled hydropower position, which delivers significant cost and other advantages in an energy intensive industry and today's carbonconstrained world.

• Rio Tinto has a first-quartile cost position for aluminium smelting, with industry-leading smelting technology.

Key production locations	Key sales destinations
–	–
Canada	Asia
–	–
Europe	Americas
–	–
Australia	Europe

Full operating review on page 28.

Copper product group

Rio Tinto's Copper group is made up of four world-class operating assets and two attractive development projects. We are managing the portfolio to bring on new production when the market demands it.

Products

Copper

Copper is a malleable, corrosion resistant, antimicrobial metal and a highly effective conductor of heat and electricity. It is an essential component of nearly all modern electrical systems, including renewable energy sources such as solar, wind, geothermal and hydro-electric technologies. Global information and communication technologies rely on it, as do hybrid and electric cars and hospitals and medical facilities, where it is used to prevent the spread of diseases and infections. We produce gold, silver and molybdenum as coproducts of our copper production.

Gold

Gold is used as a store of value. It is also highly conductive, malleable and inert, making it a key component in the electronics, chemical production, jewellery, aerospace and medical industries.

Silver

Silver has applications in art, science, and industry. It is used in many electronic devices, in aerospace applications and semiconductors. A precious metal, silver is used to make jewellery and as an investment.

Molybdenum

Molybdenum is a metallic element frequently used to produce stainless steel and other metal alloys. It enhances the metal's toughness, high-temperature strength and corrosion resistance.

Strategic advantages

• A portfolio of high-quality assets and growth opportunities.
• Attractive growth options that can be delivered when the market requires.
• Clear pathway to deliver superior profitability.
• Industry-leading technology and innovation.

Key production locations	Key sales destinations
–	–
US	US
–	–
Chile	China
–	–
Mongolia	Japan

Full operating review on page 30.

(a) On 27 February 2015, Rio Tinto announced that it would be streamlining its portfolio of assets into four product groups: Aluminium, Copper & Coal, Diamonds & Minerals and Iron Ore, with immediate effect. The coal assets of the former Energy product group became part of a new Copper & Coal product group, and the uranium assets of the former Energy product group became part of the Diamonds & Minerals product group. In this Annual report, references to Copper, Diamonds & Minerals and Energy refer to the product groups as they existed in 2014.

Diamonds & Minerals product group

The Diamonds & Minerals product group comprises a suite of industryleading, demand-led businesses, which include mining, refining and marketing operations across four sectors. Rio Tinto Diamonds is one of the world's leading diamond producers, active in mining, manufacturing, selling, and marketing diamonds. Rio Tinto Minerals is a world leader in borates, with mines, processing plants, and commercial and research facilities. Dampier Salt is one of the world's largest producers of seaborne salt. Rio Tinto Iron & Titanium is an industry leader in high-grade titanium dioxide feedstocks. The Diamonds & Minerals group also includes the Simandou iron ore project in Guinea, one of the largest known undeveloped high-grade iron ore resources in the world.

Products

Diamonds

Diamonds are an important component in both affordable and higherend jewellery. We are able to service all established and emerging markets as we produce the full range of diamonds in terms of size, quality and colour distribution.

Titanium dioxide

The minerals ilmenite and rutile, together with titanium dioxide slag, can be transformed into a white titanium dioxide pigment or titanium metal. The white pigment is a key component in paints, plastics, paper, inks, textiles, food, sunscreen and cosmetics. Titanium metal's key properties of light weight, chemical inertness and high strength make it ideal for use in medical applications and in the aerospace industry.

Borates

Refined borates are used in hundreds of products and processes. They are a vital ingredient of many home and automotive applications, and are essential nutrients for crops. They are commonly used in glass and ceramic applications including fibreglass, television screens, floor and wall tiles, and heatresistant glass.

Salt

Salt is one of the basic raw materials for the chemicals industry and is indispensable to a wide array of automotive, construction and electronic products, as well as for water treatment, food and healthcare. Other products include high purity iron, metal powders and zircon.

Strategic advantages

• Portfolio of industry-leading businesses operating in attractive markets.
• Demand-led, integrated operations that are responsive to the changing external environment.
• Poised to benefit from mid to late-cycle demand growth as consumption increases in emerging markets.

	Key production locations		Key sales destinations
– – –	North America Australia South Africa	– – –	North America South East Asia India

Full operating review on page 32.

Energy product group

Energy is essential for modern life and the demand for energy continues to grow. Rio Tinto's Energy product group produced coal and uranium, two important sources of energy from mining. The thermal coal and uranium we produce is used to generate electricity and our uranium is subject to strict safeguards and non-proliferation conditions to ensure it is only used for peaceful purposes. We also produce coking or metallurgical coal, which is an important ingredient in steel and cement production. We have operations, exploration and development projects in Australia, Namibia, South Africa and Canada.

Products

Coal

Coal is a cost effective and abundant energy source and we are a leading supplier to the seaborne thermal coal market. Thermal coal is used for electricity generation in power stations. We also produce higher-value coking or metallurgical coal, which produces steel when mixed in furnaces with iron ore. We have five operating mines in Australia and one in South Africa.

Uranium

Uranium is one of the most powerful known natural energy sources, and is used in the production of clean, stable, base-load electricity. After uranium ore is mined, it is processed into uranium oxide. This is the product that is sold for processing into fuel rods for use in nuclear power stations. We have uranium operations in Australia and Namibia, and an exploration project in Canada.

Strategic advantages

• Premium Australian coal assets located close to existing infrastructure and growing Asian markets.
• Successfully transforming the business by reducing costs, increasing productivity and improving our position on the cost curve.
• Strong product stewardship strategy, including investment in technologies to reduce emissions from our products.

Key production locations	Key sales destinations
– Australia – Namibia	– Japan – South Korea – Taiwan

Full operating review on page 34.

Iron Ore product group

Rio Tinto operates a world-class iron ore portfolio, supplying the global seaborne iron ore trade. We are well positioned to benefit from continuing demand across China and the developing world. In Western Australia, the majority of our production continues to achieve industry-leading margins through effective cost saving measures, automation and a relentless focus on optimising operational efficiencies and marketing expertise.

Products

Iron ore

Iron ore is the key ingredient in the production of steel, one of the most fundamental and durable products for modern-day living, with uses from railways to paperclips. Our iron ore mines are located in Australia and Canada.

Strategic advantages

• Proximity of the expanded Pilbara operations in Australia to Asian markets.
• Position as lowest cost major iron ore producer in the Pilbara, with a Pilbara cash unit cost of US\$19.50 in 2014.
• World-class assets comprising a seamless supply chain with unencumbered optionality.
• A premium product suite driving strong customer relationships supported by technical and commercial marketing expertise.

– Australia – China – Canada – Japan – South Korea	Key production locations	Key sales destinations

Full operating review on page 36.

Chairman's letter

Dear shareholders,

During 2014, your company maintained its steadfast commitment to generate sustainable shareholder returns by supplying the commodities essential for modern life. As this report shows, we delivered strong financial and operational performance against a challenging market backdrop. Our success is underpinned by our strong safety performance, operational excellence, values-driven approach and the best people in the industry.

I am very pleased to report we delivered on our commitments during 2014. We achieved underlying earnings of US\$9.3 billion and our focus on cash generation led to net cash from operating activities of US\$14.3 billion. We exceeded our cost reduction target and lowered net debt significantly while reducing capital expenditure to US\$8.2 billion.

Most importantly we fulfilled our promise to you, the owners of our company, to materially increase cash returns. Our primary commitment in terms of shareholder returns is our progressive dividend policy. In February 2015 we announced a 12 per cent increase in our full year dividend as well as a US\$2.0 billion share buy-back. These represent a total cash return to shareholders, in respect of 2014, of almost US\$6.0 billion. They underscore the confidence your board has in the resilience and strength of the company despite ongoing uncertainties in our external markets. We believe that delivering returns to shareholders is an important component of our overall approach to creating shareholder value.

Value through the economic cycle

This improved performance reflects the strategic approach the company has embedded throughout our more than 140 year history: to invest in and operate long-life, low-cost, expandable operations in the most attractive industry sectors. We focus on the best assets, because they are capable of delivering value throughout the cycle.

Volatility has become a characteristic of the rapidly-evolving world in which we operate. Each year presents a new economic challenge. The past six months in particular have seen increased uncertainty in energy, metals and foreign exchange markets. The prices for many of the commodities we produce were significantly lower during 2014, with average iron ore prices down 30 per cent year-on-year.

However, given the decisive action we have taken over the past two years, your company is in a strong position to capitalise on the positive long-term fundamentals for our key commodities, despite the short-term market challenges.

Rio Tinto's position as a pre-eminent supplier of raw materials and refined metals and minerals products places us in an enviable position. At a time of significant distress for late-entrant or high-cost producers, Rio Tinto has been able to go about its business in a disciplined and orderly way. This is due to our world-class assets, the quality of our products and customer relationships, and the decisive actions we have taken to strengthen our balance sheet.

We continue to focus on maximising returns from our existing assets while ensuring only the best growth projects attract fresh capital.

We also continue to optimise our portfolio, and in 2014 divested the Clermont Joint Venture and Rio Tinto Coal Mozambique coal businesses, the Søral and Alucam aluminium businesses, and the Copper group's Sulawesi and Pebble projects.

As we disclosed in October 2014, Glencore contacted Rio Tinto regarding a potential merger in July 2014. The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto shareholders.

A responsible and transparent business

The methods the company employs to deliver superior results are as important as the results themselves. We remain deeply committed to being a responsible company providing products the world over to support economic improvement and social progress.

We operate in a complex and interconnected world where global and local issues – such as biodiversity, climate change, livelihoods, and regional economic development – bring both risk and opportunity to the design, development and management of our operations.

Society's expectations are increasing, and we will continue to listen carefully to our stakeholders, as we strive to create mutual value.

Our operations can have a substantial positive economic impact on the regions and countries in which we operate. Over the past four years, our economic contribution has exceeded US\$230 billion.

We lead our industry with our ongoing commitment to tax transparency, publishing our annual Taxes Paid report to hold ourselves and host governments to account. We hope others will be encouraged to follow our example.

It is through this combination of facilitating social development, acting as a catalyst for growth, and behaving in an environmentally responsible way, that we manage our risks and deliver value for you, our shareholders, and also create projects of worth for the communities in which we work.

Governance – a balance of diversity and depth

The past year has again seen a broadening of experience and diversity on your board as we welcomed a number of new non-executive directors. Michael L'Estrange joined the board in September 2014 and Megan Clark in November. They bring to Rio Tinto a mix of backgrounds deeply relevant to our strategy and culture, including mining, science and technology, public policy and international relations. At our Australian annual general meeting in early May, Lord Kerr and Michael Fitzpatrick will step down after many years of wonderful service. I thank them both for their dedication and immense contribution to Rio Tinto.

I am delighted that Sam Walsh and Chris Lynch agreed to extend their tenure with open-ended contracts. They have provided transformative leadership since 2013, and I am confident that their experience will continue to drive the delivery of sustainable results.

A key role of the board is to ensure it has the appropriate succession arrangements for its senior leadership team and that it has the next generation of leaders moving through the company.

Rio Tinto has always prided itself on the breadth and depth of the talent within our organisation, and the capabilities of our people – across more than 40 countries – are highly regarded. I would like to thank Sam, the Executive Committee, and all of our 60,000 employees across the world for their commitment, leadership and resilience.

Looking forward with confidence

Markets are challenging, and in this environment investors seek strength, reliability and consistency. It is in these periods that your company thrives and the quality of its assets, operational excellence and balance sheet strength shines through.

Let me assure you that your board, our management, and all our people, are committed to delivering sustainable returns to you, our shareholders.

Thank you for your continued investment in Rio Tinto. I look forward to reviewing progress in 2015 with you next year.

Jan du Plessis Chairman 4 March 2015

Chief executive's statement

Dear shareholders,

Your company had a strong year, making truly satisfying progress towards building a safer, more resilient, world-class business. Our relentless focus on improving performance at all of our operations, driving down costs and strengthening our balance sheet has enabled us to deliver materially increased cash returns to shareholders. We remain committed to pursuing further improvement in the year ahead.

In 2014 we delivered excellent results and upheld our commitment to improve performance and strengthen the balance sheet. In challenging conditions we delivered on, and in many cases exceeded, expectations.

It is clear that in the short term we will continue to face challenging commodity markets as economic and geopolitical uncertainty continues. Divergent monetary policy paths in Europe, the US and parts of Asia are contributing to financial volatility. China is now experiencing slower, but still significant, economic growth as it rebalances its economic priorities from investment towards consumption.

But we also know that against a backdrop of uncertainty, Rio Tinto thrives. Our combination of world-class assets, disciplined capital allocation, balance sheet strength, operating and commercial excellence, and our culture of safety and integrity gives me confidence we are best placed to make the most of the positive long-term demand fundamentals to generate sustainable returns.

Our strong 2014 results are first and foremost due to the efforts of our hardworking and dedicated employees around the world. I had the great pleasure of visiting many of our operations during the year, and yet again I was inspired by the commitment of our people, and impressed by their expertise. I thank them all for their contributions.

I would like to thank the Executive Committee – including Alfredo Barrios and Greg Lilleyman who we welcomed to the team this year – for their strong and passionate leadership.

Putting safety first

We strive to put safety first in everything we do. From small things such as starting our meetings with what we call a "safety share", to supporting community mental health initiatives and understanding our critical risks, safety is deeply embedded in our culture.

We reduced our all injury frequency rate by nine per cent in 2014 compared with 2013. This was our best year ever in terms of injury rate performance, and over the past five years we have reduced our all injury frequency rate by 14.5 per cent.

However success really means everyone returning home safely, every day. Therefore it is with much sadness I report the deaths of two employees at managed operations during 2014. In February, at the Gove alumina refinery in Australia, our colleague Darryl Manderson died due to an equipment incident while carrying out maintenance work. In November, Enrick Gagnon died when a landslide derailed an iron ore train in Canada. I was also greatly saddened by two further fatalities earlier in 2015, at QIT Madagascar Minerals and at Zululand Anthracite Colliery in South Africa. Both of these 2015 fatalities are currently being investigated.

These deaths have had a major impact on the family, friends and workmates of these colleagues. We will learn from these tragedies to prevent future ones.

Although our safety performance leads our industry, we need to be constantly vigilant and focused on improvement. We refreshed our safety strategy in 2014 and our goal, above all, remains to eliminate fatalities.

Managing a world-class portfolio

Over decades and across our product suite we have built a strong portfolio of businesses. Across the Group in 2014, we saw numerous examples of the strength of our portfolio. Among the highlights of our operational performance were the production records we set for iron ore and Hunter Valley thermal coal.

Our Pilbara iron ore business reached its 290 Mt/a run rate two months ahead of schedule. Expanding our Pilbara operations to 360 Mt/a rests comfortably with our view of the longer-term demand for iron ore. These operations are world class in terms of assets, optionality, and low-cost operating performance, as well as in our marketing expertise and leading-edge application of technology.

The expansion translated into excellent product group earnings and cash flow for Iron Ore. Despite significant price declines for its products, Iron Ore's underlying earnings reached US\$8.1 billion. This was a reduction of only 18 per cent on 2013, thanks to continued cost reduction efforts and the favourable effect of the weaker Australian dollar.

The turnaround of our Aluminium business continued in 2014. Higher prices for aluminium and our focus on efficiency and productivity saw the product group's underlying earnings more than double, from US\$557 million in 2013 to US\$1.2 billion in 2014. Our bauxite business is generating handsome margins, but more work is needed in the alumina side of the portfolio. So we have set some tough targets for 2015, and we expect alumina's profile to steadily improve.

The Copper group delivered an 11 per cent increase in underlying earnings. This was despite a seven per cent reduction in average copper prices, and reflects the group's success in reducing costs and boosting productivity. Copper also increased production volumes and made more good progress in simplifying the portfolio.

The Diamonds & Minerals group continued to focus on maximising cash flow matching capacity to the market – the right approach for these specialist products. The product group achieved underlying earnings of US\$401 million, a 15 per cent increase on 2013, as higher volumes and lower costs more than offset lower prices in the minerals portfolio.

Lower prices across the coal sector decreased our Energy group's earnings by US\$434 million. Not all of this could be offset by the good progress the Energy team continued to make in reducing operating costs and maximising efficiencies. Ultimately this resulted in a loss of US\$210 million of underlying earnings.

All of our product groups have high-quality growth options, which we continue to pursue in a disciplined manner. We believe we have the right capital allocation framework and the right level of spending to support value-accretive growth while ensuring we retain a strong balance sheet and meet our commitment to deliver sustainable returns.

As part of our continued focus on efficiency and costs, we announced on 27 February 2015 that we would be streamlining our product group structure, with immediate effect. Under the new arrangements, Rio Tinto's world-class portfolio of assets has been condensed into four product groups: Aluminium, Copper & Coal, Diamonds & Minerals and Iron Ore.

I would like to recognise the significant contributions of Jacynthe Côté and Harry Kenyon-Slaney who left or will leave the company during 2014 and early 2015 respectively. I thank them both and wish them both well.

Focus and agility

In many respects, our industry-leading businesses are where others wish to be; however, now is not the time for complacency.

We must anticipate, adapt and respond with urgency to changing conditions, sustaining our focus on efficiency in areas that make a difference – rein in our costs, ensure every dollar is spent wisely and remove wasteful working capital.

Rio Tinto's balance sheet is strong and sound and we are committed to maintaining this position. In a period of market instability, a robust balance sheet is a major advantage. It protects the business, it protects shareholders and it creates a platform for future growth. It provides flexibility to undertake future projects – as and when required – and to find the best ways to reward shareholders.

On page 10, you can read more about the areas we will be focusing on in 2015 as we strive to enhance our performance even further.

Delivering sustainable value

In 2014, your company fulfilled its commitment to deliver greater value for shareholders. In doing so, we have also created value for many of our partners around the world who are so integral to the continuing success of our business.

I believe the quality and commitment of our people sets us apart, as does the way they embrace and embody our values: respect, integrity, teamwork and accountability.

I would like to thank our employees for their dedication and hard work, our stakeholders for continuing to partner with us, and you, our shareholders for investing in our company.

Sam Walsh AO Chief executive 4 March 2015

Strategic context

Global economy

The positive momentum in developed economies in late 2013 fuelled expectations of an acceleration in global growth, but that faded in early 2014. In the end, the US remained one of the few bright spots in the global economy in 2014 while China's slowdown became more entrenched. Europe failed to emerge meaningfully from imposed austerity, Japan's growth was negatively impacted by a consumption tax hike and emerging economies suffered from the delayed recovery in global trade. As a result, the global economy grew by only just over three per cent in 2014, in line with growth in the previous two years, and below the International Monetary Fund's forecast of 3.7 per cent growth at the start of the year.

Despite most economies continuing to deal with consequences from the 2008/09 global financial crisis (GFC), volatility in financial markets fell to low levels during the first part of 2014. Equity markets reached record levels, supported by sustained loose monetary policies. Nervousness however returned to the markets towards the end of year on the back of rising geopolitical tensions, a very sharp drop in oil prices and reminders of fragilities in the eurozone.

In China, growth in 2014 came just below the government's target of 7.5 per cent. The new leadership attempted to bring the credit boom of the past five years under control while preventing a contagion from weak property and export sectors to the broader economy. This balancing act is likely to continue into 2015 and we expect China's GDP growth to slow further to around seven per cent. The economy is in the middle of a long-signalled transition away from the investment-led and commodity-intensive growth model of the past couple of decades towards a stronger focus on consumption and services as well as a cleaner environment. This "new normal" implies still-significant but slower GDP growth and maturing commodity demand.

Among developed economies, monetary policies are moving on divergent paths. The US managed to shrug off severe winter disruptions at the start of 2014 to sustain a robust pace of growth. Manufacturing activity was strong throughout the year and the labour market strengthened appreciably. As a result, the Federal Reserve unwound its Quantitative Easing (QE) programme and the focus has now shifted towards the timing of the first interest rate hike in the US since the financial crisis, expected in 2015. In contrast, the European Central Bank has embarked on a new QE initiative in an attempt to kick-start a recovery in Europe's periphery countries, stimulate growth in the core beyond Germany and counter growing deflation risks. With the Bank of Japan also extending its QE programme in October 2014 there is an increasingly pronounced dual track in the post-GFC recovery process within Organisation for Economic Co-operation and Development (OECD) economies.

The divergent monetary policies are putting upward pressure on the US dollar, which rallied strongly against most currencies in the later part of 2014. Meanwhile, the euro fell to a nine-year low against the US currency by the start of 2015. The broad US dollar strength, combined with weaker metals and minerals prices, also put downward pressure on commodity-dependent currencies such as the Australian and Canadian dollars, both of which depreciated by around eight per cent in the course of 2014. Unlike foreign exchange, the US bond market was resilient to the anticipated shift in monetary policy last year. This could reflect concerns that even as developed economies finally emerge from post-GFC adjustment, they might only return to a growth trajectory that is lower than that of the early-2000s.

Drivers of commodity prices

Long-term structural economic trends are important drivers of future commodity prices through their effects on commodity demand. The economic development and urbanisation of emerging countries goes through an initial investment-led growth phase, which is particularly commodity-intensive. This benefits commodities such as steel and copper used in construction and infrastructure. As economies evolve, other commodities such as light metals, energy products and industrial minerals tend to take over as the main enablers of consumption-led growth models.

While the macroeconomic environment provides a common demand context, supply-side factors can result in stark structural differences between commodities. In principle, commodity prices will tend to have a relationship with the cost of developing and extracting metal and mineral resources. However the exact nature of that relationship depends on barriers to entry and exit, which are specific to each sector and evolve over time.

The long-term nature of mining investment, combined with high capitalintensity and long project lead-times, tends to result in cyclical investment patterns in the industry as a whole, which also translates into cyclical commodity prices.

Across many commodity sectors, the general supply trends in recent years have pointed towards fewer discoveries, falling ore grades and maturing existing operations as well as greater complexity of projects. In a context of accelerating demand from China, a period of higher prices and margins was required to incentivise the necessary supply-side response. With supply finally catching up with demand for most commodities, focus has naturally switched towards managing margin compressions and extracting productivity gains from recent investment instead of committing significant capital into new projects.

Commodity markets

The subdued global macro environment combined with strong supply resulted in significant downturns for most commodity prices in 2014 and into 2015.

Prices for iron ore, which had been one of the most resilient commodities in 2013, were down 30 per cent on average year-on-year in 2014. The addition of seaborne iron ore capacity exceeded demand growth, tipping the markets into oversupply. Pressured by falling prices, about 125 million tonnes of high cost production from China and non-traditional seaborne suppliers exited the market in 2014. The continued ramp-up of committed supply is expected to once again exceed the growth in iron ore demand in 2015. However, with further exits of high-cost producers anticipated, the market will be more in balance.

Thermal and metallurgical coal had already experienced large price falls in 2013 and continued on a declining trend in 2014, reaching five- and sevenyear lows respectively. Production has been slow to react to the new price environment, in particular in China where State Owned Enterprises account for a large share of output, which, combined with further cost reductions across the industry, led to lower prices.

Aluminium was one of the few commodities to see an increase in prices in 2014 when considering rising regional premiums. A combination of continued stock financing and more disciplined supply contributed to the improved market environment. Indonesia's bauxite ore export ban remained in place throughout 2014, resulting in higher Chinese demand for alumina and bauxite from alternative sources. Lower bauxite inventories in China should support imports of Australian bauxite into China in 2015.

In copper, despite the stronger ramp-up in new mine supply, low reported inventories moderated the price decline in 2014. Concerns over near-term demand have weighed more heavily on copper prices so far in 2015.

Titanium dioxide prices remained under pressure in 2014 as inventories continued to be absorbed.

Outlook

Economic growth is likely to remain modest and only mildly supportive for commodity demand in the near term. The start of 2015 suggests it will be a challenging year with continued industry-wide margin compression. The falls in oil prices and applicable exchange rates will provide some relief for miners, but could also delay the exit of higher cost producers. It is therefore likely that the industry will continue to put strong controls over capital budgets and further focus on productivity, costs and margins.

Although the outlook for our operating environment remains tough, Rio Tinto is positioned to perform better than many competitors in challenging conditions. Our strong balance sheet and world-class portfolio are competitive advantages that equip us to generate sustainable returns through the cycle.

Group strategy

External pressures continue

The mining industry is cyclical. Following a decade-long growth phase, it has now firmly entered a period of lower prices, driven by a subdued global macro environment combined with strong supply. We expect the current phase of margin compression to continue as previously committed supply enters our markets and the key drivers of demand growth taper off. Meanwhile, volatility – a feature of the macroeconomic environment since the global financial crisis – is expected to continue, bringing with it further short-term risk.

Our response to this has been to continue to focus on productivity, cost reductions and capital discipline – squeezing maximum returns out of our existing businesses while ensuring only the best growth projects attract capital. Others in the sector have embarked upon similar paths. Inefficiencies are being exposed, and so reductions in costs and capital expenditure, productivity improvements, and project deferrals and cancellations have become widespread across the mining industry.

Despite the uncertain conditions that we currently face, the long-term outlook for our sector remains positive. These factors drive demand for the minerals and metals we produce, as essential ingredients of modern life. They make our business a sustainable and valuable one to be in.

Consistent strategy underpinned by six value drivers

In today's challenging market conditions it is all the more important to have a clear and effective strategy. We remain convinced that our longstanding and consistent strategy is the right one: to invest in and operate long-life, low-cost, expandable operations in the most attractive industry sectors.

Sustainable shareholder returns

In 2014 we reaffirmed our commitment to deliver sustainable returns to shareholders. Six critical value drivers underpin this commitment, and combine to create a platform for our ongoing success.

1. World-class portfolio

At the heart of Rio Tinto is a portfolio of world-class assets – from our Pilbara iron ore business, to our Queensland bauxite ore reserves, hydro-powered aluminium smelters, our global suite of copper mines and sector-leading energy, diamonds and minerals assets. We use a clear strategic framework to assess our existing assets and new opportunities – taking into account the industry attractiveness and the competitive advantage of each asset, and its capacity to deliver best-in-class returns.

2. Quality growth

We have a compelling pipeline of near-term and longer dated projects across the portfolio. By reinforcing capital discipline and reshaping our projects, we have retained significant, high quality growth despite significantly reducing our capital expenditure. Our project pipeline has a compelling internal rate of return and is expected to deliver strong compound annual growth.

3. Operating and commercial excellence

The safety of our people is core to everything we do, and we remain at the forefront of the industry in safety performance. A well-run operation is a safe operation.

We have established a leading position in the development and use of technology and innovation – allowing us to increase productivity and reduce risk. As the industry faces increasingly complex geological, environmental and cost pressures, our technology advantage will be an increasingly important value driver.

Our commercial activities aim to ensure we reap the maximum value from each of our businesses. Our marketing teams work hand-in-hand with our operations, so that our resource management is fully aligned to the market.

Over the years we have leveraged our understanding of customer needs to create new markets for our products, including high temperature Weipa bauxite, and champagne and pink diamonds. We deploy industry-leading capabilities in supply chain optimisation and a variety of logistics solutions across the Group – and have in-house centres of excellence for value-in-use analysis, pricing and contracting strategies. Together, these activities allow us to manage risk and capture value in all market conditions.

4. Balance sheet strength

In a cyclical and capital intensive industry such as mining, a strong balance sheet is essential in order to preserve optionality and generate shareholder wealth at all points in the cycle. We target a net gearing ratio of 20 to 30 per cent in order to maintain our robust balance sheet – and aim to stay at the lower end of this range at the current point in the cycle. This positions us favourably to withstand current industry pressures, protect shareholders and seize on any opportunities these market conditions create.

5. Capital allocation discipline

We have a consistent and disciplined approach to capital allocation. Our first allocation is to essential sustaining capital for our operations. Next, we fund our primary contract with our shareholders – the progressive dividend. Finally, we assess the best use of the remaining capital between alternatives of compelling growth, debt reduction and further cash returns to shareholders. At each stage, we apply stringent governance and assessment criteria as we seek to maximise return on every dollar spent.

6. Free cash flow generation

Over recent years we have made improvements to our business – increasing our productivity, reducing operating and capital costs and delivering incremental volume expansions from high quality projects. Together with the quality of our asset base, these actions enhance our capacity to generate free cash flows, and underpin our confidence in our ability to deliver sustainable returns to shareholders.

Progress against strategy

What we said we would do in 2014	What we did
World-class portfolio
Continue reshaping our portfolio	Announced or completed asset sales of US\$3.9 billion since 2013 (see page 19)
Curtail the Gove alumina refinery during the first half of 2014	Production at Gove curtailed in May 2014 (see pages 28 to 29)
Keep sustaining capital expenditure at 2013 levels of around US\$3 billion	Reduced sustaining capital expenditure to US\$2.7 billion (see page 13)
Quality growth
Reduce total capital expenditure to less than US\$11 billion in 2014 and to around US\$8 billion in 2015, while delivering steady growth	Reduced capital expenditure from US\$13.0 billion in 2013 to US\$8.2 billion, completing two major projects which enabled us to bring on significant new volumes (see page 18)
Continue to progress key evaluation projects at a pace that matches our overall view of investment priorities	Progressed studies at South of Embley (bauxite), La Granja and Resolution (copper), Zulti South (titanium dioxide), Mount Pleasant (thermal coal) and Ranger 3 Deeps (uranium) (see pages 28 to 37)
Ramp up the Pilbara operations to reach an annual production rate of 290 Mt/a before the end of the first half of 2014	Annual production rate of 290 Mt/a from the Pilbara reached in May 2014, two months ahead of schedule.
Increase Pilbara mine production capacity by 60 Mt/a between 2014 and 2017, by focusing predominately on brownfield expansions and low-cost productivity gains	40 Mt/a of low-cost, brownfield growth in implementation. Investment decision on Silvergrass mine not required in 2015. (see pages 36 to 37)
Continue to discuss the pathway forward for Oyu Tolgoi underground expansion with the Government of Mongolia	Continued discussions with the Government of Mongolia over the development pathway. Finalised underground feasibility study and technical report (see pages 30 to 31)
Operating and commercial excellence
Target, above all, the elimination of workplace fatalities	Regrettably, our Group had two fatalities at our managed operations during 2014 (see page 22)
Achieve year-on-year improvement in AIFR and lost time injuries	Our all injury frequency rate (AIFR) improved from 0.65 per 200,000 hours worked in 2013 to 0.59 in 2014 (see page 22)
Improve how we manage critical risks and learn from serious potential accidents	Updated our safety strategy to confirm our focus on injury reduction and strengthen our emphasis on fatality elimination and catastrophic event prevention (see page 22)
Deliver further savings to reach US\$3 billion full-year improvement in 2014 versus 2012 in operating cash costs	Achieved a further US\$1.3 billion of operating unit cash cost improvements in 2014, delivering total operating cash cost savings of US\$3.6 billion versus 2012 (see page 40)
Maintain the reduced exploration and evaluation spend achieved in 2013	Reduced exploration and evaluation spend by a further US\$0.2 billion (see page 38)
Increase sales volumes at Oyu Tolgoi	Increased mined copper and gold production at Oyu Tolgoi by 94% and 275% respectively compared with 2013, with copper sales increasing seven-fold (see pages 30 to 31)

Group strategy continued

What we said we would do in 2014	What we did
Balance sheet strength
Pay down debt to a more sustainable level	Reduced net debt from US\$22.1 billion in June 2013 to US\$12.5 billion at 31 December 2014. The gearing ratio at the end of 2014 was 18.6%, compared with 25.2% at the end of 2013 (see page 13)
Capital allocation discipline
Continue to apply our enhanced capital allocation systems and controls	Maintained "cash generation offices" to strengthen the focus on cash and improve visibility for senior managers in this area Continued to reinforce Investment Committee approvals process (see pages 18 to 19)
Allocate capital in the following order of priority: essential sustaining capital expenditure; progressive dividends; iterative cycle of compelling growth, debt reduction, and further cash returns to shareholders	Disciplined capital allocation framework adhered to, resulting in: sustaining capital of US\$2.7 billion, progressive dividend of US\$3.7 billion, compelling growth of US\$5.5 billion and net debt reduction of US\$5.6 billion (see pages 18 to 19)
Free cash flow generation
Reduce working capital	Released US\$1.5 billion of working capital (see page 1)
Materially increase returns to shareholders	Increased our progressive dividend by 12 per cent and announced on 12 February 2015 a share buy-back of US\$2.0 billion (a combined increase of 64 per cent compared with 2013) (see pages 18 to 19)

Our 2015 strategic priorities

We will continue to focus on our critical value drivers in 2015, in order to meet our commitment to deliver sustainable returns to shareholders.

As always, we will maintain our relentless focus on safety, as measured by both the elimination of fatalities and minimising all injury frequency rates and lost time injuries.

We will continue to shape our world-class portfolio – ensuring that we focus on only the highest returning assets in our preferred industry sectors, and that our capital is deployed in the most efficient way.

We will further enhance our portfolio as we complete a number of key growth projects, including the infrastructure for our 360 Mt/a iron ore expansion and our new Kitimat smelter. Beyond this, we will progress our South of Embley bauxite project and will continue our work on creating the conditions necessary to further advance the underground expansion of Oyu Tolgoi. Importantly, we will deliver measured, value-adding growth while reducing our capital expenditure to less than US\$7.0 billion in 2015.

Our strong focus on costs will continue in 2015, as we target further operating cash cost savings of US\$750 million and continue to optimise our working capital. We will further leverage our strength in technology and innovation, and our leading commercial capabilities, to ensure we remain the supplier of choice to our customers and maximise the cash generated from every business.

Maintaining our balance sheet strength will remain a core priority. We aim to maintain our gearing ratio at the low end of the 20 per cent to 30 per cent range.

Business model

How we create value

Rio Tinto owns a portfolio of world-class assets, the result of investment decisions made in line with our longstanding strategy. The way we find, develop and operate these assets; the way we market the minerals and metals we produce; and the legacy we leave at the end of these assets' lives enables us to create value and deliver sustainable shareholder returns.

Through productivity improvements, cost reductions and prudent growth we preserve and enhance value from our portfolio. We commit to finding ever safer, smarter and more sustainable ways to run our businesses, and our competitive advantages – which spring from a combination of our assets, our people, our capabilities and our values – keep us strong throughout the cycle.

Explore and evaluate

Our experienced in-house exploration team has a proven track record of discovering Tier 1 orebodies: the highest-value deposits that are profitable throughout the commodity cycle. We maximise opportunities by exploring for and evaluating deposits in new geographies and in our preferred commodities. We also explore the orbits of our current operations, like Weipa in Australia or Bingham Canyon in the US, which sustains the value of our existing businesses. So that we can keep our focus on targets that are important to Rio Tinto, we operate the majority of exploration programmes ourselves, rather than outsourcing. We will, however, partner with others if it gives us access to attractive opportunities, or skills, that we do not possess in-house, and which support the quality of our exploration pipeline.

Our orebody knowledge allows us to find value-enhancing ways of developing our resources and positioning our products in the marketplace, and helps support the Group's investment decision-making. Our geological expertise gives us the confidence to keep hunting for the most elusive discoveries. And we have a strong tradition of developing and applying innovative technologies to resolve specific exploration challenges.

Develop

We develop orebodies for long-term value delivery. We have strengthened our investment assessment criteria, our levels of independent review of opportunities and our investment approval processes. We approve investment only in opportunities that, after prudent assessment, offer attractive returns that are well above our cost of capital.

During the development phase, we plan the most efficient configuration for mining the orebody and for getting the products to market. We work closely with our customers, to create demand for the optimal suite of products, thus maximising value over the deposit's lifetime. Once the value of the resource is confirmed, and internal and external approvals are received, the project moves into implementation and construction. We aim to deliver projects on time and on budget – such as reaching our targeted 290 Mt/a annual production rate from the Pilbara iron ore operations in May 2014, two months ahead of schedule.

Mine and process

We create value by safely and efficiently operating assets that fit with our strategy. By focusing on operating excellence we will sustain our low-cost leadership position and drive our operations even further down the cost curve.

Our global operating model allows us to implement standard processes and systems across the Group, for instance in procurement, operations and maintenance. This increases the life of our equipment and optimises the extraction of ore. In turn, we enjoy higher production and reduced costs, and we maximise value.

Our commitment to technology and innovation sets us apart from our peers and allows us to take advantage of opportunities that may not be available to others. Our world-class technologies bring us ongoing productivity benefits, and help us tailor our products to our customers' needs. Through our network of partnerships with academia, technology suppliers and other experts, we gain access to knowledge and technical prowess that augment our own capabilities.

Market and deliver

Supplying high-quality products, which have been developed to meet our customers' needs, is the basis of our business. Our diverse portfolio of metals and minerals allows us to respond to demand across the development cycle: we supply basic raw materials and refined products that are the building blocks of added-value goods. Most of our customers are industrial companies that process our products further and supply numerous sectors – including construction and infrastructure, automotive, machinery, energy and consumer goods.

Our marketing teams work closely with our operations, so that our resource management is fully aligned to the market, and we innovate and improve our products and services to maximise value to customers.

We are constantly adding to our knowledge of our markets and our customers' requirements, allowing us to improve our investment decisions. In many cases, we are responsible for delivering product to our customers, and do so efficiently, reliably and cost-effectively. We have capabilities across a variety of logistics solutions, including our own networks of rail, ports and ships.

Close down and rehabilitate

We integrate closure planning throughout an asset's life cycle, from the earliest stages of project development, and aim to progressively rehabilitate as much land as possible before closure. When a resource reaches the end of its life, we seek sustainable and beneficial future land uses, to minimise financial, social and environmental impact. We work together with our stakeholders to identify post-closure options that take into account their concerns and their priorities for the use of the land. By partnering with external conservation organisations, we access expertise that helps us improve our rehabilitation performance. Our approach helps us to maintain a positive reputation and uphold our licence to operate.

Read more about how we embed sustainability throughout our business on pages 20 to 26.

Delivering value for our stakeholders

Rio Tinto's primary focus is on the delivery of value for our shareholders. We balance disciplined investment with prudent management of our balance sheet and cash returns to shareholders. We offer a long-term investment opportunity, and commit to sustainable growth in returns to shareholders through our progressive dividend policy. As we work, fixed on this core aim, our activities also give us the opportunity to create value for our other stakeholders, in a variety of ways.

Customers

We supply our customers with the right products at the right time. They then add further value, by turning them into the end products that society needs to make modern life work.

Communities

Our operations create employment and career development opportunities for our local communities, as well as business opportunities for local suppliers. Communities often benefit from the infrastructure we put in place to serve our facilities and, once our operations are closed, we restore the sites – often for community use, new industry, or back to native vegetation.

Our people

We invest in our people throughout their careers, offering diverse employment prospects, opportunities for development, and competitive rewards and benefits that have a clear link to performance.

Governments

We are often a major economic contributor to the local, state and national jurisdictions in which we operate. Our tax and sovereign equity contributions enable governments to develop and maintain public works, services and institutions. We work together to facilitate growth of diverse and sustainable economies that endure far beyond the active life of our operations.

Suppliers

By seeking a balance of global, national and local supply capability, and supporting local supplier development, we drive value for our shareholders and deliver economic benefits for the communities in which we operate.

Key performance indicators

Our key performance indicators (KPIs) enable us to measure our financial and sustainable development performance. Their relevance to our strategy and our performance against these measures in 2014 are explained below.

Some KPIs are used as a measure in the long-term incentive arrangements for the remuneration of executives. These are identified with this symbol:

KPI trend data

The Group's performance against each KPI is covered in more detail in later sections of this Annual report. Explanations of the actions taken by management to maintain and improve performance against each KPI support the data.

See the Remuneration Report on page 64

Indicator

All injury frequency rate (AIFR) Per 200,000 hours worked

Underlying earnings(a) (b) US\$ millions

Net cash generated from operating activities(a) US\$ millions

Relevance to strategy

The safety of our people is core to everything we do. Our goal is zero harm, including, above all, the elimination of workplace fatalities. We are committed to reinforcing our strong safety culture, and improving safety leadership.

This is the key financial performance indicator used across the Group. It gives insight to cost management, production growth and performance efficiency. We are focused on reducing our costs and increasing productivity to improve earnings and deliver sustainable returns to shareholders.

Net cash generated from operating activities is a complementary measure demonstrating conversion of underlying earnings to cash. It provides additional insight to how we are managing costs and increasing efficiency and productivity across the business in order to deliver increased returns.

Our AIFR has improved by 14 per cent over the last five years. We improved our AIFR by nine per cent from 2013. However, we did not meet our goal of zero fatalities and two people died while working at Rio Tinto managed operations in 2014.

Underlying earnings have decreased by US\$912 million compared with 2013. This reflects strong volumes (primarily in iron ore), favourable exchange rates, operating cash cost improvements and reductions in exploration and evaluation expenditure, which largely offset the unfavourable effect of price movements on major commodities.

Net cash generated from operating activities of US\$14,286 million, which include US\$298 million of dividends from equity accounted units, are five per cent lower than in 2013, primarily as a result of lower prices which were partially offset by higher volumes, cash cost improvements and favourable movements in working capital.

Notes

• (a) The accounting information in these charts is drawn up in accordance with IFRS.
• (b) Underlying earnings is the key financial performance indicator which management uses internally to assess performance. It is presented here as a measure of earnings to provide greater understanding of the underlying business performance of the Group's operations. Items excluded from net earnings to arrive at underlying earnings are explained in note 2 to the 2014 financial statements. Both net earnings and underlying earnings deal with amounts attributable to the owners of Rio Tinto. However, IFRS requires that the profit for the year reported in the income statement should also include earnings attributable to non-controlling interests in subsidiaries.

Definition

AIFR is calculated based on the number of injuries per 200,000 hours worked. This includes medical treatment cases, and restricted work-day and lost-day injuries for employees and contractors.

Items excluded from net earnings to arrive at underlying earnings are explained in note 2 to the 2014 financial statements.

Net cash generated from operating activities represents the cash generated by the Group's consolidated operations, after payment of interest, taxes, and dividends to noncontrolling interests in subsidiaries.

More information

Total shareholder return (TSR) %

Net debt(a) US\$ millions Capital expenditure(a) US\$ millions

Greenhouse gas (GHG) emissions intensity

Indexed relative to 2008 (2008 being equivalent to 100)

The aim of our strategy is to maximise total shareholder return over the long term. This KPI measures performance in terms of shareholder wealth generation. We also monitor our relative TSR performance against peers.

Net debt is a measure of how we are managing our balance sheet and capital structure. A strong balance sheet is essential for withstanding external pressures and seizing opportunities through the cycle. We constantly evaluate and balance the alternative uses for our cash between disciplined investment, strengthening our balance sheet, and returning cash to investors.

We adopt a consistent approach to capital allocation. We are committed to a disciplined and rigorous investment process – investing capital only in assets that, after prudent assessment, offer attractive returns that are well above our cost of capital.

Our GHG performance is an important indicator of our commitment and ability to manage exposure to future climate policy and legislative costs, and is closely linked to our energy use and cost. We are focusing on reducing the energy intensity of our operations as well as the carbon intensity of our energy, including through the development and implementation of innovative technologies.

Rio Tinto's TSR performance over the five-year period from 2010 to 2014 was characterised by continued nervousness in global equity markets. Total dividends paid in calendar year 2014 were 204.5 US cents per share, a 15 per cent increase on 2013. The subdued global macro environment coupled with a strong supply response caused prices for many of our commodities to decrease, which, in turn, pushed the Rio Tinto plc and Rio Tinto Limited share prices lower in 2014. These factors resulted in the Rio Tinto Group registering a TSR of - 9.7 per cent in 2014.

Net debt decreased from US\$18,055 million at 31 December 2013 to US\$12,495 million at 31 December 2014 due to operating cash inflows from divestment proceeds and the Turquoise Hill rights offering far exceeding outflows relating to capital expenditure and the increased dividend payment.

Capital expenditure declined by US\$4,839 million or 37 per cent to US\$8,162 million in 2014, following the completion of five major capital projects in 2013 (Pilbara iron ore infrastructure expansion to 290 Mt/a, Oyu Tolgoi copper/gold mine, AP60 aluminium smelter, Kestrel coking coal mine and Argyle underground diamond mine).

We have reduced our total GHG emissions intensity by 18 per cent between 2008 and 2014. This is largely a result of the aluminium smelter divestments (Ningxia in 2009, Sebree and Saint Jean in 2013), closure of the Lynemouth smelter in 2012, commissioning of our low intensity AP60 smelter in late 2013 and improved measurement methodology for coal seam gas at our Australian coal mines.

TSR combines share price appreciation and dividends paid to show the total return to the shareholder.

Net debt is calculated as: the net borrowings after adjusting for amounts due to equity accounted units originally funded by Rio Tinto, cash and cash equivalents, other liquid resources and derivatives related to net debt. This is further explained in note 24 "Consolidated net debt" to the 2014 financial statements.

Capital expenditure comprises the cash outflow on purchases of property, plant and equipment, and intangible assets.

Our GHG emissions intensity measure is the change in total GHG emissions per unit of commodity production relative to a base year. Total GHG emissions are direct emissions, plus emissions from imports of electricity and steam, minus electricity and steam exports and net carbon credits purchased from, or sold to, recognised sources.

Principal risks and uncertainties

The focus on the six value drivers articulated on pages 8 to 10 has been accompanied by a significant review of the principal risks and uncertainties the business faces.

Overview of Rio Tinto's risk management framework

Our risk management framework recognises that managing risk effectively is an integral part of how we create value, and fundamental to our business success. The responsibility for identifying and managing risks lies with all of Rio Tinto's managers and business leaders. They operate within the Group-wide framework to ensure that risks are managed within agreed thresholds. The framework, underpinned by Rio Tinto's Risk policy and standard, includes clearlydefined oversight responsibilities for the board of directors and the Executive Committee, supported by the Risk Management Committee. It also outlines the roles played by central support functions, by Group Risk, and by Group Audit & Assurance to support effective risk analysis and management across Rio Tinto.

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

• First line of defence: ownership of risk by the operations.
• Second line of defence: control of risk by Group functions and management committees.
• Third line of defence: assurance of our systems by Group Audit & Assurance.

More information on the Group's approach to risk management can be found in the corporate governance section on page 62.

Board of directors and board committees Provides oversight across the risk management process, confirms that management's risk thresholds reflect the level of risk the board is willing to accept in pursuit of strategic objectives and monitors Group-level risks

Executive Committee Responsible for risk strategy and accepting risks inherent in key investments and in strategic, business or annual plans

Risk Management Committee Responsible for ensuring that significant risks to Group-level objectives are identified and for ensuring the risk management process is effective

Business risk owners Managers across the business are accountable and responsible for effective risk identification

and management

Group Risk Responsible for maintaining appropriate risk policy and standard, providing co-ordination and support of Group-level risk management activity and risk reporting

Central support functions Provide targeted expertise and support to risk owners, develop and maintain risk specific controls to ensure effective management of material Group-level risk within agreed thresholds

Group Audit & Assurance Responsible for providing reasonable assurance that the systems for internal control are adequate and effective

Risk factors

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. Principal risks and uncertainties are those that the Risk Management Committee, business unit or function determine to have potential material consequences at a Group level. They also include factors that may trigger a succession of events that, in aggregate, become material to the Group. Once identified, each principal risk or uncertainty is reviewed by the relevant internal experts and by the Risk Management Committee.

Pages 15 to 17 describe the currently-known principal risks and uncertainties that could materially affect Rio Tinto or its ability to meet its strategic objectives. 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. The risk factors outlined do not include the management detail on how each is managed and mitigated, or the controls established to decrease the likelihood or impact of these risks occurring. This is discussed in more detail on page 62.

Risks may materialise individually, simultaneously or in combination and could significantly affect the Group's:

• short, medium and long-term business and prospects;
• earnings, cash flow and financial position;
• overall financial results and product demand;
• current asset values;
• future asset values and growth potential;
• safety record and the long, medium and short-term health of its employees;
• environmental and social impact on neighbouring communities;
• social licence to operate; or
• Group or business unit reputation.

The principal risks and uncertainties should be considered in connection with any forward-looking statements in this document and the cautionary statement on the inside front cover.

External risks

Factor	Nature
Commodity prices and global demand for the Group's products are expected to remain uncertain	Commodity prices and demand are volatile and strongly influenced by fluctuating world economic conditions. The Group's policy is to sell its products at prices that reflect the value of our products in the market and not to enter into price hedging arrangements.
Past strong demand for the Group's products in China could be affected by future developments in that country	The Group is highly exposed to the Chinese market. China's demand for any of the Group's products, and iron ore in particular, could be substantially affected by: – an economic slowdown in China; – financial or banking market conditions impacting investment; – an accelerated shift from infrastructure-led to service-oriented growth; or – a material change in energy policy. Any or all of these may adversely affect the Group's profitability and cash position.
Rio Tinto is exposed to fluctuations in exchange rates	The vast majority of the Group's sales are denominated in US dollars, which is also the currency used for holding surplus cash, financing operations, and presenting external and internal results. Although many costs are incurred in US dollars, a significant portion are incurred in, or influenced by, the local currencies of the countries where the Group operates, principally the Australian dollar and Canadian dollar. The Group's normal policy is not to hedge foreign exchange rates and so the Group may be adversely affected by appreciation in the value of other currencies against the US dollar, or to prolonged periods of exchange rate volatility. Currency fluctuations may negatively impact the Group's profitability and dividend payments as well as rating agency metrics and asset carrying values.
Political, legal and commercial changes in the places where the Group operates	The Group operates across a large number of jurisdictions, resulting in exposure to a broad spectrum of economies, political and legal frameworks and societal norms. Each jurisdiction poses unique complexities and challenges that in turn impose risks on the value chain, from new business development through to closure and rehabilitation, and on asset carrying values. These can include: – difficulty in obtaining agreements, leases or permits for new activities; – renegotiation, unilateral variation or nullification of existing agreements, leases and permits; – changes in government ownership levels in Group businesses; – changes in taxation rates, regimes or international tax agreements; – currency and foreign investment restrictions; – limitations to power, water, energy and infrastructure access; and – general increases in regulation and compliance requirements. Jurisdiction-specific behaviour or circumstance may also present uncertainties to our operating environment: unclear land title and rights to land and resources (including Indigenous title); political and administrative change, policy reform, and changes in law or government regulation; an inherent culture of bribery and corruption; violent criminal or sectarian tensions. Any such jurisdictional instability or legislative uncertainty that impacts the Group's operations may result in increased costs, curtail or negatively impact existing operations and/or prevent the Group from making future investments.
Community disputes in the countries and territories in which the Group operates	Some of the Group's current and potential operations are located in or near communities that may regard these operations as being detrimental to them. Community expectations are typically complex, with the potential for multiple inconsistent stakeholder views that may be difficult to resolve. Stakeholder opinion and community acceptance can be subject to many influences, for example, related industries, operations of other groups, or local, regional or national events in any of the places where we operate. These disputes can disrupt our operations and may increase our costs, thereby potentially impacting our revenue and profitability. In the extreme, our operations may be a focus for civil unrest or criminal activity, which can impact our operational and financial performance, as well as our reputation.
Increased regulation of greenhouse gas emissions could adversely affect the Group's cost of operations	Rio Tinto's operations are energy-intensive and depend on fossil fuels. In numerous jurisdictions, there is increasing regulation of greenhouse gas emissions, tighter emission reduction targets and progressive introduction of carbon pricing mechanisms. These may raise worldwide energy, production and transport costs over the medium to long term, which may increase the Group's cost base and potentially negatively impact the Group's profitability.
Regulations, standards and stakeholder expectations regarding health, safety, environment and community evolve over time and unforeseen changes could have an adverse effect on the Group's social licence to operate, business viability and reputation	The resources sector is subject to extensive health, safety and environmental laws, regulations and standards alongside community and stakeholder expectations. Evolving regulation, standards and stakeholder expectations could result in increased costs, regulatory action, litigation or, in extreme cases, threaten the viability of an operation.

Principal risks and uncertainties continued

Strategic risks

Factor	Nature
The Group's exploration and development of new projects might be unsuccessful	Rio Tinto identifies new orebodies and mining properties through its exploration programme, and develops or expands other operations as a means of generating shareholder value. Exploration is not always successful and there is a high degree of competition for world-class orebodies. The Group may also not be able to source or maintain adequate financing, or may be unable to find willing and suitable joint venture partners to share the cost of developing large projects. Furthermore, project execution may not proceed as planned and project budgets and schedules may prove inaccurate, all of which may negatively impact the Group's profitability and the mineral resources from which future cash flows should come.
Rio Tinto may fail to successfully execute divestments and acquisitions	Potential acquisitions may not succeed and the Group may not be able to successfully divest assets it wishes to sell, resulting in unforeseen pressure on the Group's cash position or reducing the Group's ability to expand operations as a means of generating shareholder value. All business combinations or acquisitions entail a number of risks, including the cost of effectively integrating acquisitions to realise synergies, significant write-offs or restructuring charges, and unanticipated costs and liabilities. The Group may also be liable for the past acts, omissions or liabilities it has acquired that were unforeseen or greater than anticipated. The Group may also face liabilities for divested entities if the buyer fails to honour all commitments or the Group agrees to retain certain liabilities.
Large outsourcing programmes may result in exposure to third party failure, or loss of intellectual property	The Group is implementing business transformation programmes to increase efficiency. These include outsourcing and off shoring elements of important business support delivery as well as increasing procurement of goods and services from emerging market suppliers. The Group may be exposed to business continuity failure impacting financial performance, loss of intellectual property or data, data privacy violations and/or reputational damage as a result of third-party failure or actions.

Financial risks

Factor	Nature
The Group's reported results could be adversely affected by the impairment of assets including goodwill	The Group may be required to record impairment charges as a result of adverse developments in the recoverable values of its assets (including goodwill). Significant assumptions in the determination of recoverable value include, but are not limited to: pricing of the Group's commodities and products, reserves and resources, infrastructure availability, discount and foreign currency exchange rates, operating and development cost projections, and the timing of expenditure and revenues related to major projects. In addition, the occurrence of unexpected events, or events beyond the Group's control that adversely impact its business, may have an impact on the assumptions underlying the recoverable value of its assets. The foregoing items are not exhaustive and impairments may be caused by factors currently unknown to the Group. To the extent that the recoverable value of an asset is impaired, such impairment will negatively impact the Group's profitability during the relevant period.
Discount rates used in	Discount rates are utilised to determine provisions for costs of known future obligations (such as close-down and
determining provisions and	remediation) as well as valuing assets for impairment testing and capital allocation purposes. Discount rates may vary over
asset valuations may change,	time as underlying assumptions change. These assumptions include observable long term government bond yields, market
causing changes to provisions,	risk premiums, and other situational changes (such as change in political stability in a particular jurisdiction).
asset carrying values and	Changes to the discount rate may impact the size of provisions recognised, lead to changes in the carrying value of assets, or
capital allocation	alter the capital allocated to various projects.
The Group's liquidity and cash flow expectations may not be realised, inhibiting planned expenditure	Both the Group's ability to fund planned expenditure such as capital growth, mergers and acquisitions, innovation and other objectives or obligations as well as the ability to weather a major economic downturn could be compromised by inadequate access to sufficient liquidity, including external financing sources such as bank financing or capital markets.
Failure to reduce costs may	Failure to reduce costs may have an adverse impact on our operating margins and the viability of our capital
result in reduced margins	expansion projects.

Operational risks

Factor	Nature
Estimates of ore reserves are based on uncertain assumptions that, if changed, could result in the need to restate ore reserves	There are numerous uncertainties inherent in estimating ore reserves, including subjective judgments and determinations that are based on available geological, technical, contract and economic information. Previously valid assumptions may change significantly with new information, which may result in changes to the economic viability of some ore reserves and the need for them to be restated. In addition, volatility in commodity prices can result in substantial adjustments in the Group's recognition of ore reserves.
Labour disputes could lead to lost production and/or increased costs	Some of the Group's employees, including employees in non-managed operations, are represented by labour unions under various collective labour agreements. The Group may not be able to renegotiate agreements satisfactorily when they expire and may face difficult negotiations, higher wage demands or industrial action. In addition, labour agreements may not prevent a strike or work stoppage and labour disputes may arise even in circumstances where the Group's employees are not represented by labour unions.

Factor	Nature
Some of the Group's technologies are unproven and failures could adversely impact costs and/or productivity	The Group has invested in and implemented new technologies both in information systems and in operational initiatives, some of which are unproven and their eventual viability cannot be assessed with certainty. The actual benefits of these technologies may differ materially from expectations.
The Group may be exposed to major failures in the supply chain for specialist services, equipment and materials	Rio Tinto operates within a complex supply chain depending on suppliers of materials, services, equipment, and infrastructure, and on providers of logistics. Supply chain failures, or significantly increased costs within the supply chain, for whatever reason, could have an adverse effect on the Group's business.
Joint ventures, strategic partnerships or non-managed operations may not be successful and may not comply with the Group's standards	The Group participates in several joint venture and partnership arrangements, and it may enter into others, all of which involve risk. Whether or not the Group holds majority interests or maintains operational control in its joint ventures, its partners may: – have economic or business interests or goals that are inconsistent with, or opposed to, those of the Group; – exercise veto rights to block actions that the Group believes are in its or the joint venture's best interests; or – be unable or unwilling to fulfil their obligations under the joint venture or other agreements, such as contributing capital to expansion or maintenance projects. Where these joint ventures are controlled and managed by others, the Group may provide expertise and advice but has
	limited control over compliance with its standards and objectives. Controlling partners may take action contrary to the Group's interests or policies, resulting in adverse impact to the Group's operations, financial performance, legal liability or reputation.
The Group's operations are vulnerable to a range of interruptions, not all of which are covered fully by insurance	1. Natural disasters and events Mining, smelting, refining and infrastructure installations are vulnerable to natural events including earthquakes, subsidence, drought, flood, fire, storm and climate change. 2. Sustained operational difficulties Operating difficulties are many and various, ranging from geological variations that could result in significant ground or containment failure to breakdown of key capital equipment. Reliable roads, rail networks, ports, power generation and transmission, and water supplies are required to access and conduct our operations and deliver product to market. Limitations, delayed development, bottlenecks or interruptions in infrastructure, including as a result of third parties gaining access to our integrated facilities, could impede our ability to deliver products. 3. Information technology and cyber security The Group relies heavily on information technology and process control systems to support our business. In common with most large global companies, the Group has experienced cyber attacks and is faced with ongoing threats to the confidentiality, integrity and availability of such systems. An extended failure of critical system components, caused by accidental or malicious actions, including those resulting from a cyber security attack, could result in a significant environmental, health or safety incident, commercial loss or interruption to operations. 4. Major operational failure The Group's operations involve chemicals and other substances stored under high temperature and pressure, with the potential for fire, explosion or other loss of control of the process, leading to a release of hazardous materials. This could occur by accident, systems failure or a breach of operating standards, and could result in a significant environmental, health or safety incident. 5. Sustained pandemic The Group has exploration, development projects and operations in numerous countries and is reliant on effective global shipping/transportation movements to deliver product to markets. The sustained outbreak of a pandemic may result in health exposure to our workforce as well as the temporary closure of a site or access to shipping/transportation movements, adversely impacting financial performance. The Group's insurance does not cover every potential loss associated with its operations and adequate coverage at reasonable rates is not always obtainable. In addition, insurance provision may not fully cover its liability or the consequences of any business interruption. Any occurrence not fully covered by insurance could have an adverse effect on the Group's business.
The Group depends on the continued services of key personnel	The Group's ability to maintain its competitive position is dependent on the services of a wide range of highly-skilled and experienced personnel available in the locations where they are needed. Failure to recruit and retain key staff, and the inability to deploy staff worldwide, where they are most needed, could affect the Group's business. Similar constraints may be felt by the Group's key consultants, contractors and suppliers, thereby impacting the Group's operations, expansion plans or business more generally.
The Group's costs of close down, reclamation, and rehabilitation could be higher than expected	Close-down and reclamation works to return operating sites to the community can be extensive and costly. Estimated costs are provided for, and updated annually, over the life of each operation but the provisions might prove to be inadequate due to changes in legislation, standards and the emergence of new, or increases in the cost of, reclamation techniques. In addition, the expected timing of expenditure could change significantly due to changes in the business environment that might vary the life of an operation.

Capital allocation

The aim of Rio Tinto's capital allocation process is to invest in a sustainable way through the cycle, having consideration of shareholders' expectations of returns, and the robustness of our balance sheet. This is achieved through an evaluation and prioritisation of the Group's portfolio of investment opportunities over a number of years to determine what will be the best use of capital.

Key considerations in determining the best use of capital include the progressive dividend policy and the strength of the balance sheet. This, together with financial policies, existing capital commitments and net cash generated from operating activities forecasts set the boundaries for how much capital is available for investment.

In today's capital-constrained environment, only the highest-returning investments will be approved. The Group analyses each investment based on net present value but also considers a number of further factors, including internal rate of return, payback period and risk profile. This suite of ranking criteria, together with the application of strategic judgment, ensures that capital is deployed to the best opportunities.

Rio Tinto's capital expenditure reduced by 37 per cent to US\$8.2 billion in 2014, compared with the peak level in 2012 of US\$17.6 billion. It is expected to be reduced further to less than US\$7 billion in 2015 of which around US\$2.5 billion is expected to be sustaining capital. Rio Tinto funded its capital expenditure with net cash generated from operating activities in 2014 and aims to continue funding its capital programme from internal sources.

Major capital projects (>US\$1bn)

(Rio Tinto 100% owned unless otherwise stated)	Total approved capital cost (100%) US\$	Status/milestones
In production
Iron ore – expansion of the Pilbara mines, ports and railways from 237 Mt/a to 290 Mt/a. (Rio Tinto share US\$8.4bn).	\$9.8bn	The integrated mines, rail and ports reached a run-rate of 290 Mt/a in May 2014, two months ahead of schedule. The Nammuldi mine expansion was completed and is commencing production.
Ongoing and approved
Iron ore – expansion of the Pilbara port, rail and power supply capacity to 360 Mt/a. (Rio Tinto share, US\$3.5bn).	\$5.9bn	The phase two expansion to 360 Mt/a includes investment in the port, rail and power supply and investment in automation.
Iron ore – investment to extend the life of the Yandicoogina mine in the Pilbara to 2021.	\$1.7bn	The investment includes a wet processing plant to maintain product specification levels.
Aluminium – modernisation and expansion of Kitimat smelter in British Columbia, Canada to increase capacity from 280ktpa to 420ktpa.	\$4.8bn	First production from the modernisation is expected towards the end of the first half of 2015 with full capacity expected to be reached in the first half of 2016.
Copper – development of Organic Growth Project 1 (OGP1) at Escondida (Rio Tinto 30%), Chile.	\$1.3bn (Rio Tinto share)	Replacement of the Los Colorados concentrator with a 152kt per day plant, accessing higher-grade ore. Initial production is expected in the first half of 2015.
Copper – construction of a desalination facility to ensure continued water supply and sustain operations at Escondida (Rio Tinto 30%), Chile.	\$1.0bn (Rio Tinto share)	The project is designed to provide a sustainable supply of water for the new OGP1 copper concentrator. Commissioning is scheduled for 2017.

Cash returns to shareholders

The aim of Rio Tinto's progressive dividend policy is to maintain or increase the US dollar value of ordinary dividends per share. The rate of the total dividend, in US dollars per share, is determined annually, taking into account the results for the past year and the outlook. The interim dividend is set at one half of the total dividend per share for the previous year.

The full year dividend in respect of 2014 was increased by 12 per cent, to 215 US cents per share, reflecting the board's confidence in the business and its attractive prospects. This follows a 15 per cent increase in both the 2013 and 2012 full year dividends.

In February 2015, Rio Tinto announced a US\$2.0 billion share buy-back programme, comprising a targeted A\$500 million (c. US\$0.4 billion) off-market share buy-back tender of Rio Tinto Limited shares and the balance of approximately US\$1.6 billion for an on-market buy-back of Rio Tinto plc shares.

These represent a total cash return to shareholders, in respect of 2014, of almost US\$6.0 billion, an increase of approximately 64 per cent on 2013.

Divestments and acquisitions

Asset	Consideration US\$m	Status
Divested in 2014
Clermont Joint Venture	1,015(a)	Sold to GS Coal Pty Ltd.
Rio Tinto Coal Mozambique	50(a)	Sold to International Coal Ventures Private Limited (ICVL).
Søral	Undisclosed	Sold to Norsk Hydro.
Alucam	Undisclosed	Sold to the Government of Cameroon.
Divested in 2013
Northparkes mine	820	Sold to China Molybdenum Co. Ltd.
Constellium	671	Shares sold to general public.
Palabora Mining Company Limited	373	Sold to a consortium led by Industrial Development Corporation of South Africa and Hebei Iron & Steel Group.
Eagle nickel – copper project	315	Sold to Lundin Mining Corporation.
Altynalmas Gold	235	Sold to Sumeru Gold B.V.
Inova Resources Limited	81	Sold to Shanxi Donghui Coal Coking & Chemicals Group Co.
Sebree	48	Sold to Century Aluminum Co.
Divested in 2012
Alcan Cable	229	Sold to General Cable Corporation.
Specialty Alumina businesses	Undisclosed	Sold to H.I.G.
Lynemouth Power Station	Undisclosed	Sold to RWE.
Energy – Extract Resources Ltd/Kalahari Minerals plc	429	Equity investment sold to Taurus Mineral Limited.
Acquired in 2012
Copper – Turquoise Hill Resources Ltd. (formerly Ivanhoe Mines Limited)	307	Purchase of additional shares increasing the Group's holdings to 51 per cent.
Minerals – Richards Bay Mining Proprietary Limited	1,700	Acquisition of BHP Billiton Group's entire interests in Richards Bay Minerals, doubling the Group's holding to 74 per cent.

(a) Before working capital and completion adjustments.

There were no material acquisitions in 2014 or 2013.

Sustainable development

Rio Tinto's vision is to be a company that is admired and respected for delivering superior business value and for being the industry's trusted partner. To earn this trust we must continually find safer, smarter, more sustainable ways to run our business.

We are always looking for new answers to the complex global and local challenges we face, which include resource scarcity, climate change, community employment and regional economic development. We see these challenges as opportunities to advance our reputation and create value for our business, our shareholders and the people we are proud to work alongside. To achieve our sustainable development goals, we work hand-in-hand with our partners and communities on the ground, where it matters most.

The foundation is The way we work, our global code of business conduct. It contains the principles and standards of conduct which reaffirm our commitment to sustainable development, and operational excellence at our sites. All of our sites must meet a minimum set of performance standards for health, safety, environment, closure and community and social performance. These ensure we meet or go beyond our statutory and regulatory requirements. The standards are backed up by strong processes to assure management that we are performing to the right levels and establishing longer-term identification and management of risks.

We also measure ourselves against the performance of other companies in our sector as well as leaders in other industries. Over many years we have played a leading role in developing sustainable development standards in the mining and metals sector through organisations such as the International Council on Mining and Metals (ICMM), and national bodies, particularly in Australia. We look to learn from other sectors where leading companies' performance can inform us and help us improve.

Materiality

We use a materiality assessment to focus our report on the sustainable development issues that matter most. This tells us which issues are material to our stakeholders and to our business. We run this process annually as part of our corporate reporting cycle, to ensure that each year we provide the information that our stakeholders are looking for.

Current or potential impact on our business

Our process has been developed in line with the Global Reporting Initiative (GRI) guidance on materiality and completeness (www.globalreporting.org). This specifies that sustainable development reports should cover topics and indicators that "reflect the organisation's significant economic, environmental and social impacts" or that "substantively influence the assessments and decisions of stakeholders". It involves identifying and prioritising issues that may affect our business and stakeholders over the next three years, taking internal and external perspectives into account.

We create a materiality matrix which plots external stakeholders' level of concern against the current or potential impact on our business. Each issue is given a rating of "low", "medium" or "high" from both internal and external perspectives. An impact can be either positive or negative.

Issues that are of high importance to both our external and internal stakeholders are reported in this section of our Annual report. Those of medium-to-high importance are reported in the full Sustainable development report on our website.

Having determined which topics to include in our 2014 materiality matrix, we reviewed these with internal experts from each of our sustainable development focus areas to determine their validity and relative importance. The results of this assessment were reviewed and approved by the Sustainability Committee.

Further information on the Sustainability Committee is included in the Directors' report on page 59.

Performance overview

Performance progress in 2014 included:

• A nine per cent reduction in our all injury frequency rate (AIFR) compared with 2013.
• A 12 per cent reduction in our lost time injury frequency rate (LTIFR) compared with 2013.
• An 18 per cent reduction in our greenhouse gas emissions intensity from 2008.
• Receiving the CDP leadership award for the largest absolute carbon reduction on the ASX 200.
• Meeting our communities target that all operations have locallyappropriate, publicly-reported indicators in place consistent with the Millennium Development Goals.
• Being recognised as having good practice on human rights reporting in line with the UN Guiding Principles on Business and Human Rights.
• Improving our listing as a leading company on the FTSE4Good and Dow Jones Sustainability Indexes, which investors use to monitor businesses' sustainability performance.

However, we did not achieve all our goals and there are areas where we need to improve. Above all, we must achieve our target of zero fatalities. Tragically, two colleagues lost their lives while working at our managed operations in 2014.

Also, in addition to complying with statutory reporting obligations, we reported 12 environmental incidents to the Executive Committee with the potential to impact the environment or to concern local communities. In 2013, we reported 15 such incidents.

Our priorities for 2015 are to:

• Deliver our refreshed safety strategy for fatality elimination, injury reduction and catastrophic risk management.
• Maintain progress on reducing greenhouse gas emissions intensity.
• Achieve our target to implement critical control monitoring plans against material health risks.
• Complete an epidemiology study of the workforce at Rössing Uranium Limited.

• Further develop and implement our Mental Health Framework throughout the business.

• Implement our updated Health, Safety, Environment & Communities (HSEC) and Closure standards throughout our operations.

• Enhance business management of water risks and rehabilitation performance.
• Meet our diversity and inclusion targets for women and graduates.
• Advance our talent pipeline and the continued implementation of diversity and inclusion.
• Develop a regional economic development toolkit in partnership with local communities and our Procurement function.
• Further streamline the integration of human rights considerations into existing corporate processes. We will also develop a more targeted riskbased approach for stand-alone human rights studies.
• Continue developing our integrity and compliance programme. We will focus on ways in which we can improve risk assessments where they relate to business integrity, third party due diligence and monitoring.
• Refresh The way we work, to ensure it remains relevant to our employees, the business and the risks we face.

Performance data

Our sustainable development performance data are reported for calendar years and, unless stated otherwise, represent 100 per cent of the parameters at each managed operation, even though Rio Tinto may have only partial ownership.

Data reported in previous years may be modified if verification processes detect material errors, or if changes are required to ensure comparability over time.

Wherever possible, data for operations acquired prior to 1 October of the reporting period are included. Divested operations are included in data collection processes up until the transfer of management control.

We have incorporated the requirements of the ten sustainable development principles of the ICMM and the mandatory requirements set out in ICMM Position statements into our own policies, strategies and standards. We report in line with the GRI G3 guidelines at Application level A+. In 2015, we will begin reporting in accordance with the GRI G4 guidelines.

Further information on our data definitions, our GRI-checked report and our alignment with the ICMM sustainable development principles and supporting position statement can be found online at riotinto.com/sd2014

Goals and targets

As part of our commitment to continuous improvement, we have set Group targets for a range of sustainable development metrics. These help us drive performance improvement and manage risk. Further information on the risk framework that Rio Tinto applies to identify these metrics and drive decision-making can be found on pages 14 to 17.

Targets	Performance to date
Our goal is zero harm, including, above all, the elimination of workplace fatalities.	2 fatalities at managed operations in 2014.
Performance against this goal is measured by the number of fatalities and a year-on-year improvement in our all injury frequency rate (AIFR) per 200,000 hours worked.	9 per cent reduction in our AIFR compared with 2013.
A year-on-year improvement in the rate of new cases of occupational illness per 10,000 employees annually.	6 per cent reduction in the rate of new cases of occupational illness compared with 2013.
All managed operations will have reviewed – and increased their focus on managing – their health risks, through implementation of critical control management plans (CCMPs) to address their specific material health risks, by the end of 2015.	41 per cent of managed operations have identified their critical health risks and implemented CCMPs.
Ten per cent reduction in total greenhouse gas emissions intensity between 2008 and 2015.	18 per cent reduction in our total greenhouse gas emissions intensity compared with 2008, currently beating our 2015 target.
All managed operations with material water risk will have achieved their approved local water performance targets by 2018.	66 per cent of managed operations are on track to meet their recently approved local water performance targets.
Our diversity goal is to employ people based on job requirements that represent the diversity of our surrounding communities. We are targeting: – Women to represent 20 per cent of our senior management by 2015. – Women to represent 40 per cent of our 2015 graduate intake. – 15 per cent of our 2015 graduate intake to be nationals from regions where we are developing new businesses.	– Women represented 15.5 per cent of our senior management in 2014. – Women represented 31.8 per cent of our 2014 graduate intake. – 17.8 per cent of our 2014 graduate intake were nationals from regions where we are developing new businesses.
By 2015, all operations have in place locally-appropriate, publicly-reported social performance indicators that demonstrate a positive contribution to the economic development of the communities and regions where we work, consistent with the Millennium Development Goals.	We met our target and all operations have locally-appropriate, publicly reported indicators in place.

Performance data 2010-2014

	2014	2013	2012	2011	2010
Social
Fatalities at managed operations from safety incidents	2	3	2	6	3
Fatalities at managed operations from health incidents	–	–	1	–	–
All injury frequency rate (per 200,000 hours worked)	0.59	0.65	0.67	0.67	0.69
New cases of occupational illness (per 10,000 employees)	15	16	15	13	20
Employees (number) (a)	60,000	66,000	71,000	68,000	77,000
Environment
Greenhouse gas emissions intensity (indexed relative to 2008)	82.0	83.2*	94.1	95.9	96.1
Total energy use (petajoules)	450	484*	502	516	513
Freshwater used (billion litres)	465	436*	446	465	457
Land footprint – disturbed (square kilometres)	3,592	3,556	3,530	3,485	3,453
Land footprint – rehabilitated (square kilometres)	502	472	446	422	420
Economic contribution
Value add (US\$ million) (a) (b)	29,178	31,818	26,195	38,193	33,812
Payments to suppliers (US\$ million) (a)	21,370	26,054	30,271	28,444	27,486
Community contributions (US\$ million)	261	331	291	294	166

* Numbers restated from those originally published to ensure comparability over time. Amendments due to changes in measurement and calculation methodologies or immaterial updates to data.

(a) These figures include the Group's share of joint ventures and associates.

(b) Value add is the sum of labour costs, payments to governments and returns on capital invested in operations.

Social

Safety

2014 proved to be our best year ever in terms of injury rate performance. Our all injury frequency rate (AIFR), which includes data for employees and contractors, is one of the key safety measures we consider in monitoring our performance. At the end of 2014, our AIFR was 0.59 per 200,000 hours worked. Over the last five years we have reduced our AIFR by 14.5 per cent. Our lost time injury frequency rate (LTIFR) was 0.37 per 200,000 hours worked in 2014.

Our commitment to safety is the foundation of how we operate, as we work to achieve our vision of everyone going home safe and healthy after each working day. We believe we can prevent fatalities, injuries and illness by effectively identifying and controlling risks in our business.

For us to achieve our goal of zero fatalities, every person working at Rio Tinto must be fully engaged. To this end we are building a positive safety culture, where everyone contributes to improving our safety performance and has the confidence to stop work and ensure it is safe.

We have a long history of good safety performance and strive to improve on this every year. In 2014, we updated our safety strategy to confirm our focus on injury reduction and strengthen our emphasis on fatality elimination and catastrophic event prevention. This helps us drive effective risk management, identify critical risks, verify that we have controls in place and provide our people with appropriate training.

Regrettably, we did not meet our goal of zero fatalities in 2014. Two people lost their lives while working at Rio Tinto managed operations. Darryl Manderson died due to an equipment incident during maintenance activities at the Gove alumina refinery in Australia. Enrick Gagnon died in a train derailment incident at the Iron Ore Company of Canada. These are tragic events that affect families, friends and workmates. We provide support and counselling to those who have lost loved ones.

To achieve our target of zero fatalities it is essential we learn from both actual and potential significant incidents to prevent them happening again. We are strengthening our investigative process so that we improve our understanding of the factors that lead to fatalities, and the behavioural and process changes needed to eliminate them. We continue to collaborate industry-wide to share and apply best practice.

This focus on investigation and sharing lessons learned extends to our nonmanaged operations. Further discussion of this is covered on page 25.

We continued our focus on incorporating learnings from the Oil and Gas industry into our management of process safety . We have projects in place to:

• build leader awareness and competence;
• improve incident reporting and investigation; and
• deepen our understanding of the process safety risks and the effectiveness of controls through rigorous process hazard risk analysis studies.

Health

We provide a healthy environment for our workforce. We continue to focus on identifying, minimising and managing key occupational health risks to control occupational exposures. We also focus on promoting the fundamentals of fitness for work, particularly for safety-critical roles.

We are targeting a year-on-year improvement in the rate of new cases of occupational illness. In 2014, we reduced our rate of new cases of occupational illness by six per cent from 2013. The main types of occupational illnesses recorded relate to musculo-skeletal disorders (49 per cent), stress (33 per cent) and noise-induced hearing loss (four per cent).

Worldwide, our employees face occupational health risks that vary significantly because of the diversity and geographic spread of our operations. We now have a 2015 Group target for all managed operations to have reviewed – and increased their focus on managing – their health risks, through implementation of critical control management plans (CCMPs) to address their specific material health risks, by the end of 2015. This will help businesses to focus on the right issues and have the right critical controls in place.

The process we are using to help businesses put these plans in place has led to a more pragmatic, focused approach to the control of material health risks. We have helped businesses to develop internal competency in this area. Forty one per cent of managed operations have identified their critical health risks and implemented CCMPs. Most (89 per cent) believe they are well placed to meet the CCMP target by the end of 2015.

In 2014, we revised our health standards to simplify them, to provide a consistent framework for managing health risks and focus on material risks for the Group. These will be rolled out in 2015. This change aims to encourage improved ownership of the standards by operations' leaders and ensure we are managing the impacts and risks related to our operations in order to protect employees and improve our workplaces.

The potential for fatigue to contribute to safety incidents is well understood. To improve fatigue management we use research tools and technology to complement our programmes, including: personal alerting tools; personal monitors to measure sleep quantity, quality and associated mental effectiveness; and scheduling.

Across many industries, the potential for mental health problems to lead to short and long-term disability, employee turnover and occupational injuries is becoming better understood. In partnership with subject matter experts in this field we have developed tools and training that will support the management of mental health risks for our workers. These cover a broad range of areas across mental health management, including crisis response, understanding mental health and ultimately improving the wellbeing and resilience of our workforce.

March 2015 marks one year since the World Health Organisation (WHO) was notified of an outbreak of Ebola in West Africa. In Guinea, where we have operations, 2,730 cases were reported and 1,739 deaths since the outbreak began. Responding to the outbreak, a Rio Tinto Business Resilience Team was established and a number of control measures have been implemented in partnership with the Guinean Government, WHO and other international organisations. We have put prevention measures in place both for our employees and the local Guinean communities. We have supported the Government and communities through awareness raising and providing logistics and food. As part of our efforts we have organised and conducted prevention and awareness campaigns, distributed hygiene kits and provided support to local hospitals with protective equipment and medical supplies. To date, none of our employees or their families in Guinea have been affected by the disease.

Rössing was challenged by local and international stakeholders in relation to the long-term health of, and impacts from radiation on, its employees at the Rössing mine in Namibia. It was alleged that employees were not given access to their medical records. In fact, since the mine started in 1976, all employees have had access to their own health records and Rössing has longstanding standards and programmes to help manage health risks including monitoring and academic review. For 2015, Rössing will undertake a new epidemiological study. This study will be conducted by independent experts and will be peer reviewed.

People

The way we work sets out the principles that form the foundation of our business: collaboration, fair treatment and living our values of respect, integrity, teamwork and accountability.

We seek to hire, motivate and retain people who demonstrate our values and are passionate about making a difference to our business and the communities in which we live and work. We employ people on the basis of job requirements and do not discriminate on grounds of age, ethnic or social origin, gender, sexual orientation, politics, religion, disability or any other status. We do not employ forced, bonded or child labour. We recognise the right of all employees to choose to belong to a union and seek to bargain collectively. We employ people with disabilities and make considerable efforts to offer suitable alternative employment and retraining to employees who become disabled and can no longer perform their regular duties.

To ensure that what we do creates long-term value for all our stakeholders, we set clear performance objectives for employees. We have Group-wide performance and remuneration systems that ensure we assess employees consistently and transparently. By engaging with employees about the business and their career aspirations, we make a clear link between performance and reward.

In 2014, we employed 60,000 people (including the Group's share of joint arrangements and associates). Of these, approximately 31,000 were located in Australasia, 16,000 in North America, 7,000 in Africa, 4,000 in Europe and 2,000 in Central and South America. See page 180 for a breakdown of employees by business units.

Throughout 2014, we remained one of the largest private sector employers of Indigenous Australians, with over 1,650 full time Indigenous employees who represented approximately 7.5 per cent of our permanent Australian workforce. In addition to our permanent Indigenous workforce we had over 550 Indigenous contractors working on our Australian mine sites. Our local employment commitments are often managed through directly-negotiated agreements with Traditional Owners.

Diversity helps us generate new and innovative ways of thinking. We are committed to increasing the representation of women in our business and remain focused on ensuring our workforce is representative of the countries and communities in which we operate. Women represented 31.8 per cent (female: 34; male: 73) of our graduate intake in 2014, 21.4 per cent (female: 3; male: 11) of the board, 15.5 per cent (female: 104; male: 565) of our senior management, and 18.7 per cent (female: 9,963; male: 43,122)(c) of our total workforce. In 2014, 17.8 per cent of our graduate intake were nationals from regions where we are developing new businesses. Further information on diversity and inclusion can be found on page 60 in the Corporate governance section.

We recognise we have further work to do to deliver on our diversity targets for 2015 and this is reflected in our work plan. We will continue to develop our graduate talent to build on the completion of a successful three-year emerging regions graduate intake programme from 2011 to 2014.

Our 2014 employee survey showed that our people continue to report high levels of engagement, with employees feeling that safety, efficiency and flexibility have improved since the last survey. They believe that we can do more to celebrate our successes and manage personal performance. Action planning has occurred across the Group, with improvement plans developed in partnership between leaders and employees. The implementation of these plans will continue throughout 2015.

Good communication and open, honest dialogue are vital if we are to meet the expectations of our employees. Rio Tinto's culture of leader-led communication and engagement is supported by a number of communication tools. These include myRioTinto, a portal dedicated to employment needs, and keeping employees informed of Group updates, news and announcements.

Communities and regional development

We strive to build good relationships with our host communities. We engage with them to understand the social, environmental and economic implications of our activities, seeking to minimise negative impacts and bring shared value to the places where we work.

We work to a Communities and Social Performance (CSP) framework based on building knowledge, engaging with communities and developing programmes that reflect local community priorities. Our CSP programme and our policy, standards and guidance notes support this.

During 2014, our business contributed to just under 2,200 socio-economic programmes covering a wide range of activities such as health, education, environmental protection, housing, agricultural and business development. In 2014, we spent US\$261 million on these community contribution programmes. There was a decrease in overall community contributions of 21 per cent compared to 2013, which reflects prevailing market conditions, divestments and completion of key programmes at developing projects such as Oyu Tolgoi and La Granja.

Our Communities target requires that, by 2015, all operations must have in place locally-appropriate, publicly-reported social performance indicators that demonstrate a positive contribution to the economic development of the communities and regions where we work. This is consistent with the UN's Millennium Development Goals. We met our target and 100 per cent of operations have the indicators in place and have reported them publicly, in 2014. During 2015 we will establish a new Group target, to apply from 2016, to indicate progress and results of our Communities and Social Performance work in our businesses.

(c) Gender distribution for our total workforce is based on managed operations (excludes non-managed operations and joint ventures) as of 31 December 2014. We accept that we cannot meet everybody's concerns and expectations. However, wherever we operate we seek to do so with broad-based community support. By listening carefully to the concerns of our stakeholders, and consistently aiming to align their needs with our own, we work to create mutually beneficial outcomes through collaboration with our partners to manage the shared risks, responsibilities and benefits of the long-life investments we make.

Environment

Climate change

The scale of necessary emissions reductions – coupled with the world's increasing requirements for secure, affordable energy – create large challenges which require worldwide attention. Our climate change programme focuses on reducing the energy intensity of our operations, as well as the carbon intensity of our energy.

Our total greenhouse gas (GHG) emissions were 33.9 million tonnes of carbon dioxide equivalent (CO2-e) in 2014, 3.5 million tonnes lower than in 2013. In 2008 we set a target of a ten per cent reduction in total GHG emissions intensity, to be achieved by 2015. We have reduced our total GHG emissions intensity by 18 per cent compared with 2008, currently beating our 2015 target. Over the same period absolute emissions were reduced by 31 per cent.

A new target will be set in 2015 that extends the existing external target to 2020. This will focus on the challenge to increase energy efficiency. Targets will be developed in collaboration with businesses, and take into account their current circumstances and future plans.

Our business is inherently energy intensive. The majority of our GHG emissions are generated from energy use (electricity, fuel) and chemical processes (anodes and reductants) during mining, milling and smelting activities at our sites. The majority (65 per cent) of the electricity we use is from hydropower.

Transportation, processing and use of our products also contribute significantly to GHG emissions. In 2014, the three most significant sources of indirect emissions associated with our products were:

• Approximately 5.3 million tonnes of CO2-e associated with third party transport of our products and raw materials.
• An estimated 129.6 million tonnes of CO2-e associated with customers using our coal in electricity generation and steel production.
• Approximately 459.4 million tonnes of CO2-e associated with customers using our iron ore to produce steel (these emissions are not all in addition to the coal-use emissions above, as some customers use both our iron ore and our coal to produce steel).

To assess how carbon policy and regulation will affect our businesses and our products in the future, we closely monitor national and international climate and energy policy developments and we advocate constructively for policies that are environmentally effective, economically efficient and equitable. We also assess the potential risks to the resilience of our operations from changing climatic events.

Further information on the Group's greenhouse gas emissions is included in the Directors' report on page 48.

Closure

Although it may extend over decades, mining is a temporary land use. It is a priority that we plan ahead for the closure of our operations after the commercially recoverable ore is exhausted. We must balance the needs and expectations of the present with those of future generations, while responding to environmental and social challenges of mine closure.

The Closure standard applies to all our managed operations and to nonoperational (legacy) sites. This provides consistency in closure planning and management. It also helps us identify opportunities for generating positive socio-economic benefits from our activities.

Closure planning is integrated into our operational activities and we aim to progressively rehabilitate as much land as possible prior to closure. In 2014, 26 per cent of our disturbed land (excluding land disturbed for hydroelectricity dams) had been rehabilitated. Our biodiversity goal is also closely connected to closure planning and management. At sites with high or very high biodiversity values, we aim to have achieved a net positive impact (NPI) on biodiversity, or have a clear set of criteria that demonstrates trajectory to NPI, agreed by the time we close operations. These sites are determined by their proximity to biodiversity-rich habitats, species of conservation significance and the site conservation context. In 2014, 32 of our operations were prioritised with either high (eight), or very high (24) biodiversity values. To achieve our goal these sites are required to develop and implement biodiversity action plans.

Stakeholder consultation – with local communities, including traditional landowners, governments, and employees – is a fundamental part of our closure planning.

Water

Wherever possible we prevent – or otherwise minimise, mitigate and remediate – the impact that our operations may have on water resources. Our approach to water management is based on the identification, assessment and control of water-related risks. We seek risk-based local solutions to promote sustainable water supply for our operations and communities.

For many years, our focus has been on reducing the freshwater use per tonne of product and we set ourselves a target for this metric from 2008 to 2013. However, over this period, we learnt that this metric alone did not always address the issues that have the greatest potential to impact our performance, or that were of most concern to local stakeholders.

Water challenges and risks vary by region and site, so we have redefined our Group water target to better reflect the local and regional conditions and the risks to the environment where we operate. The current Group water target requires that, by 2018, all managed operations with material water risk will have reviewed and improved their management of these material water risks, and will have achieved their approved local water performance targets.

A site is identified as having a material water risk where there is potential for a high or critical impact on the business through effects on the environment, production, community, compliance or reputation.

Local water performance targets have been set to improve the site-specific water performance. These cover three areas: water supply, ecological impacts, and water surplus management. Each site has a target that is appropriate to its specific operational circumstances. At the end of 2014, 66 per cent of managed operations were on track to meet their approved local water performance targets by 2018 and the remaining sites are committed to making progress and will have submitted, by the end of 2015, clear plans to meet these targets.

Unfortunately, five incidents related to water were reported to the Executive Committee in 2014. These are listed in the environmental regulation section included in the Directors' report on page 47. We use these incidents and our annual assessment of performance against the targets to focus attention and effort on those sites and businesses that need support to improve their water management performance.

In 2014, our total water use was 834 billion litres and total recycled water was 264 billion litres. This is consistent with 2013 performance.

Environmental regulation

We are subject to various environmental regulations and are required to disclose Group-level environmental incidents and fines. Further information on the Group's environmental regulation is included in the Directors' report on page 47.

Economic

Economic contributions

Our operations can have a substantial impact on the regions and countries in which we operate through our tax payments to local and national governments, the direct and indirect employment we generate and our community programmes.

Globally, the Group's economic contribution was US\$51 billion(d) in 2014. This includes:

• US\$29 billion in value add, made up of payments to employees, payments to governments and returns to capital.
• US\$21 billion as payments to suppliers.

We are committed to contributing to the social and economic development of our host communities. It is important to our shareholders, employees and many other stakeholders that we contribute to social stability through local employment opportunities, procurement and the transparent payment of tax and dividends.

Details of payments to governments are available in our report on Taxes paid in 2014, which is made available on the Group's website.

The figures presented in this section include the Group's share of joint ventures and associates.

Non-managed operations and joint ventures

Rio Tinto holds interests in companies and joint ventures that it does not manage, including the Escondida copper mine in Chile and the Grasberg copper-gold mine in Indonesia. We actively engage with our partners around sustainable development through formal governance structures and technical exchanges. In this way we endeavour to ensure that the principles in The way we work are respected at all times and encourage them to embed a strong safety and security culture in their workforces.

Escondida

Rio Tinto has a 30 per cent interest in Escondida, which is managed by BHP Billiton. Our seats on the Owners' Council ensure we have regular input on strategic and policy matters. In 2014, Escondida began construction of the Escondida Water Supply project to develop a new 2,500 litre per second seawater desalination facility. This project will ensure a continued water supply to sustain operations while minimising Escondida's need to use groundwater. Escondida is recognised as having a world-class process for managing significant health, safety and environmental risks. Rio Tinto is in the process of adopting the Escondida process to effectively manage critical fatality risk and has benefited from Escondida's guidance and willingness to openly share its learnings.

Grasberg

PT Freeport Indonesia (PTFI), a subsidiary of Freeport-McMoRan Inc., owns and operates the Grasberg mine in Papua, Indonesia. Rio Tinto has a joint venture interest attributable to the 1995 mine expansion, which entitles it to a 40 per cent share of production above specified levels until the end of 2021 and 40 per cent of all production after 2021. We engage with and influence PTFI through five formal channels: the Operating, Technical, Communities and Sustainable Development committees and the Tailings board.

Tragically, there were six industrial fatalities at PTFI in 2014: four at the surface mine involving a collision between a light vehicle and a haul truck; one due to a fall of ground in the underground operation; and one due to a rollover involving a concrete mixer truck in the surface area of the operation. We have worked closely with, and continue to support, the PTFI leadership team in the investigations and in the post-investigation lesson implementation. In 2014 senior Rio Tinto leaders and technical specialists visited the site, shared our Group's knowledge and provided practical advice to support PTFI's actions to learn from, and avoid a recurrence of these, tragic accidents. There was a further fatality at Grasberg in early 2015, as a result of an equipment/ pedestrian interaction.

The operation employs controlled riverine tailings transport, a process that the World Bank does not consider as good industry practice, on the basis that it is contrary to the International Finance Corporation's 2007 Environmental, Health, and Safety Guidelines for mining. However, several independent expert reviews concluded that this method represents the best available option for this operation because of the extremely rugged topography, high rainfall and significant seismic activity. We continue to believe that this method is appropriate given these conditions, but have adopted the standard that riverine and shallow marine disposal of mining and processing mineral waste will not be used at new Rio Tinto managed operations.

Rio Tinto technical personnel review and provide guidance and oversight of the controlled riverine tailings management system with a focus on geotechnical, geochemical and environmental issues. There is an official multidisciplinary Technical Committee which addresses environmental issues along with technical issues related to geology, worker health and safety, mine planning, processing and tailings management. Rio Tinto is represented by a senior environmental manager on the PTFI Tailings Management board, which meets twice a year at Grasberg and includes third-party experts. The emphasis of Rio Tinto's involvement is to promote continuous improvements in the environmental performance of the existing tailings management system. Historic and ongoing improvements since Rio Tinto's involvement began include:

• construction, extension and maintenance of a levee system to limit the lowlands depositional footprint;
• diversion of the Ajkwa River system in the lowlands out of the permitted tailings deposition area;
• ongoing re-vegetation programmes in the deposition area;
• ongoing efforts to increase tailings retention within the deposition area; and
• ongoing efforts to ensure that the tailings remain geochemically benign and will therefore not pose an acid rock drainage risk.

Governance

Human rights

Rio Tinto respects and supports human rights wherever it operates in a way that is consistent with the Universal Declaration of Human Rights. Our human rights approach is founded in The way we work, our human rights policy and voluntary commitments. It is also consistent with the UN Guiding Principles on Business and Human Rights (UNGPs). In implementing our policies, we are subject to local laws. We build on compliance with local laws and, where our policies and procedures are more stringent, we operate to these standards.

In line with the human rights due diligence process in the UNGPs, we look to understand our potential and actual human rights impacts, ensure we are managing them, and communicate our performance. We embed human rights considerations into existing corporate processes including risk analysis, impact assessment and complaints handling and may also conduct standalone human rights studies where appropriate. While we respect all internationallyrecognised human rights, there are some issues to which we pay particularly close attention because of our geographical and operating footprint. These include: security; land access and resettlement; environment including access to water and sanitation; cultural heritage including the rights of Indigenous peoples; labour rights; and in-migration related impacts on local communities, including access to health services.

We work with suppliers, contractors and other partners to avoid our involvement in human rights harm, and to positively influence human rights through those business relationships. The way we work and our Procurement principles apply to all suppliers and contractors working with Rio Tinto or on its behalf. The principles reiterate that we oppose and prohibit forced, bonded or child labour. They specify that suppliers should maintain human rights policies and have a process to assure compliance. Prequalification checks, contractual arrangements and ongoing monitoring help us to ensure that suppliers follow these principles.

We provide employees an online human rights training programme. It explains why respecting human rights is important, what human rights impacts we might have, and internal resources and mechanisms to help manage them. Last year, approximately 1,500 employees, a large proportion of whom work in our Procurement function, completed this training. We also provide sitespecific training and in 2014 developed a training package that sites can adapt to address their priority human rights issues.

Rio Tinto has made voluntary commitments to the OECD Guidelines for Multinational Enterprises, UN Global Compact and the Voluntary Principles on Security and Human Rights (VPSHR). To avoid human rights violations through our security arrangements, we provide training for security personnel and continue to conduct security and human rights assessments at all high risk sites. We have developed practical guidelines, toolkits and training on implementing the VPSHR. Our online VPSHR training became mandatory for all security personnel at high risk sites from January 2014, and is strongly recommended for all other sites. In 2014 we conducted in-person VPSHR and Use of Force training for guards at four sites in Africa. This training involved both private and public security.

Under our Communities standard all sites must have a complaints, disputes and grievance mechanism in place, in line with the effectiveness criteria for operational-level grievance mechanisms in the UNGPs. Speak-OUT, the Group's confidential and independently-operated whistleblowing programme, can also be used to lodge human rights-related complaints.

We respect the land connection of Indigenous communities and seek mutually beneficial agreement with affected communities in the development and performance of our operations. We strive to achieve the free, prior and informed consent of Indigenous communities as defined in the 2012 International Finance Corporation Performance Standard 7 and the 2013 ICMM Position Statement on Indigenous Peoples and Mining. We seek consent as defined in relevant jurisdictions, and ensure agreement-making processes are consistent with such definitions.

Integrity and compliance

The way we work sets out our overall commitment to integrity and compliance. It puts our values – respect, integrity, teamwork and accountability – into practice, and holds us to the highest ethical standards to behave in ways that earn the trust of others. We operate within all applicable laws and regulations and are dedicated to open and transparent dealings with our stakeholders.

Our compliance standards are core to our Integrity and Compliance programme. In 2014, we introduced a new Business Integrity standard, which applies to all Rio Tinto businesses and functions. Developed in consultation with compliance managers from across the businesses, it consolidates and streamlines four previous business integrity-related standards: anti-bribery due diligence; fraud; business integrity (anti-corruption); and business integrity (conflicts of interest). This ensures that employees and contractors have a single point of reference for integrity and compliance matters. The standard applies a risk-based approach, with simplified language and improved readability.

We refreshed our online training to ensure it is geared more towards the risks encountered by each individual. The new system incorporates a wider range of shorter task-based or awareness modules, which tailor the training depending on the individual's role. Each person then completes a set of core and elective modules.

We are committed to a culture of transparency and speaking up about issues. We provide our businesses with internal and external channels for raising concerns, anonymously if required. Speak-OUT, the Group's confidential and independently-operated whistleblowing programme, enables employees to report anonymously, subject to local law, any significant concerns about the business or behaviour of individuals. This could include suspicion around safety violations, environmental procedures, human rights, financial reporting, or business integrity issues in general. We encourage employees to raise their concerns to management first; Speak-OUT is always available as an alternative option.

In 2014, 588 Speak-OUT reports were lodged, representing approximately five per cent fewer than the number reported in 2013.

In line with our commitment to transparency and good governance, we issue information on the Group's operational, financial and sustainable development performance in a timely way through a number of channels, such as media releases and regulatory filings. We communicate views to governments and others on matters affecting our business interests.

Assurance

We engaged an independent external assurance organisation, PricewaterhouseCoopers, to provide the board of directors of Rio Tinto plc and Rio Tinto Limited with assurance on selected sustainable development subject matters, as explained on the next page.

PricewaterhouseCoopers' assurance statement satisfies the requirements of subject matters 1 to 4 of the ICMM assurance procedure whilst our online GRI report has been checked by GRI, satisfying subject matter 5 of the ICMM procedure.

Further information on external auditors and internal assurance is included in the Directors' report under the Corporate governance section on pages 62 and 63.

Independent limited assurance report

What we found

Based on the work described below, nothing has come to our attention that causes us to believe that the selected subject matter for the year ended 31 December 2014 has not been prepared, in all material respects, in accordance with the Reporting criteria.

To the directors of Rio Tinto plc and Rio Tinto Limited (together Rio Tinto),

What we did

Rio Tinto engaged us to perform a limited assurance engagement on the selected subject matter within the Sustainable development sections of the Rio Tinto 2014 Annual report and the Rio Tinto 2014 Strategic report for the year ended 31 December 2014.

Selected subject matter

• Rio Tinto's assertion that it has incorporated the requirements of the 10 sustainable development principles of the International Council on Mining and Metals (ICMM) and the mandatory requirements set out in ICMM Position Statements into its own policies, strategies and standards
• Rio Tinto's assertions regarding the approach that it has adopted to identify and prioritise its material sustainable development risks and opportunities
• Rio Tinto's assertions regarding the existence and status of implementation of systems and approaches used to manage the following selected sustainable development risk areas:
• Safety
• Greenhouse gas emissions
• Energy use
• Water
• The following Rio Tinto performance data related to the selected sustainable development risk areas:
• Number of fatalities
• All injury frequency rate
• Lost time injury frequency rate
• Number of lost time injuries (numerator of the lost time injury frequency rate)
• Total greenhouse gas emissions
• Greenhouse gas emissions intensity
• Total energy use
• Percentage of managed operations with material water risk that are on track to achieving their approved local water performance targets

Reporting criteria

The subject matter above has been assessed against the definitions and approaches which will be presented at www.riotinto.com/sd2014 as at 6 March 2015.

Responsibilities

PricewaterhouseCoopers

Our responsibility is to express a conclusion based on the work we performed.

Rio Tinto

Rio Tinto management is responsible for the preparation and presentation of the selected subject matter in accordance with the Reporting criteria.

What our work involved

We conducted our work in accordance with the International Standard on Assurance Engagements 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information and (for selected subject matter relating to greenhouse gas emissions) the International Standard on Assurance Engagements 3410 Assurance Engagements on Greenhouse Gas Statements. These Standards require that we comply with independence and ethical requirements and plan the engagement so that it will be performed effectively.

Main procedures performed

• Making enquiries of relevant management of Rio Tinto
• Evaluating the design and effectiveness of the key processes and controls for capturing, collating and reporting the performance data within the selected subject matter
• Testing performance data, on a selective basis, substantively at both an operational and corporate level, which included testing at a selection of operations from across Aluminium, Energy, Iron Ore, Copper, and Diamonds & Minerals
• Undertaking analytical procedures over the performance data
• Reviewing a sample of relevant management information and documentation supporting assertions made in the selected subject matter

We believe that the information we have obtained is sufficient and appropriate to provide a basis for our conclusion.

Partner Canberra 4 March 2015

Liza Maimone PricewaterhouseCoopers

Liability limited by a scheme approved under Professional Standards Legislation

Inherent limitations

Inherent limitations exist in all assurance engagements due to the selective testing of the information being examined. Therefore fraud, error or non-compliance may occur and not be detected. Additionally, non-financial data may be subject to more inherent limitations than financial data, given both its nature and the methods used for determining, calculating and sampling or estimating such data.

Restriction on use

This report has been prepared in accordance with our engagement terms to assist Rio Tinto in reporting its sustainable development performance. We do not accept or assume responsibility for the consequences of any reliance on this report for any other purpose or to any other person or organisation. Any reliance on this report by any third party is entirely at its own risk.

We consent to the inclusion of this report in the Rio Tinto 2014 Annual report and the Rio Tinto 2014 Strategic report to assist Rio Tinto's members in assessing whether the directors have discharged their responsibilities by commissioning an independent assurance report in connection with the selected subject matter.

Limited assurance

This engagement is aimed at obtaining limited assurance for our conclusions. As a limited assurance engagement is restricted primarily to enquiries and analytical procedures and the work is substantially less detailed than that undertaken for a reasonable assurance engagement, the level of assurance is lower than would be obtained in a reasonable assurance engagement.

Aluminium

Financial performance

	2014 US\$ million	2013 US\$ million
Revenue	12,123	12,463
Net cash generated from operating activities	2,550	1,696
Underlying earnings	1,248	557
Capital expenditures	2,021	2,226
Net operating assets	18,297	18,814

Strategy and strategic priorities

Rio Tinto's Aluminium group is focused on delivering industry-leading performance through the cycle and strong returns in the years to come. The business has been reshaped around the core pillars of bauxite and the group's smelting assets that are in the first quartile of the industry. By taking action to move the smelting asset base down the cost curve, the portfolio has been positioned squarely into the first quartile. Upon completion of the Kitimat Modernisation Project, more than 80 per cent of the Aluminium group's smelter assets will be in the first quartile compared with only 40 per cent in 2011. Following the transition of Gove to a bauxite export business, the group has ramped up bauxite exports and supplied around 50 per cent of Chinese bauxite imports in 2014. Its goal is to establish its Cape York bauxite as the product of choice for Chinese seaborne demand.

In 2015 the Aluminium group intends to capitalise on its competitive advantages through:

• Growing the group's sector-leading, high-margin bauxite position while further enhancing performance and cash generation from its low-cost smelters.
• Driving operating excellence at the group's alumina refineries, providing competitive supply security to its first-quartile smelter portfolio.
• Capitalising on its commercial and trading capabilities to increase margins and value.
• Achieving continuous improvement from driving sustainable cost reduction, productivity improvement initiatives and working capital reductions across all the Aluminium group's operations.
• Optimising the portfolio by divesting non-core operations to concentrate on strategic, top-tier assets.
• Exercising a disciplined approach to capital allocation, geared to delivering key brownfield and modernisation projects that leverage the group's competitive advantages in bauxite ore reserves and self-generated energy.

Safety

The Aluminium group's all-injury frequency rate continued its steady downward trend in 2014. The key all-injury metric at the year's end was 0.53, which represented a 20 per cent improvement over the 0.66 rate at the end of 2013. However, despite showing an incremental improvement in the group's overall safety performance, the tragic death of Darryl Manderson at the Gove operations in Australia in the first half of 2014 is a sobering reminder of the importance of the relentless focus on safety. The Aluminium group is committed to a zero harm workplace and there is simply no room for these kinds of accidents. The group has therefore redoubled its efforts to improve further through initiatives such as the "Zero Harm by Choice" leadership development programme, a Human Performance initiative and activities to improve process safety. Drawing on lessons learned from previous incidents, the group is constantly working to implement enhanced policies, systems and procedures to improve performance.

Greenhouse gas emissions

Rio Tinto's Aluminium group has one of the lowest carbon footprints in the aluminium industry. The group has reduced greenhouse gas emissions by 40 per cent since 2008. Almost 80 per cent of its total power needs comes from non-fossil-fuel based hydro (72 per cent) and nuclear (six per cent) power compared with an industry average of 35 per cent for non-fossil-fuel based power. This means that the emissions intensity from the group's smelters is around half of the industry average – less than six tonnes of CO2 equivalent per tonne of aluminium versus an industry average of around 11 tonnes.

Review of operations

With effect from 1 June 2014, Alfredo Barrios succeeded Jacynthe Côté as chief executive of the Aluminium group and also joined the Rio Tinto Executive Committee.

The group's position as a sector-leading business is demonstrated in its financial performance in 2014. The Aluminium group's underlying earnings increased by 124 per cent to US\$1,248 million, US\$691 million higher than in 2013. The group achieved underlying EBITDA of US\$2,930 million, which represented a gain of 55 per cent from 2013, while widening the gap with the competition on the strength of its industry-leading EBITDA margins. The improved underlying EBITDA, combined with reduced working capital levels, has increased net cash generated from operating activities by US\$854 million to US\$2,550 million and generated positive free cash flow. The solid financial results reflected numerous ongoing cost reduction and productivity improvement initiatives across the Aluminium group, as well as benefits derived from rising regional and product premiums and the impact of the weaker Australian and Canadian dollars. Value-added products, which are produced to individual customer specifications, represented some 62 per cent of the primary metal produced by Rio Tinto in 2014, which translated into superior realised prices and margins.

The average London Metal Exchange price for aluminium in 2014 was US\$1,867 per tonne, which compares with an average of US\$1,845 per tonne in 2013. Rio Tinto's average realised price for primary metal products – including market and product premiums – was US\$2,395 per tonne in 2014, compared with US\$2,249 per tonne in 2013.

Cash cost improvements lifted earnings by US\$168 million (US\$232 million pre-tax). Greater production efficiencies, lower raw material prices, reduced functional costs, and increased production at various operations all helped to reduce unit cash costs of production.

In 2014, record bauxite production was achieved at the Sangaredi mine in Guinea and the Weipa mine in Australia delivered a similarly strong performance to that achieved in 2013. However, global bauxite production was marginally lower in 2014 compared with 2013 as Gove production was impacted by infrastructure constraints following the shift to bauxite exports, after curtailment of the refinery. Exports are expected to ramp up towards a run rate of eight million tonnes per annum in 2015 as export infrastructure constraints are addressed.

Alumina production increased by six per cent in 2014. This position will be further improved during the second half of 2015, when the expanded Yarwun refinery in Australia is expected to reach full capacity as design and construction challenges are progressively addressed.

Rio Tinto's share of aluminium production for 2014 totalled 3.4 million tonnes, which was broadly in line with 2013. Production from the new AP60 plant, and capacity creep across the smelter portfolio offset the closure of Shawinigan in November 2013 and the partial shutdown at Kitimat as preparations are made to commission the modernised smelter. Eight smelters, representing 54 per cent of 2014 production volumes, achieved annual production records.

The Aluminium group continues to make some difficult but necessary decisions with respect to portfolio management. The Gove site in Australia is now operating as a bauxite export business, following the curtailment of refinery operations in May 2014. The plan is to ramp up export capacity from six to eight million tonnes per annum towards the end of 2015, following upgrades to export infrastructure. While the workforce at Gove has been reduced, the bauxite business will be used to sustain an important economic base for the region and its Indigenous population.

Since 2009, Rio Tinto has closed, curtailed or divested approximately one million tonnes of primary aluminium capacity and three million tonnes of alumina capacity. In October 2014, Rio Tinto sold its 50 per cent interest in the SØRAL aluminium smelter in Norway, and in December divested its 46.67 per cent interest in the Alucam smelter in Cameroon.

The new Arvida Aluminium Smelter – AP60 Technology Centre in Quebec's Saguenay-Lac-Saint-Jean region was inaugurated in January 2014. With an initial capacity of 60,000 tonnes per annum, the smelter provides an industrial-scale Research & Development platform for commercialisation of Rio Tinto's latest-generation AP Technology™. This facility also benefits from low-cost, self-generated hydropower.

In Iceland, modernisation of the ISAL smelter, including the addition of a leading-edge casting facility to produce value-added billet, was completed in the first half of 2014. Annual capacity has been increased from 190,000 to 205,000 tonnes.

In June 2014, as a result of further revisions to future capital required to complete the modernisation project at Kitimat in British Columbia, and related impacts on the project, the Kitimat assets were impaired by US\$800 million (net of tax). In December 2014, an impairment reversal of US\$1 billion (net of tax) was recognised relating to the Pacific Aluminium operations, where significant cost improvements and high regional and product premiums have increased the value of the assets.

Development projects

The Aluminium group's development pipeline is focused on leveraging the product group's two sustainable competitive advantages: unrivalled positions in energy and bauxite.

At the year's end, preparations were being finalised for full commissioning of the transformed Kitimat smelter in the first half of 2015. Leveraging the Aluminium group's wholly-owned Kemano hydropower resource and highefficiency AP smelting technology, the Kitimat Modernisation Project will increase production capacity at the smelter by more than 48 per cent to approximately 420,000 tonnes per year, while reducing overall environmental emissions by nearly 50 per cent. Kitimat will be one of the lowest-cost smelters in the world – in the first decile of the cost curve – and is strategically located to supply key emerging markets in the Pacific Rim. In August 2014, the board approved additional capital of US\$1.5 billion to complete the Kitimat project, taking the total approved capital cost to US\$4.8 billion.

In early 2014, Rio Tinto entered into an option agreement with LNG Canada for an undisclosed sum. Exercise of the option would entitle LNG Canada to acquire or lease a wharf and associated land at the Kitimat port to facilitate a proposed liquid natural gas export project. The exercise of this option would not impact the group's ability to operate the Kitimat aluminium smelter.

Rio Tinto is now prioritising the South of Embley bauxite growth project at Cape York, Queensland in Australia. With mining costs in the first quartile and with attractive returns, this is a Tier 1 investment opportunity. The project includes mine, port and infrastructure elements, with a planned initial output of 22.8 million tonnes per year and options, using the same infrastructure, to later expand up to 50 million tonnes. The project feasibility study is under way. The project will be brought to the board for approval in 2015.

Outlook

After several very challenging years, there is growing optimism and positive sentiment about the prospects for the aluminium industry. The fundamentals are strong, with forecasters anticipating a healthy market deficit outside China for the coming years.

Global primary demand reached around 54 million tonnes in 2014, and is expected to grow in the range of six to seven per cent during 2015. Aluminium prices gradually improved over the course of 2014, and regional premiums have continued to increase, reflecting the tight market outside China.

A combination of current forecast production rates and strong demand is expected to result in the global market maintaining a supply deficit for 2015. Crucially, the ex-China market appears set to continue a strong rate of drawdown of stored metal in the coming years, which is expected to result in inventory returning to pre-financial crisis levels when measured against growing demand.

Over the medium term, forecasters envisage compound annual aluminium demand growth of around four per cent through 2025, supported by increased intensities in key applications, most notably the transportation sector.

Aluminium's unique properties – light weight, strength and resistance to corrosion – are driving increasing market penetration in the automotive market. It is expected that within the next ten years, seven out of ten new pickup trucks produced in North America will be aluminium-bodied, as competitors follow the lead of Ford, which recently introduced its first aluminium-bodied F-150. Many other leading automakers also have been increasing the amount of aluminium used in lightweight and fuel-efficient car models.

Demand for alumina will be underpinned by aluminium and will be nearly balanced, given that alumina cannot be stored as easily as aluminium or bauxite.

Prospects for bauxite – a sector where Rio Tinto enjoys an unrivalled position – are particularly bright, with a projected rate of growth outpacing that of aluminium, thanks in large part to robust demand in the Chinese market. The emerging Middle East market represents an additional opportunity.

On the supply side, exports from Indonesia, a major bauxite producer, have ceased in the wake of an export ban imposed by the Indonesian Government that took effect in January 2014. Although medium-term uncertainty remains, sustained tightness in supply is expected. With attractive growth opportunities ranging from South of Embley to rich deposits in Brazil and Guinea, the Aluminium group is well positioned to capitalise on increased demand for seaborne bauxite.

Financial performance

	2014 US\$ million	2013 US\$ million
Revenue	6,282	5,916
Net cash generated from operating activities (a)	1,701	379
Underlying earnings	912	821
Capital expenditure	1,011	1,866
Net operating assets	10,581	12,070

(a) Net cash generated from operating activities excludes that from equity accounted units (Escondida) but includes dividends from equity accounted units.

Strategy and strategic priorities

The Copper group's strategy is to focus its resources on generating value from a core portfolio of low-cost, high-value, world-class assets. This includes existing operations at Rio Tinto Kennecott, Oyu Tolgoi, Escondida and Grasberg, and greenfield growth opportunities at La Granja and Resolution.

The Copper group's goal is to set an industry profitability benchmark by:

• Focusing on a world-class asset portfolio.
• Positioning itself in the first or second quartile of the cost curve.
• Delivering quality earnings by reducing costs and improving productivity.
• Making selective investments that can deliver growth to meet market opportunities.

The group's strategic priorities are to:

• Improve productivity through safer, better and smarter practices, and selected technology investments.
• Drive maximum value out of the products the group mines and optimise the entire supply chain.
• Develop strong leadership and an aligned, capable, engaged and collaborative workforce.

Safety

In 2014, the Copper product group's all injury frequency rate was 0.51, compared with 0.49 in 2013. While there has not been a fatal incident in the Copper group's managed operations in the past two years, unfortunately six employees were killed at the non-managed Grasberg operation during 2014: four in a haul truck incident, one due to a fall of ground in the underground operation and one due to a roll-over involving a concrete mixer truck.

During 2014, the group launched several new safety initiatives:

• A Critical Risk Management programme aimed at easily identifying and mitigating the common risks that can lead to fatalities and catastrophic accidents. The programme was built on the principles of the Material Safety Risk Management process at Escondida, where there have been no fatalities since the process was put in place in 2011.
• A Hand Safety campaign designed to increase employee awareness of safe practices and decrease common injuries to hands and fingers.
• Drilling safety standards and improvements to underground control safety standards.

Greenhouse gas emissions

The Copper group's 2014 greenhouse gas (GHG) emissions were 8.57 tonnes of carbon dioxide equivalent per tonne of copper cathode produced, compared with 8.34 tonnes in 2013. The decrease in efficiency resulted from a planned maintenance shutdown of the Kennecott smelter, which reduced copper cathode production year-on-year despite the continued operation of the mine and concentrator during the shutdown period. As a result, GHG emissions per tonne of copper cathode produced were higher.

Review of operations

The Copper group is focused on creating long-term value for shareholders. In the short term, it aims to achieve this by improving earnings quality through ongoing cost improvements and productivity gains. In the medium term, it aims to develop attractive brownfield projects at Kennecott and Oyu Tolgoi to leverage the next copper market cycle. In the longer term, the group is focused on two greenfield projects designed to deliver world-class returns and steady cash flows.

In 2014, the group delivered significant improvements in productivity, with a seven per cent increase in mined copper from its operations at Kennecott and Oyu Tolgoi, making Rio Tinto the world's sixth largest supplier. The group produced 603 thousand tonnes of mined copper (Rio Tinto share). Copper operations also produced 487 thousand ounces of mined gold, 4,699 thousand ounces of mined silver and 11.5 thousand tonnes of molybdenum as byproducts.

The Copper group's underlying earnings of US\$912 million were 11 per cent higher than 2013, driven by increased gold and molybdenum sales at Kennecott, the ramp-up of Oyu Tolgoi and delivery of further cash cost savings. The group generated sustainable cost reductions of more than US\$900 million in 2013 and 2014, and is making good progress improving operating costs. In 2014, the Copper group reduced working capital by US\$500 million, generated positive free cash flow for the first time since 2010 – delivering US\$800 million in free cash flow – and delivered underlying EBITDA margin improvement of 26 per cent, compared with 2013, closing the gap with its peer companies.

The group's impairment charge resulted from a review of the investment case for the Molybdenum Autoclave Process project at Kennecott. The review concluded that the project, which has been on care and maintenance since early 2013, will be terminated. The recoverable amount was determined based on anticipated net disposal proceeds. As a result, a pre-tax impairment charge of US\$559 million has been recorded against property, plant and equipment.

As part of ongoing work to focus its portfolio on high-value, world-class assets, the group divested its ownership in the Sulawesi nickel project in Indonesia, and its 19.1 per cent stake in Northern Dynasty Minerals, owner of the Pebble copper and gold project in the Bristol Bay region of Alaska.

Core operating assets

Rio Tinto Kennecott (Rio Tinto: 100 per cent)

Kennecott supplies approximately 20 per cent of US refined copper requirements, and is one of the world's few fully-integrated mining, concentrating, smelting and refining operations.

In 2014, Kennecott produced 204.1 thousand tonnes of refined copper, 252.2 thousand ounces of refined gold, and 11.5 thousand tonnes of molybdenum. Production in 2014 was impacted by ongoing recovery from the 130 million-tonne landslide on the north-east wall of the Bingham Canyon Mine, which occurred in April 2013, and a 65-day planned smelter shutdown completed in the fourth quarter of 2014. Recovery work will continue in 2015, with production in the near- and medium-term impacted by continued removal of slide material and constrained by ongoing management of pit wall stability.

Oyu Tolgoi (Rio Tinto: 50.8 per cent interest in Turquoise Hill Resources)

Located in Mongolia's South Gobi Desert, Oyu Tolgoi is one of the world's largest copper-gold-silver mines. In 2014, Oyu Tolgoi produced 148 thousand tonnes of copper and 589 thousand ounces of mined gold (100 per cent basis). Since the second half of 2014, deliveries to Oyu Tolgoi customers have outstripped production and the operation ended the year with inventories at normalised levels.

Escondida (Rio Tinto: 30 per cent interest)

Located in Chile's Atacama Desert, Escondida is the world's largest copperproducing mine. In 2014, Escondida produced 1,137.6 thousand tonnes of mined copper (100 per cent basis). Copper production was higher year-onyear due to increased mill throughput and increased ore stacked for leaching. Water constraints at Escondida are expected to create some risk to production volumes in 2015.

Grasberg (a joint venture that gives Rio Tinto a 40 per cent share of production above specified levels until the end of 2021 and 40 per cent of all production after 2021)

Grasberg is owned and operated by PT Freeport Indonesia (PTFI), a subsidiary of US-based Freeport-McMoRan, Inc. Located in the province of Papua, Indonesia, it is one of the world's largest copper mines. Rio Tinto's share of mined copper production at Grasberg was 7.7 thousand tonnes in 2014.

Development projects

The Copper group is focused on delivering high-quality, medium-term projects to extend mine life at its existing operations, creating future options with world-class greenfield projects and developing innovations that drive safety, growth and productivity. A phased development approach allows the group to deploy capital in a way that maximises shareholder return, minimises risk and times new production to come online when the market requires.

Productivity and mine life extension

Rio Tinto Kennecott

Kennecott is at the early stages of its South Pushback project which may allow the Copper group to extend the life of Bingham Canyon through accessing additional copper units from approximately 510 million tonnes of ore reserves(b).

Grasberg

PTFI continues to develop the large-scale, high-grade underground orebodies located beneath and nearby the Grasberg open pit. In aggregate, these underground orebodies are expected to ramp up over several years to approximately 240,000 tonnes of ore per day following the anticipated transition from the Grasberg open pit in 2017.

Oyu Tolgoi

The Copper group is focused on unlocking the full value of Oyu Tolgoi and remains committed to the underground development, pending appropriate investment conditions. Rio Tinto continues to engage with the Government of Mongolia to resolve a number of outstanding shareholder matters, progress project financing and meet certain conditions needed to proceed with the proposed underground development project, where a significant portion of the value is contained.

Greenfield projects

La Granja (Rio Tinto: 100 per cent)

Located in northern Peru, the La Granja project is one of the world's largestknown undeveloped copper resources.

The project team is assessing a range of options to develop the large nearsurface resource at La Granja, including staged development with early production from leaching of both secondary sulphide and primary sulphide mineralisation. The team continues to successfully prove very good recoveries from the leaching of chalcopyrite-dominant ore, and has continued to build a strong social consensus for the project.

Resolution Copper (Rio Tinto: 55 per cent)

The Resolution Copper project, located in Arizona, US, is one of the world's largest undeveloped copper deposits. In 2014, drilling continued and the project completed construction of the #10 mine shaft to final depth of 2,116 metres. Drilling, underground development and engineering studies continue as the Copper group works to optimise the business case.

(b) This is only a portion of Rio Tinto Kennecott's current ore reserves. See Ore reserves section of this report for Rio Tinto Kennecott's ore reserves including breakout of all metals and classifications.

Resolution submitted a General Mine Plan of Operations in 2013. In December 2014, President Obama signed legislation that will allow the US Federal Government to exchange 2,400 acres of federally owned land immediately adjacent to Resolution's operational site, for 5,300 acres of important wildlife habitat, conservation and recreational land owned by Resolution. Both the land exchange and proposed mine plan will now undergo a comprehensive environmental and regulatory review that includes an assessment under the US National Environmental Policy Act. This process will include public input, government-to-government consultation with Arizona Native American tribes, and a US Federal Government appraisal of the exchange lands.

Growth and innovation

Rio Tinto Copper is testing and evaluating technologies to drive improved safety and productivity at its current mines and development projects. The innovation portfolio is being prioritised to ensure that the best projects are being pursued, and that there is a balance between short and long-term initiatives.

In 2014, Rio Tinto opened the Processing Excellence Centre after successful trials at a number of copper and energy sites. The Centre is improving concentrator performance by linking experts with operations across the globe in real-time, which has driven significant improvements at Oyu Tolgoi and Kennecott.

During an industrial-scale chalcopyrite heap leaching demonstration at Kennecott, the group achieved expected copper extraction targets. The Growth & Innovation team is now conducting laboratory tests at its Bundoora facility near Melbourne, Australia with the aim of enhancing leaching recovery further. This will allow the group to develop chalcopyrite deposits such as La Granja more efficiently.

The Copper group is working with a variety of partners in areas such as the development of safer and more productive underground mining equipment and processes, as well as technologies for dynamic measurement of underground rock mass and caving performance. The goal of these projects is to significantly improve safety and productivity during construction and operation of underground mines.

Outlook

The copper market is expected to see a period of continued price weakness in the short term as, despite continued demand growth, the market moves into a surplus resulting from a number of new projects coming online. However, beyond this challenging short-term picture, the medium and long-term fundamentals remain robust, with a substantial supply gap expected by the end of the decade requiring further significant investment in new capacity. The continued urbanisation, industrialisation and electrification of China and other large markets creates a solid demand outlook, while supply will be constrained by the industry's need to invest to offset grade declines and closures at existing mines, and by the many challenges of bringing on new projects.

These market dynamics create opportunity for Rio Tinto Copper. The group has a world-class portfolio of low-cost assets and high-quality growth opportunities. It has made material progress in reducing costs and is on course to become a producer in the first or second quartile of the cost curve and deliver superior profitability. It is leveraging technology to make Copper group operations safer, more productive and more sustainable. The group is pursuing high-value growth opportunities at its existing operations in the medium term and greenfield development projects in the longer term, using a phased approach to manage risk and time new production to come online when the market requires. Finally, the Copper group is building strong community partnerships and encouraging its employees to deliver results through collaboration and sharing of best practices. The group believes this strategy will generate significant and sustainable shareholder value.

Diamonds & Minerals

Financial performance

	2014 US\$ million	2013 US\$ million
Revenue	4,150	4,193
Net cash generated from operating activities	1,201	842
Underlying earnings	401	350
Underlying earnings excluding Simandou	456	393
Capital expenditure	508	1,009
Net operating assets	7,308	7,900

Strategy and strategic priorities

The Diamonds & Minerals product group has an attractive portfolio of businesses that connect customers and consumers all around the world with products that enhance their quality of life. Demand growth for diamonds and industrial minerals typically comes mid-to-late in the economic development cycle, following peak requirements for commodities such as iron ore and copper. The product group's strategy is focused on operating safe, low-cost, demand-led businesses. Through its integrated marketing strategies and insight, the product group creates and grows global markets for its products in order to deliver value for Rio Tinto and its shareholders.

The product group's strategy is focused on:

• Operating demand-led, integrated operations that can respond quickly to the changing external environment.
• Creating and growing global markets through technical research and development and market insight.
• Improving operating performance by reducing costs, driving productivity and streamlining the organisation.
• Strengthening its position in traditional segments and entering attractive new markets.

Safety

Diamonds & Minerals continues to focus on fostering a culture of accountability and awareness among employees and improving contractor safety in our pursuit of zero harm. The product group's all injury frequency rate (AIFR) fell to 0.48 in 2014 from 0.75 in 2013.

The product group faces some unique challenges in health and safety. The workforce spans multiple nationalities, ethnicities, languages and cultures in developing countries. In response, management employs innovative strategies and visible safety leadership to train the workforce. Diamonds & Minerals is focused on eliminating fatality risks by placing an emphasis on critical controls and robust process safety.

Ebola, which has had tragic human consequences, is a critical issue for the product group. The priority for Diamonds & Minerals has been to ensure the health and safety of employees, contractors and their families. In addition, Diamonds & Minerals has supported the Government of Guinea and international organisations by donating more than US\$3.4 million worth of equipment and in-kind donations to facilitate the response to this disease.

Greenhouse gas emissions

Overall greenhouse gas (GHG) emissions intensity increased slightly in 2014. This was largely due to lower production at Rio Tinto Iron & Titanium (RTIT), where a reduction in capacity utilisation of its smelters led to an increase in GHG emissions per tonne of product. This was reflected in a four per cent increase in emissions intensity for RTIT compared with 2013. GHG emissions per tonne of product were marginally higher at Rio Tinto Minerals, but improved across Rio Tinto Diamonds operations. The product group continues to invest in the implementation of more efficient equipment and technology, such as the wind farm at Diavik.

Review of operations

The Diamonds & Minerals group's underlying earnings of US\$401 million were 15 per cent higher than 2013. Excluding Simandou exploration and evaluation costs, underlying earnings of US\$456 million were 16 per cent higher than 2013. This reflected favourable exchange rates, higher diamond prices, lower exploration and evaluation costs, higher sales volumes of titanium dioxide feedstock, borates and zircon and cash cost improvements, partly offset by lower prices for titanium dioxide feedstocks, borates and zircon. In absolute terms, cash operating costs were US\$223 million lower than 2013 including a US\$152 million benefit from exchange rate movements. Net cash generated from operating activities of US\$1,201 million was 43 per cent higher than 2013, reflecting higher EBITDA and improved working capital management.

Rio Tinto Diamonds (RTD)

RTD is a leading producer of rough diamonds, with a product portfolio that provides a presence in all major markets and market segments. Rio Tinto's diamonds assets comprise the Argyle Diamond Mine in Australia (Rio Tinto: 100 per cent), the Diavik Diamond Mine in Canada (Rio Tinto: 60 per cent), Murowa Diamonds in Zimbabwe (Rio Tinto: 78 per cent) and the Bunder diamond project in India (Rio Tinto: 100 per cent). RTD markets its share of rough diamond production through its centralised sales and marketing office and has a niche cutting and polishing factory in Australia for its high-end branded pink polished diamonds from the Argyle mine, which it sells to an international customer base.

RTD produced 13.9 million carats of rough diamonds in 2014, 13 per cent lower than in 2013. Argyle production was negatively impacted by the move from open pit to underground mining, the processing of lower grade tailings as underground production ramped up, and a maintenance shutdown impacting both underground crushers. Diavik production was in line with 2013 despite lower grades, thanks to improved mining rates and processing plant improvements. Murowa production was seven per cent higher than in 2013.

Revenue in 2014 was six per cent higher than in 2013, reflecting higher sales volumes at Diavik and increased prices. Earnings of US\$104 million were US\$51 million higher than 2013. The second crusher at Argyle was commissioned during the year and the ramp-up of the Argyle underground mine to full operation is on schedule to be completed by 2015. Diavik has been operating as a fully underground mine since 2012.

Rio Tinto Iron & Titanium (RTIT)

RTIT is the largest producer of high-grade titanium dioxide feedstocks. It mines ilmenite at its wholly-owned Rio Tinto Fer et Titane (RTFT) operation in Canada; its managed operation Richards Bay Minerals (RBM) in South Africa (Rio Tinto: 74 per cent); and its QIT Madagascar Minerals (QMM) operation (Rio Tinto: 80 per cent). RTIT produces high-grade titanium dioxide feedstocks at its world-class metallurgical complexes at RTFT and RBM as well as valuable co-products including high purity iron, steel, metal powders, zircon and rutile.

In 2014, titanium dioxide feedstock production fell by 11 per cent year-on-year to 1.44 million tonnes (Rio Tinto share). Due to challenging market conditions for high grade titanium dioxide feedstock, production continues to be aligned with market demand. One of nine furnaces remains offline at RTFT pending a rebuild which has been deferred until market conditions improve. RTIT's revenues fell by four per cent due to lower prices for titanium dioxide feedstocks and zircon, partly offset by higher sales volumes. Earnings fell by six per cent to US\$248 million.

Rio Tinto Minerals (RTM)

RTM (Rio Tinto: 100 per cent) supplies over 30 per cent of the world's refined borates from its world-class deposit in Boron, California. RTM also has borates refineries and/or shipping facilities in China, France, Malaysia, the Netherlands, Spain and the US.

Borates production of 508,000 tonnes boric oxide equivalent was three per cent higher than in 2013 in response to higher sales demand. Global demand for RTM refined borates improved slightly with revenue three per cent higher than 2013. Earnings of US\$121 million were eight per cent lower than 2013 due to a decrease in product prices and the absence of prior year tax benefits. During the year, Rio Tinto Minerals completed the modified direct dissolving of kernite (MDDK) project, which allows for more efficient orebody utilisation.

Dampier Salt (DSL)

DSL (Rio Tinto: 68 per cent), the world's largest solar salt exporter, produces industrial salt by solar evaporation of seawater at Dampier and Port Hedland, and from underground brine at Lake MacLeod, all in Western Australia. Salt is sold principally to base chemical industry markets in Asia. Salt production of 6.8 million tonnes (Rio Tinto share) was one per cent higher than 2013.

Development projects

The feasibility study to develop the A21 kimberlite pipe at Diavik was completed and approved in 2014. This development will provide an important source of incremental production to maintain existing production levels. A21 is estimated to cost US\$350 million (Rio Tinto share US\$210 million), with first production expected in 2018.

Work continued on the feasibility study for the Zulti South mine expansion at RBM, which will maintain the low-cost RBM smelter capacity post-2017. If the project is approved in 2015, commissioning is scheduled for 2017. The mineral sands exploration programme in Mozambique and other brownfield studies at the group's operations also continued throughout the year.

The Simandou iron ore project in Guinea is one of the largest-known undeveloped high-grade iron ore resources in the world. The concession will enable the development of the largest mine and infrastructure project ever undertaken in Africa. This will include the progressive development of a 100 million tonne per annum mine, a 650-kilometre trans-Guinean railway and a new deep-water port.

In May 2014, Rio Tinto and its partners, Chinalco and the International Finance Corporation, signed the Investment Framework with the Government of Guinea for the development of the Simandou iron ore project. This provides the legal and commercial foundation for the project and formally separates the infrastructure from the mine development. The Investment Framework was approved for ratification by the Guinean National Assembly in June 2014, followed by Presidential promulgation and Supreme Court review and took effect in August 2014.

The project partners are continuing to work towards the completion of a bankable feasibility study and the establishment of a funding consortium to build the infrastructure. These two elements will provide the basis for disciplined capital allocation decisions.

The Bunder diamond project is progressing its prefeasibility study, which began in July 2010. These studies have confirmed the economic potential of the orebody and work is under way on the mine plan, environmental and forestry approvals required to execute a Mining Lease.

The Jadar Project in Serbia is potentially a world-class lithium-borate deposit discovered by Rio Tinto in 2004. If developed, the deposit could supply a significant proportion of global demand for lithium and borates. Findings so far are encouraging and feasibility assessments are ongoing to build an economic business case and advance the environmental and social-economic impact assessments for the project. Lithium carbonate's fastest-growing application is in batteries that provide clean power to industrial systems and electric and hybrid vehicles.

In 2011, Diamonds & Minerals re-entered the potash business through an exploration joint venture with North Atlantic Potash Inc. (NAPI), a subsidiary of JSC Acron. Acron is a world leader in fertiliser production and holds multiple potash exploration permits in Saskatchewan, Canada. Rio Tinto has completed an extensive exploration programme on the joint venture properties, with promising results and is in discussions with NAPI and Acron regarding the future of the joint venture. Higher nutritional standards, population growth and limited arable land make potash a critical factor in maintaining global food security, and a natural complement to RTM's existing borate fertiliser business.

Outlook

Diamonds & Minerals' businesses serve a range of different industries, but have in common a track record of creating and defining new and profitable markets for the group's products. Demand softened in these markets in 2013 and 2014 in response to broader economic trends. The group's key markets are beginning to stabilise, although the pace of recovery is slower than previously thought and unlikely to fully manifest during 2015. However, the medium- to long-term outlook continues to be positive across all products as urbanisation and rising standards of living, particularly in China, drive higher levels of demand.

RTM will continue to seek to capture profitable growth in emerging economies and maintain its position in its established markets. Ongoing supply chain improvements will facilitate speed and flexibility in shifting supply to promising sectors and regions. Demand for borates is expected to remain stable in the near term, and the long-term industry fundamentals remain attractive. RTM will focus on increasing refined borates capacity to meet higher-than-GDP demand growth while achieving world-class safety performance and improving its cost position.

Demand for titanium dioxide feedstock is expected to continue to grow in the medium to long term, in line with improving global economic conditions, urbanisation and demand growth in emerging markets supported by rising per capita incomes. In response to weak demand and excess inventory in the feedstock supply chain, and in order to reduce operating costs and inventory, RTIT has taken action at a number of its operations, including temporary closures of the QMM mine and the upgraded slag (UGS) plant and deferral of a furnace rebuild at RTFT. Pigment and feedstock inventories within the supply chain are now returning towards historical levels.

The medium to long-term fundamentals for the diamond industry are positive and expected to support sustainable future price growth. The global mineral resource base is steadily declining, compounded by limited exploration investment and success, and expected reductions in supply over the medium to longer term. Demand in India and China is expected to continue to grow, and to represent nearly 50 per cent of global diamond consumption by 2025. Demand in mature markets is expected to continue to grow in line with GDP.

Energy

Financial performance

	2014 US\$ million	2013 US\$ million
Revenue	4,308	5,454
Net cash generated from operating activities	355	919
Underlying earnings/(loss)	(210)	33
Capital expenditure	224	732
Net operating assets	3,794	4,872

Strategy and strategic priorities

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

Its strategic priorities were:

• Extract full value from the group's assets.
• Leverage technology and deliver competitive projects.
• Maintain the group's licence to operate.
• Build and steer a resilient, high-return portfolio.

Safety

The Energy product group's 2014 all injury frequency rate was 0.74 compared to 0.67 in 2013 with a large number of hand injuries recorded during the year.

Energy strives to foster a culture of shared and personal accountability for health and safety, and to create a workplace where everyone goes home safe and well at the end of every shift. Throughout 2014, the group's health and safety efforts focused on:

• Strengthening the management of critical risks, specifically in areas of process safety, underground operations, and vehicles and driving.
• Improving contractor safety performance through active engagement and interaction with contract partners.
• Comprehensively refreshing the safety culture and systems at all sites to raise personal awareness and commitment to improve hazard management processes, and to strengthen the implementation of lessons arising from incidents.
• Reducing high frequency incidents such as hand injuries.

Greenhouse gas emissions

The Energy group's greenhouse gas emissions decreased to approximately 3.3 million tonnes of carbon dioxide equivalent in 2014, compared with 3.6 million tonnes in 2013. This reduction was mainly due to the divestment of the Clermont Mine and the closure of the Blair Athol Mine, and the continued efforts of the group to increase the energy efficiency of its operations through a range of initiatives including equipment optimisation and engine improvements.

Over the past 15 years, Rio Tinto has spent more than US\$100 million on research and development into technologies that will reduce emissions from coal-fired power plants. In 2014, the Energy product group continued its sponsorship of The Otway Project, Australia's first industrial-scale demonstration of geological carbon dioxide capture and storage.

Review of operations

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

Annual site production records at Hail Creek, Hunter Valley Operations and Bengalla, cost improvements and benefits from a weaker Australian dollar were more than offset by lower prices, which reduced earnings by US\$434 million, and lower uranium production. Energy continued to focus on positioning its assets further down the cost curve through a range of cost, productivity and revenue enhancements. An aggressive programme of cost and productivity improvements delivered US\$795 million of pre-tax cash savings in 2014 and 2013 compared with 2012, contributing to the product group's cash flow generation in 2014.

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

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

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

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

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

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

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

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

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

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

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

RTCA is also demonstrating operational and commercial excellence by adjusting semi-soft coal production to deliver improved margins at its Hunter Valley sites. In response to deteriorating coking coal markets its Hail Creek Mine began producing a thermal coal product for targeted customers.

RTCA has been working for nearly five years to secure a long-term future for Mount Thorley Warkworth mine. In 2014, it continued to seek approvals to maintain operations at the 30 year old mine, on land it owns within the footprint of existing mining leases. Approval is critical for the future of the operation and its 1,300 employees and contractors as existing approvals only allow the mine to maintain production and employment at current levels until the end of 2015. Two separate planning applications have been submitted for the integrated operation and the NSW Department of Planning and Environment has recommended approval. A decision on both applications is expected in 2015.

Zululand Anthracite Colliery (Rio Tinto: 74 per cent)

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

Rio Tinto Coal Mozambique (formerly Rio Tinto: 100 per cent) In October 2014, Rio Tinto completed the sale of RTCM, which includes the Benga coal mine in the Tete province of Mozambique, to International Coal Ventures Private Limited.

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

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

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

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

The Ranger 3 Deeps project remains in prefeasibility. On 3 October 2014 ERA lodged a Draft Environmental Impact Statement for the proposed Ranger 3 Deeps underground mine with the Northern Territory Environmental Protection Authority and the Commonwealth Department of the Environment.

During 2014 ERA achieved cash savings of more than A\$23 million, surpassing its objective of saving a cumulative A\$150 million in operating costs during the period 2011-2014.

Rössing Uranium Limited (Rio Tinto: 68.6 per cent)

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

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

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

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

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

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

Exploration and development studies on the project progressed during 2014.

Development projects

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

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

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

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

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

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

Outlook

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

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

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

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

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

Iron Ore

Financial performance

	2014 US\$ million	2013 US\$ million
Revenue	23,281	25,994
Net cash generated from operating activities	10,274	14,008
Underlying earnings	8,107	9,858
Capital expenditure	4,211	6,814
Net operating assets	20,987	21,062

Strategy and strategic priorities

The Iron Ore product group's vision is to remain the best iron ore producer in the world by focusing on three strategic goals:

• Production at the right cost, delivered through high-performing teams with the support of unrivalled technology.
• Value-driven growth through disciplined phasing and low-cost growth options.
• Maximising portfolio value through specialist sales and marketing expertise.

Safety

In 2014, Iron Ore's all injury frequency rate was 0.73 compared with 0.70 in the previous year. This result was reached amidst a challenging environment in which Iron Ore completed 80 per cent of the infrastructure component of the Pilbara 360 million tonne per annum (Mt/a) expansion programme and recovered from a severe tropical cyclone. Sadly, there was one fatality in November 2014 at the Iron Ore Company of Canada. Train driver Enrick Gagnon lost his life as a result of a train derailment on the Quebec North Shore and Labrador railway (QNS&L) that was caused by a landslide.

During 2014 Iron Ore initiated a health, safety and environment system review and continued with the roll-out of improvements to safety interactions, pre-start safety meetings and safety training programmes. The group has continued the implementation of its innovative THINK safety programme, which is focused on increasing employee engagement and leadership in safety management.

In Western Australia the group maintained a strong focus on the mental health of employees, including the development of a three-year wellbeing strategy. This focuses on building both mental and physical wellbeing, raising awareness and better equipping leaders to provide support and recovery assistance when required. Implementation of the strategy will commence in 2015.

The Pilbara Utilities team received the 2014 Group-wide Chief Executive Safety Award, which recognises the sites and teams with the best annual safety performance over the prior three years.

Greenhouse gas emissions

During 2014 there was a significant change in the external legislative environment for energy and climate change. The Australian Government repealed both the Energy Efficiency Opportunities (EEO) Act and the Clean Energy Act, effective 1 July 2014, introducing a review of the renewable energy target and commissioning a white paper on energy issues.

Throughout 2014, Iron Ore continued to implement high value opportunities identified in the final round of EEO, establishing more than 35 initiatives across mines, rail and ports. For example at Yandicoogina, greenhouse gas emissions have been reduced by approximately 8,700 tonnes of carbon dioxide per year through the use of a Le Tourneau 2350 loader, which uses regenerative technology to achieve a low fuel burn rate.

Iron Ore met all legislative requirements in 2014, including reporting, under the National Greenhouse and Energy Reporting Scheme, the Clean Energy Act, the Clean Energy Repeal Bill, and the EEO Act, until it was repealed in July.

The product group's total greenhouse gas emission intensity has improved 6.7 per cent on the baseline target set in 2008.

Greenhouse gas (GHG) intensity of saleable production at the Iron Ore Company of Canada marginally improved during 2014 despite a product mix that saw a greater fraction of total concentrate production converted to the more GHG-intensive pellet product. Although being more GHG intensive to produce than concentrate, pellet ultimately provides a lower GHG intensity route to finished steel for the end user.

Review of operations

Rio Tinto operates a world-class iron ore portfolio. Operations in the Pilbara region of Western Australia comprise 15 mines, four independent port terminals, the largest privately-owned heavy freight railway in Australia and supporting infrastructure, including the Operations Centre in Perth. The Iron Ore Company of Canada (IOC) operates a mine, concentrator and pelletising plant in the province of Newfoundland and Labrador, together with port facilities in Sept-Îles, Quebec. Rio Tinto Marine delivers shipping services to the wider Rio Tinto Group, including Iron Ore.

In 2014 Iron Ore achieved underlying earnings of US\$8,107 million. Record sales volumes, continued cash cost savings and lower taxes following the repeal of Mineral Resources Rent Tax in September 2014 were offset by weaker iron ore prices, down 30 per cent on average year-on-year, reducing earnings by US\$3.8 billion on 2013.

Iron Ore met global production guidance in 2014, producing 295.4 million tonnes globally. Rio Tinto's share of production was 233.6 million tonnes – an increase of 12 per cent on 2013.

Quarterly production and sales records were consistently achieved through the year. This strong performance was delivered despite interruptions caused by severe weather conditions in both the Pilbara and Canada. In January 2014, all Pilbara coastal and some mine operations were suspended as a result of tropical cyclone Christine and heavy rainfall that continued into February. North America's extreme weather in Q1 also significantly affected IOC's production and shipments in the first half of 2014.

Pilbara production improved as the year progressed, contributing to the early achievement of a 290 Mt/a run rate. Production at IOC stabilised as phase two of the Concentrate Expansion Project (CEP) was successfully completed, delivering 8.7 million tonnes of pellets and 6.0 million tonnes of concentrate for sale for the year.

Steel demand in China, while robust, did not grow at the strong rates witnessed for most of the past decade. Combined with strong growth in seaborne iron ore supply, this put downward pressure on the iron ore price, with the Platts 62 per cent iron fines index averaging US\$96.70 per dry metric tonne, a landed price in China that excludes moisture content. Iron Ore's global shipments in 2014 were 303 million tonnes at an average realised free on board (FOB) price of US\$84.30 per wet metric tonne for Pilbara volume.

Rio Tinto Marine shipped 238 Mt of dry bulk cargo on behalf of the wider Group, an increase of 25 per cent on 2013. Rio Tinto is now the largest dry bulk shipping business in the world in terms of volume, with a contract fleet of more than 200 vessels at any given time, including 17 vessels owned by Rio Tinto. Average freight rates in 2014 tracked below 2013 and forward voyage rate curves are flat, reflecting vessel oversupply and a drop in bunker fuel prices.

In the Pilbara, a new nameplate capacity of 290 Mt/a capacity was achieved in May 2014, two months ahead of schedule. Effective coordination between the expansion and operations teams enabled an almost seamless transition to the increased nameplate capacity, overseen by the Operations Centre to ensure optimal supply chain performance.

"Production at the Right Cost" improvement initiatives focused heavily on reducing costs and driving productivity gains, contributing US\$710 million in pre-tax savings to the wider Rio Tinto Group since 2012. These included reducing the use of contractors, external service providers and consultants, finding low-cost production improvements, increasing the utilisation of assets and maximising the value of new technologies. People remained a key driver in reducing costs and increasing productivity throughout 2014. An example of this was the Training Transformation strategy, which returned an overall

376,000 productive hours to the business and delivered an overall saving of US\$48 million through a focus on future innovation and technology solutions, and real-time field training.

The Mine of the Future™ programme continued to deliver efficiencies in 2014 across production, health, safety and environmental performance. In conjunction with the Technology & Innovation group, Iron Ore successfully converted four drills at the West Angelas mine to an Autonomous Drilling System, adding to the two units already in operation. The autonomous haulage system (AHS) continued to be deployed across the Pilbara, delivering lower load and haul operating costs, increased productivity and safer operating environments. At the Hope Downs 4 mine, autonomous haulage exceeded the Iron Ore Pilbara site with the highest manned effective utilisation by 14 per cent, and decreased load and haul operating costs by approximately 13 per cent. Hope Downs 4 and Nammuldi mines became the first fully-operational AHS sites, with 19 Komatsu 830E AHS haul trucks at Hope Downs 4 and 25 Komatsu 930E AHS trucks at Nammuldi. A further 13 930E AHS trucks are also in operation at Yandicoogina. Iron Ore continues to be the world's largest operator of AHS trucks and a proud leader in automated mining technologies.

Progress was also made towards AutoHaul®, the world's first autonomous heavy-haul rail system, with the project moving through a number of testing phases and the first autonomous train journey piloted in the fourth quarter.

Throughout the year, the US\$300 million Wickham town upgrade project, supporting the Cape Lambert rail and port operations workforce, was largely completed. It included construction of more than 240 houses, the Wickham Lodge fly-in, fly-out accommodation and the Julutharndu Maya central facilities building as well as new parks, roads and other town infrastructure.

In 2014, a key focus for Iron Ore remained on supporting local communities, businesses and people within the company's operational footprint. Sixty three per cent of expenditure outlayed to businesses located in the Pilbara, was with Pilbara Aboriginal businesses and their joint venture partners, providing integral services to various operations and projects, and saw millions of dollars reinvested into local economies. Iron Ore remains one of the largest private sector employers of Aboriginal people, with more than 1,100 workers in 2014.

Iron Ore continued to actively implement key participation agreements with Traditional Owners in the Pilbara, which secures land access for the life of mining operations. These agreements incorporate mutual obligations to deliver outcomes in employment, financial compensation, education and training, heritage surveys and practices, environmental care and land use.

IOC (Rio Tinto share 58.7 per cent) continued to be an important operation within Iron Ore's portfolio, maintaining a strong position as a supplier of high quality, premium pellets and high quality, low contaminant concentrate. The company is poised to realise the full potential of an enviable orebody and additional capacity brought online through recently completed expansions, while the operation remains dedicated to the journey towards zero harm.

Development projects

In May, Iron Ore announced that the Pilbara network of mines, rail and ports had reached a run rate of 290 Mt/a, two months ahead of schedule, following completion of first-phase port and rail expansion works in late 2013. This major milestone signalled a step change in production performance and paved the way for second-phase developments to 360 Mt/a.

Infrastructure to support the 360 Mt/a expansion is 80 per cent complete, with all marine and wharf works commissioned. A new shiploader at Cape Lambert Port B has been installed along with the early commissioning of a new stacker and reclaimer. First ore through a new car dumper was achieved ahead of schedule in the third quarter and all rail works for the expansion to 360 Mt/a have been completed, including AutoHaul® wayside rail works.

Iron Ore's breakthrough pathway to match the upgraded port and rail capacity will see Pilbara mine production capacity increase towards 350 Mt/a through a series of low-cost brownfield expansions. US\$400 million of capital expenditure was also approved for plant equipment and modification, as well as additional heavy machinery for use at various mines in the Pilbara. The rapid low-cost

growth pathway from existing mines such as West Angelas deposit B, Paraburdoo, Brockman 2, Nammuldi and Yandicoogina is well advanced, with around 40 Mt/a approved and in implementation. This will enable a target production rate of more than 330 Mt/a in 2015 and support delivery towards 350 Mt/a in 2017. An investment decision regarding development of the greenfield Silvergrass mine has been deferred until 2016.

The brownfield mine growth is being achieved at an average mine production capital intensity of approximately US\$9 per tonne and the full expansion from 220 Mt/a to 360 Mt/a is expected to be delivered at an industry-leading capital intensity of US\$110-120 per tonne.

Iron Ore's Pilbara expansion programme remains the largest integrated mining project in Australian history and has a proven record of delivering project stages on time and budget.

Milestones from 2014 include first ore delivered from a new 21-kilometre conveyor system at Western Turner Syncline to Tom Price in the first quarter. Completion of this project contributed to the 360 Mt/a expansion plan and provides a safer, more efficient alternative to the previous road haul operation. Rio Tinto has also approved development of Western Turner Syncline phase two, which will increase production by an additional 7 Mt/a.

The Nammuldi Below Water Table process plant delivered first ore to the stockyards in November and is expected to be in full production by the end of the first quarter of 2015.

First ore was also delivered through the new fines circuit and stacker at West Angelas deposit B in mid-November, five weeks ahead of plan. Development of deposit B included a new pit, fines circuit, stacker, and a haul road connecting to deposit A. All other non-processing infrastructure is scheduled for completion in the first quarter of 2015.

Marandoo phase two, which includes construction of a new wet processing plant to access ore reserves below the water table, was completed in 2014 and will extend the life of Marandoo operations.

At IOC, the completion of stage two of the Concentrate Expansion Project in the first half helped remove pit-to-plant bottlenecks and aided extra capacity to grow production. The project commissioned an additional ball mill and mining equipment, and upgraded power distribution infrastructure providing an additional 1.3 Mt concentrate capacity.

Outlook

The demand outlook for iron ore remains sound with expected contestable iron ore demand growth in excess of 100 Mt/a by 2020. In the longer term, there is significant potential for growth in demand in emerging markets such as ASEAN and India due to population growth, urbanisation and rising incomes.

Supply growth is expected to outpace demand growth, with approximately 300 Mt/a of additional seaborne capacity currently under construction or in ramp-up. These volumes will be spread out across the remainder of this decade and, as a consequence, supply-side exits from Chinese domestic suppliers and some high-cost seaborne suppliers will continue. Approximately 125 Mt of high-cost supply from China and non-traditional seaborne suppliers exited in 2014.

With its low-cost position, proximity to China and emerging markets, and suite of iron ore products, Rio Tinto is well placed to take advantage of demand growth for seaborne iron ore through its expansion options.

Exploration

Rio Tinto has had a sustained commitment to exploration since 1946, with an exceptional track record in mineral discovery. Mature operations such as Weipa, the Pilbara and Rössing were Tier 1 greenfield discoveries by Rio Tinto Exploration where value is still being realised after more than 40 years of production.

Strategy

The goal of Exploration is to create value for Rio Tinto through the discovery or acquisition of well-located, high-grade Tier 1 resources to supplement the Group's existing high-quality resource base. The Exploration group performs both greenfield and brownfield exploration programmes and undertakes focused research and development to aid the exploration effort. Greenfield exploration aims to establish completely new operating business units, involving, among other objectives, geographic or commodity diversification. Brownfield exploration is directed at sustaining or growing existing Group businesses in the orbit of existing operations, providing significant value to the product groups.

Additionally, Exploration is supporting an increasing array of projects across the business. This includes providing orebody knowledge expertise to the product groups, helping business development groups to evaluate merger and acquisition opportunities and assisting the Economics team with industry analysis and intelligence to support supply forecasts. In 2014, Exploration also reviewed the orebody knowledge content for all projects that were progressed to the Investment Committee.

The exploration process can take over 20 years to progress from target generation to development decisions, due to community, sustainability and investment requirements. Rio Tinto's core exploration capability and rigorous global prioritisation process has consistently delivered Tier 1 discoveries. Tier 1 discoveries over the past decade include:

Year	Discovery	Commodity	Location
2005	La Granja	Copper	Peru
2005	Caliwingina	Iron ore	Australia
2008	Sulawesi	Nickel	Indonesia
2008	Mutamba	Titanium	Mozambique
2009	Jadar	Lithium/borates	Serbia
2011	Amargosa	Bauxite	Brazil
2013	KP405	Potash	Canada
2014	Yandi Braid	Iron ore	Australia

At the end of 2014, the Exploration group was active in 19 countries and assessing opportunities in other countries across a range of commodities including copper, nickel, iron ore, bauxite, coking coal, uranium, diamonds and mineral sands. Exploration activities in China were conducted through CRTX, the joint venture between Chinalco (51 per cent) and Rio Tinto (49 per cent).

The Exploration group is organised into regional multi-commodity teams headquartered in Melbourne, London, Salt Lake City, Perth, Brisbane and Beijing; supported by a team of technical and commodity professionals. This structure provides a global reach with a local presence that allows for effective community engagement and development of the Group's social licence to operate.

Safety

At the end of 2014 the Exploration group's all injury frequency rate was 0.47, a further improvement on the 0.49 rate at the end of 2013. A multi-year change programme rolled out across the Exploration group has helped to sustain the significant safety improvement gained in 2013 and as a result Rio Tinto Exploration was awarded the "2014 Chief Executive Safety Award – most improved". This programme also contributed to measureable improvements in operational performance across all regions.

Performance

During 2014, commercial activities provided access to quality projects and supported the progression of projects through the Exploration project pipeline. Exploration joint ventures were established in Canada, the US, Chile, Mexico

and Australia. In addition, Exploration divested part of its interest in the Tamarack project in Minnesota, US thereby securing funding to increase the pace of the multi-year drilling programme required to continue testing for extensions to the nickel-copper-precious metal resource.

Resource knowledge of the Roughrider uranium project in Saskatchewan has increased, with further drilling and resource modelling. In 2015 the Exploration group will focus on identifying potential for additional resources in the orbit surrounding the project. In addition, Rio Tinto's Saskatchewan regional tenure has been prioritised and rationalised following further drilling. At the Sanxai bauxite project in Laos, ongoing exploration provided greater certainty around resource size whilst infrastructure studies targeting a range of options have been progressing. The Amargosa bauxite project in Brazil has progressed, with drilling and mapping advancing a number of brownfield areas in the Amargosa orbit as well as adding new prospects in the region.

Brownfield projects generated good drilling results at iron ore projects in the Pilbara, coking coal projects in the Bowen Basin, and in the Weipa orbit in Australia. In the Bingham orbit, drilling continued to extend the mineralisation envelope.

Exploration activities are underpinned by data and information management. The focus on data accuracy and availability has continued to drive efficiency improvements.

Research and development projects have progressed, with new analytical techniques for mineral geochemistry supporting exploration targeting. Progress continued on the development of the VK1 airborne gravity gradiometer, with a significant improvement in detection levels achieved in 2014.

In addition to Exploration's projects, the Group's major evaluation projects in 2014 were:

Project	Commodity	Country
La Granja	Copper	Peru
Resolution	Copper	US
Pilbara	Iron ore	Australia
Bowen Basin	Coking coal	Australia
Hunter Valley	Thermal coal	Australia
Zulti South	Mineral sands	South Africa
Simandou	Iron ore	Guinea
Weipa	Bauxite	Australia

In 2014, the Group reduced its exploration and evaluation expenditure to US\$747 million(a). This represented a 21 per cent decrease compared with 2013 expenditure of US\$948 million. Of the 2014 spend, US\$209 million relates to centrally-controlled exploration and evaluation activity. In total, Rio Tinto's exploration and evaluation activity covered ten commodities in 2014, across a range of greenfield and brownfield environments.

Outlook

In 2015 the Exploration group will continue to work on a prioritised portfolio of greenfield and brownfield projects. The downturn in commodity prices is expected to produce further cost-effective commercial opportunities, by providing access to high quality projects. However, challenges around timeframes to access ground, the need to increasingly explore for orebodies beneath cover rocks, and the decreasing grade and quality of potential orebodies are expected to continue. The Exploration group will focus on project generation in a number of key geographies, as well as testing of targets within the portfolio. For 2015, exploration projects at a more advanced stage include:

Project	Commodity	Country	Type	Stage
Tamarack	Nickel	US	Greenfield	Project of Merit
Roughrider	Uranium	Canada	Greenfield	Order of Magnitude
Sanxai	Bauxite	Laos	Greenfield	Project of Merit
Amargosa orbit	Bauxite	Brazil	Greenfield	Order of Magnitude
Bowen Basin	Coking coal	Australia	Brownfield	Project of Merit
Pilbara	Iron ore	Australia	Brownfield	Project of Merit

(a) An additional US\$18m loss on an undeveloped evaluation project was recorded separately in Loss relating to interests in undeveloped projects.

Technology & Innovation

Rio Tinto's Technology & Innovation group (T&I) partners with the product groups to achieve operating excellence. T&I has a recognised track record of value creation and protection, while embedding fundamental changes that will keep Rio Tinto competitive for the long term. Gross costs in 2014 were US\$340 million, compared with US\$370 million in 2013 and US\$415 million in 2012. The total number of employees in T&I increased from 730 at year-end 2013 to 919 at year-end 2014, primarily attributed to the transfer of Iron Ore project teams into T&I.

Strategy

T&I delivers value through three levers:

• Project shaping and delivery: ensuring the Group "does the right projects" and "does the projects right".
• Productivity: focusing on asset performance, technology deployment and global processes to sustainably improve operations, maximise margins and capture value.
• Innovation: creating step-change improvements to address the significant challenges facing the mining industry.

Safety

T&I is committed to the safe operation of its managed facilities and the safe deployment of its personnel. The all injury frequency rate for T&I in 2014 was 0.57 compared with 0.63 in 2013. The improvement resulted from several changes, including improved supervision and leadership in the field, improved HSE resourcing of construction projects, focus on specific construction injury risks and work planning, and attention to critical controls in the workplace. In 2014, the Cornerstone project at Rio Tinto Kennecott, US under the leadership of Rio Tinto Projects, won the Chief Executive Safety Award for the best project. This annual award recognises the project that has achieved outstanding safety performance and embodies a strong safety culture.

Performance

Project shaping and delivery

The Strategic Planning team works with product groups to identify valuable development options. In 2014, the team developed and successfully piloted a project shaping process. This considers the full spectrum of options and stakeholder interests early in the capital project life cycle, so that attractive projects get the best start and non-economic ones are culled early. The process will continue to be rolled out across the Group in 2015.

Rio Tinto Projects was established in 2014 by combining the T&I and Iron Ore project teams. Rio Tinto now has a single projects organisation, responsible for executing capital development projects and using a consistent accountability model. In 2014, Rio Tinto Projects worked on delivering the following:

• Pilbara 360 project, Australia continuing in 2015
• Concentrate expansion project at the Iron Ore Company of Canada
• Exploration decline at Energy Resources of Australia
• Modernisation of the ISAL aluminium smelter, Iceland
• AP60 project at the Arvida aluminium smelter, Canada
• Modified direct dissolving of kernite project at Boron Operations, US
• Cornerstone project continuing in 2015
• Kitimat modernisation project, Canada continuing in 2015

Rio Tinto Projects also contributed to studies for the South of Embley bauxite project, Mount Pleasant coal project, Hail Creek mine expansion, Zulti South mine expansion, Simandou iron ore project and Oyu Tolgoi copper expansion project phase 2.

The Technical Assurance team provides independent assessments to the Rio Tinto Investment Committee and board to ensure investment decisions are thoroughly reviewed and technically sound. Technical Assurance has developed and applied more rigorous project review, due diligence, and postinvestment review processes to Rio Tinto's governance. This has been effective in helping prioritise 2014's reduced capital spend and will continue to support future capital allocation.

Productivity

T&I's Productivity team continues to help operations attain the best operating performance from an asset. Key initiatives in 2014 included:

• Productivity programmes to improve the performance of mines and processing plants: For example, improving throughput in a number of operations, improving haul truck payloads and reducing train loading times in the Pilbara, increasing concentrator throughput at Oyu Tolgoi, improving recoveries at Escondida through process modelling and debottlenecking the beneficiation plant at Weipa. T&I's Integrated Value Chain Engagement (IVCE) programme undertaken by the Brockman iron ore mine since 2012 has delivered seven million tonnes of additional saleable ore and an additional 45 million tonnes of material movement without introducing new assets. Many other operations have benefited from the IVCE programme.
• Asset management: Including maintenance tactics, shutdown strategies and defect elimination protocols – to enhance the reliability, utilisation and life of operating assets.
• Process development: Using sophisticated laboratory and pilot plant facilities, and world-class modelling capabilities, to provide support to operations and projects. Examples include a step-change in leach extraction from copper sulphides and low-cost tailings de-watering.
• Technical risk mitigation: Supporting projects like Pilbara 360, the Kennecott landslide recovery, and tailings dam design and operations.

Innovation

Automation programmes continued to progress under the Mine of the Future™ programme with 57 autonomous trucks in operation in the Pilbara at year end and the world's first autonomous heavy-haul railway (Autohaul®) under construction. In 2014, T&I deployed three new technologies under the Mine of the Future™ programme:

• Processing Excellence Centre (PEC): Following successful trials that delivered significant value at Rio Tinto copper process plants, the PEC was officially opened in March. This state-of-the-art facility provides advanced remote technical support to operations. The excellence centre platform will be further developed across the Group.
• RTVis™: This visualisation software allows novel analysis of in-ground data, improving understanding of the orebody at an operation. Application of RTVis™ at the Yandicoogina mine has seen a reclassification of more than one million tonnes of material to a high silica ore product for blending. At West Angelas, the high-grade recovery programme enabled by RTVis™ created a two per cent increase in high-grade ore recovery.
• Autonomous drilling system (ADS): West Angelas is now the world's first full-time autonomous drill mine, with six rigs in operation. Functionality of the system is being extended to allow use by Rio Tinto Energy. ADS has demonstrated a ten per cent increase in use of equipment availability and significant improvement in labour productivity at West Angelas.

In addition, the Rio Tinto Chinalco Innovation Joint Venture (RTCI) was established in November. Combining Rio Tinto's global leadership in mining innovation with the resources and expertise of Chinalco's world-class research and development and engineering teams will provide a solid basis to develop and/or commercialise next-generation technologies.

Outlook

In 2015, T&I will continue to build on its 2014 successes by:

• implementing the project shaping process and improving capital project performance;
• ramping up the delivery of industry-leading productivity improvements;
• moving to the next phase of Mine of the Future™ by harnessing "big data" and predictive analytics, further equipment automation, further implementation of operation centres, excellence centres and implementation of other step-change innovations.

Financial overview

The key metrics for Group financial management and planning are summarised below.

	2014 US\$ million	2013 US\$ million	2012 US\$ million
Underlying earnings (a)	9,305	10,217	9,269
Net earnings/(loss) (a)	6,527	3,665	(3,028)
Net cash generated from operating activities	14,286	15,078	9,430
Net debt Total capital (b)	12,495 67,089	18,055 71,557	19,192 76,932

• (a) Underlying earnings is the key financial performance indicator which management uses internally to assess performance. It is presented here as a measure of earnings to provide greater understanding of the underlying business performance of the Group. Items excluded from net earnings to arrive at underlying earnings are explained in note 2 to the financial statements. Both net earnings and underlying earnings deal with amounts attributable to the owners of Rio Tinto. However, IFRS requires that the profit for the year reported in the income statement should also include earnings attributable to non-controlling interests in subsidiaries.
• (b) Total capital is defined as equity attributable to owners of Rio Tinto plus equity attributable to non-controlling interests plus net debt.

Decreased underlying earnings reflect the unfavourable impact of lower prices in the Group's main commodities, other than aluminium and diamonds. This was offset by the favourable impact of improved sales volumes, operating cash cost improvements and continued overall strengthening of the US dollar against local currencies.

Net earnings of US\$6.5 billion reflect non-cash exchange losses of US\$1.9 billion; impairment reversals of US\$1.0 billion offset by impairment charges of US\$1.1 billion; a US\$0.4 billion write-off of deferred tax assets following the repeal of the Mineral Resources Rent Tax by the Australian senate; and losses on disposal of businesses during the period of US\$0.3 billion.

Net cash generated from operating activities, which include dividends from equity accounted units, reflect the negative impact of lower commodity prices partially offset by the favourable impact from higher volumes and cost reduction initiatives and a reduction in net interest paid as a result of lower net debt.

Net debt decreased from US\$18.1 billion at 31 December 2013 to US\$12.5 billion at 31 December 2014 as operating cash inflows, divestment proceeds and proceeds from the disposal of the Group's St James's Square properties more than offset the outflows relating to capital expenditure and the increased dividend payment. Gearing ratio decreased from 25.2 per cent at 31 December 2013 to 18.6 per cent at 31 December 2014. Interest cover remained unchanged from the prior year at 13 times. The board's objective when managing capital is to safeguard the business as a going concern whilst maximising returns for the Group's shareholders. In practice, this involves regular reviews by the board and senior management. These reviews take into account the Group's strategic priorities, economic and business conditions, and opportunities that are identified to invest across all points of the commodities cycle. The resulting capital structure provides the Group with a high degree of financial flexibility at a low cost of capital.

In addition to the information provided on the product groups on pages 28 to 37, further information on their financial performance can be found in notes 2 and 3 to the financial statements on pages 123 to 126 and the financial information by business unit on pages 178 to 182.

Five year review

Selected financial data

The selected consolidated financial information below has been derived from the historical audited consolidated financial statements of the Rio Tinto Group. The selected consolidated financial data should be read in conjunction with, and qualified in their entirety by reference to, the 2014 financial statements and notes thereto. The financial statements as included on pages 103 to 194 have been prepared in accordance with IFRS as defined in note 1.

Rio Tinto Group

Income statement data

For the years ending 31 December Amounts in accordance with IFRS	2014 US\$m	2013 US\$m	2012 US\$m	2011 US\$m	2010 US\$m
Consolidated sales revenue	47,664	51,171	50,942	60,529	55,171
Group operating (loss)/profit (a)	11,346	7,430	(1,925)	14,037	19,608
Profit/(loss) for the year from continuing operations	6,499	1,079	(3,020)	6,800	15,195
Loss after tax from discontinued operations	–	–	(7)	(10)	(97)
Profit/(loss) for the year	6,499	1,079	(3,027)	6,790	15,098
Basic earnings/(losses) per share (b)
Profit/(loss) from continuing operations (US cents)	353.1	198.4	(163.4)	303.9	731.0
Loss after tax from discontinued operations (US cents)	–	–	(0.4)	(0.5)	(4.9)
Profit/(loss) for the year per share (US cents)	353.1	198.4	(163.8)	303.4	726.1
Diluted earnings/(losses) per share (b)
Profit/(loss) from continuing operations (US cents)	351.2	197.3	(163.4)	302.0	726.7
Loss after tax from discontinued operations (US cents)	–	–	(0.4)	(0.5)	(4.9)
Profit/(loss) for the year per share (US cents)	351.2	197.3	(163.8)	301.5	721.8
Dividends per share	2014	2013	2012	2012	2010
Dividends declared during the year
US cents
– interim	96.0	83.5	72.5	54.0	45.0
– final	119.0	108.5	94.5	91.0	63.0
UK pence
– interim	56.9	54.3	46.4	33.1	28.2
– final	78.0	65.8	60.3	57.3	39.1
Australian cents
– interim	103.1	93.0	68.5	49.8	49.3
– final	153.0	120.14	91.7	84.2	61.9
Dividends paid during the year (US cents)
– ordinary	204.5	178.0	163.5	117.0	90.0
Weighted average number of shares – basic (millions)	1,848.4	1,847.3	1,849.1	1,923.1	1,961.0
Weighted average number of shares – diluted (millions) (b)	1,858.7	1,857.7	1,849.1	1,935.5	1,972.6
Balance sheet data
at 31 December Amounts in accordance with IFRS	2014 US\$m	2013 US\$m	2012 US\$m	2011 US\$m	2010 US\$m
Total assets	107,827	111,025	118,437	120,152	112,773
Share capital/premium	9,053	9,410	10,189	10,024	10,105
Total equity/Net assets	54,594	53,502	57,740	58,884	64,512
Equity attributable to owners of Rio Tinto	46,285	45,886	46,553	52,199	58,247

(a) Group operating profit or loss includes the effects of charges and reversals resulting from impairments (other than impairments of equity accounted units) and profit and loss on disposals of interests in businesses. Group operating loss or profit amounts shown above exclude equity accounted operations, finance items, tax and discontinued operations.

(b) The effects of anti-dilutive potential have not been included when calculating diluted loss per share for the year ended 31 December 2012.

Summary Remuneration Report: Annual statement by the Remuneration Committee chairman

Dear shareholders

On behalf of the board, I am pleased to introduce a summary of our 2014 directors' remuneration report (the Remuneration Report), for which we seek your support at our annual general meetings (AGMs), in London in April, and in Perth in May.

The Remuneration Report, which is available to shareholders free of charge on request, as well as to view in full on our website, riotinto.com/ar2014, is designed to demonstrate the link between our Group's strategy, its performance, and the remuneration outcomes for our executives, particularly the executive directors.

With a view to delivering sustainable returns to shareholders over time, Rio Tinto takes a long-term approach to its activities, and this means concentrating on developing long-life, low-cost, expandable operations that are capable of providing competitive returns throughout business cycles. Our executives' performance objectives are set accordingly.

The Remuneration Report has been prepared in accordance with applicable legislation and corporate governance guidance in the UK and Australia. Australian legislation requires disclosures in respect of "key management personnel", being those persons having authority and responsibility for planning, directing and controlling the activities of the Group. The key management personnel are, in addition to the directors, the non-director members of the Executive Committee. The Executive Committee comprises the executive directors, product group chief executive officers and Group executives. Throughout this Remuneration Report, the members of the Executive Committee are collectively referred to as "executives". They are listed on pages 49 and 52 of the Group's 2014 Annual report, which also show the positions held during the year and dates of appointment.

Shareholders will be aware that we have to comply with UK and Australian legislation in the remuneration arena and that the rules are different. We have structured the voting arrangements such that all shareholders vote on all three resolutions that we are putting to our AGMs.

The Remuneration Report is divided into two parts: the statement of remuneration policy, which summarises our compensation policies and practices (the Remuneration Policy); and the annual report on remuneration, which shows how the Remuneration Policy has been applied (the Implementation Report).

The Remuneration Policy is once again subject to a binding vote at our 2015 AGMs for UK law purposes. The Implementation Report (including this statement) is subject to an advisory vote for UK law purposes. The Remuneration Report as a whole is subject to an advisory vote at the 2015 AGMs for Australian law purposes.

For the purposes of UK regulations on remuneration reporting, the Remuneration Policy will, if the resolution is passed, become effective in respect of payments to directors from the date of the second of our AGMs (7 May 2015).

The board presented to shareholders a policy for the remuneration of its directors for the first time at the 2014 AGMs. Following approval at the 2014 AGMs, the Remuneration Policy, for the purposes of the UK regulations, became effective in respect of payments to directors from 8 May 2014. While the board intended the Remuneration Policy put to shareholders at the 2014 AGMs to apply for three years, it has taken the decision to present you with an updated Remuneration Policy, which will be subject to a binding vote at the 2015 AGMs. This is because the board has decided to seek approval for the proposed change to the contractual notice periods for the chief executive and the chief financial officer announced, subject to shareholder consent, on 23 October 2014 by way of an update to the Remuneration Policy.

Furthermore, the board has decided to update the risk management section of the Report to incorporate its policy relating to malus and claw back for performance related payments. Both sections (being the only sections containing material changes to the Remuneration Policy) are identified in italics in the Group's 2014 Annual report. Other minor clarification and contextual changes have been made to reflect the revised Remuneration Policy becoming effective in 2015, but these are not marked. A version that shows the comparisons between our 2013 and 2014 Policy Reports is, however, available on the company's website at riotinto.com.

In the absence of circumstances which may necessitate a change to the Remuneration Policy, it is our intention that the Policy will next be put before shareholders for a vote at our AGMs in 2018. The contextual changes referred to above are designed to avoid the need to update the Remuneration Policy before then.

Although, as a matter of UK law, the Remuneration Policy only applies to the remuneration of our directors, it is the Committee's intention that the broad policy principles will continue to inform the way in which our non-director key management personnel on the Executive Committee are remunerated.

The Remuneration Policy describes among other things: our executive remuneration structure; the details of the discretions available to the Committee; our approach to remuneration on recruitment; the details of executives' service contracts; and how we treat leavers.

Remuneration for executives comprises fixed compensation in the form of base salary, participation in a pension plan, superannuation fund and/or a cash allowance to contribute to a pension fund, the receipt of certain benefits, and performance-related remuneration. Each element is described in the Remuneration Policy.

The majority of the remuneration of executives will normally be performancerelated, and is provided in the form of variable short and long-term incentives.

In relation to the short-term incentive plan (STIP), the Committee each year sets performance criteria relative to three benchmarks: threshold, target and outstanding. Target performance is intended to be stretching, and is typically equivalent to budget for the year.

I want to remind you of our policy relating to the disclosure of measures, weightings and targets. In relation to the long-term incentive plan (LTIP), these will all be disclosed in advance, at the beginning of each five-year performance period. In relation to the STIP, we will, when it comes to disclosure, distinguish between safety, financial and individual goals. In the area of safety goals, we have disclosed and will continue to disclose the measures, weightings and targets at the beginning of each year. In the area of financial and individual goals, we have disclosed, and will continue to disclose, at the beginning of each year, the measures and weightings only, because we regard the targets as commercially sensitive. However, as we said in the Remuneration Report last year, we intended to disclose, and have in the Implementation Report disclosed, the targets and outcomes for 2014 retrospectively. In the rare instances where this may not be prudent on

grounds of commercial sensitivity, I will seek to explain why and give an indication of when they would be disclosed.

The chart on page 85 of the Implementation Report demonstrates the usual timeframe for the delivery of the components of remuneration, using 2014 as an example. This emphasises the long-term nature of our remuneration arrangements.

You will see several mechanisms in the Remuneration Report that are intended to create alignment of interest between shareholders and executives. We have, for our executives, a mandatory conversion of 50 per cent of any annual short-term bonus payment into shares, with vesting deferred for three years. The performance measures under our long-term remuneration plans are structured to support and incentivise the creation of long-term shareholder value. In addition, should circumstances warrant, we have reserved to the Committee such discretions as enable it to safeguard against the return experience of shareholders being materially misaligned with the reward experience of executives. We want the remuneration outcomes properly to reflect the Group's overall performance. We also have meaningful share ownership requirements for our executives as described in the Implementation Report.

There are many examples in the Remuneration Policy and practice of how our dialogue with shareholders has influenced the Committee's decisions. In 2013, we added a new performance measure to our Performance Share Plan (PSP), namely the relative EBIT margin improvement measure. We did this because many of our owners had expressed a wish that our PSP should incorporate some diversification beyond total shareholder return (TSR). We extended the performance period of the PSP from four to five years and have materially reduced the pay-out for threshold performance. We have ceased using share options as a mechanism for long-term reward. We adjusted our safety measures in our STIP targets to reflect lost time injuries and all injury frequency rates. Meanwhile, as you will see in the Implementation Report, our decisions relating to base pay changes for executive directors and executives are now broadly guided by pay changes for the wider employee population.

2014 performance and remuneration

In terms of STIP for 2014, the Committee determined that the underlying "unflexed" earnings target set by the board had not been met. However, the "unflexed" free cash flow target and "flexed" earnings and free cash flow targets have been exceeded. "Flexed" targets are designed to take into account the impact of uncontrollable fluctuations in exchange rates, quoted metals and other prices during the year, and as such may be higher or (as was the case in 2014 – a year in which many commodity prices fell sharply) lower than "unflexed" targets set by the board. This is reflected in the financial component of the STIP awards at Group and product group level.

Disappointingly, the Group did not attain its goal of zero fatalities. However, the Group's all injury frequency rate reduced from 0.65 in 2013 to an all-time low of 0.59 in 2014, bettering the Group target of 0.61. This has led to a total safety score for the Group, excluding the impact of fatalities, of 138 per cent out of a maximum of 200 per cent. Reductions have been applied as required for executives with portfolios where a fatality has occurred.

The net effect of these outcomes, also taking into account the achievement of individual objectives, is that STIP awards for Executive Committee members have been made in a range from at or about target to above target levels.

The Committee considered the Group's overall performance in the context of the LTIP awards that were due to vest at the end of 2014. These were the 2011 award under the PSP, which had an indicative vesting of 73.5 per cent of face value, and the 2012 grant under the Share Option Plan, which has an indicative vesting of 100 per cent of face value. The Committee concluded that the vesting of awards, based upon the achievement of the TSR measures, was justified.

As previously announced, Jacynthe Coˆte´, chief executive of the Aluminium group, left the Group on 1 September. The details of her departure terms are summarised on page 84 of the Implementation Report.

2015 decisions

The Committee has reviewed the base salary levels for executives and, for the executive directors and the majority of the Executive Committee, made adjustments in line with the base salary budgets applying to the broader employee population.

The base salary increases for Alan Davies and Jean-Sébastien Jacques are specific adjustments which reflect the additional responsibilities and broader portfolios transferred to them from the former Energy product group announced on 27 February 2015. Details are set out on page 82 of the Implementation Report.

The quantum of LTIP awards to be granted to executives in March 2015 is broadly similar to those made in 2014.

Safety, cost and capital expenditure reductions, and cash flow management will continue to feature prominently in the individual objectives for executives in 2015.

Further details are provided in the Implementation Report.

Governance and owners' views

It has been and continues to be our intention to be alert to evolving best practice and to the views and guidance given to us in the conversations we have with our owners.

We are committed to a continuing dialogue with shareholders, including listening to their views about this report, which are most welcome.

Yours sincerely,

John Varley Remuneration Committee chairman

Remuneration Summary – Single total figure of remuneration

Single total figure of remuneration for executive directors

The table below provides the single total figure of remuneration for each individual who acted as an executive director during 2014, with appropriate prior year comparison figures, and is stated in the currency of payment. This is in addition to Australian statutory disclosure requirements set out in Table 1a of the 2014 Implementation Report which include theoretical accounting values relating to various parts of the remuneration packages, most notably LTIP arrangements.

The purpose of this table is to enable shareholders better to understand the actual remuneration received and to provide an overview of the actual outcomes of the Group's remuneration arrangements.

	Sam Walsh (A\$)			Chris Lynch (£)
					2013	2013
(stated in '000)	2014	2013	2012	2014	1 Mar to 31 Dec	1 Jan to 31 Feb
Base salary paid (a)	1,940	1,889	1,643	817	667	35
STIP payment – cash	1,721	1,371	1,075	746	457	–
STIP payment – deferred shares (b)	1,721	1,370	1,075	746	456	–
Total short-term pay	5,382	4,630	3,793	2,309	1,580	35
Value of LTIP awards vesting (c)	3,161	3,121	2,225	–	–	–
Pension or superannuation (d)	841	1,322	745	204	167	–
Other benefits (e)	1,030	997	232	107	941	–
Single total figure of remuneration	10,414	10,070	6,995	2,620	2,688	35
Percentage change in total remuneration
(2014 versus 2013; 2013 versus 2012)	3.4%	44.0%	14.8%	(3.8%)	–	–
Percentage of total remuneration provided as performance related pay (STIP and LTIP)	63.4%	58.2%	62.5%	56.9%	34.0%	–
Percentage of total remuneration provided as non-performance related pay (base
salary, pension or superannuation & other benefits)	36.6%	41.8%	37.5%	43.1%	66.0%	100%
Percentage of maximum STIP awarded (f)	88.4%	72.1%	65.0%	91.0%	68.1%	–
Percentage of maximum STIP forfeited	11.6%	27.9%	35.0%	9.0%	31.9%	–
Percentage of target STIP awarded	147.3%	120.2%	108.3%	151.7%	113.5%	–
Percentage of PSP award vesting	73.5%	75%	92.5%	–	–	–
Percentage SOP award vesting	–	–	100%	–	–	–

Single total figure of remuneration for the chairman and non-executive directors

The table below provides details of the fees and other benefits paid to the chairman and non-executive directors in 2014 and 2013 and is reported in US dollars.

	2014			2013
(Stated in US\$'000)	Fees and allowances	Non-monetary benefits (e)	Single total figure of remuneration	Fees and allowances	Non-monetary benefits	Single total figure of remuneration
Chairman
Jan du Plessis	1,203	92	1,295	1,119	121	1,240
Non-executive directors
Robert Brown	286	50	336	246	74	320
Megan Clark	21	–	21	–	–	–
Vivienne Cox	54	16	70	184	14	198
Michael Fitzpatrick	284	–	284	294	–	294
Ann Godbehere	251	23	274	246	22	268
Richard Goodmanson	350	20	370	340	97	437
Lord Kerr	218	13	231	222	14	236
Anne Lauvergeon	180	11	191	–	–	–
Michael L'Estrange	91	–	91	–	–	–
Paul Tellier	309	67	376	293	71	364
Simon Thompson	172	3	175	–	–	–
John Varley	342	10	352	325	18	343

(a) Salary paid in the financial year to 31 December. Salaries are reviewed with effect from 1 March.

(b) Value of STIP deferred under the Bonus Deferral Plan (BDP).

(c) Based on the value of the LTIP awards which vested in respect of the performance period that ended 31 December.

(d) For Sam Walsh, Pension or superannuation reflects the value accrued during the year assuming that it was to come into payment immediately. For Chris Lynch, it reflects the value of the pension contribution and payment in lieu of pension during the year.

(e) Non-monetary/other benefits include healthcare, company provided transport, car allowance, professional tax advice, international assignment or relocation benefits as appropriate and other contractual payments.

(f) The maximum potential STIP award is 200 per cent of base salary.

Summary shareholder information

Financial calendar

2015

20	January	Fourth quarter 2014 operations review
12	February	Announcement of results for 2014
4	March	Rio Tinto Limited shares and Rio Tinto plc ADRs quoted "ex-dividend" for 2014 final dividend
5	March	Rio Tinto plc shares quoted "ex-dividend" for 2014 final dividend
6	March	Record date for 2014 final dividend for Rio Tinto plc and Rio Tinto Limited shares and Rio Tinto plc ADRs
6	March	Publication of 2014 Annual report, 20-F and Notices of annual general meetings
17	March	Plan notice date for election under the dividend reinvestment plan and date for electing dividends paid in alternate currency for the 2014 final dividend
31	March	Dividend currency conversion date (Rio Tinto plc holders electing to receive Australian dollars and Rio Tinto Limited holders electing to receive pounds sterling)
9	April	Payment date for 2014 final dividend to holders of ordinary shares and ADRs
16	April	Annual general meeting for Rio Tinto plc, London
21	April	First quarter 2015 operations review
7	May	Annual general meeting for Rio Tinto Limited, Melbourne
16	July	Second quarter 2015 operations review
6	August	Announcement of half year results for 2015
12	August	Rio Tinto Limited shares and Rio Tinto plc ADRS quoted "ex-dividend" for 2015 interim dividend
13	August	Rio Tinto plc shares quoted "ex-dividend" for 2015 interim dividend
14	August	Record date for 2015 interim dividend for Rio Tinto plc and Rio Tinto Limited shares and Rio Tinto plc ADRs
19	August	Plan notice date for election under the dividend reinvestment plan and date for electing dividends paid in alternate currency for the 2015 interim dividend for Rio Tinto plc
20	August	Plan notice date for election under the dividend reinvestment plan and date for electing dividends paid in alternate currency for the 2015 interim dividend for Rio Tinto Limited
3	September	Dividend currency conversion date (Rio Tinto plc holders electing to receive Australian dollars and Rio Tinto Limited holders electing to receive pounds sterling)
10	September	Payment date for 2015 interim dividend to holders of ordinary shares and ADRs
16	October	Third quarter 2015 operations review

2016

January	Fourth quarter 2015 operations review
February	Announcement of results for 2015
April	Annual general meeting for Rio Tinto plc, London
April	First quarter 2016 operations review
May	Annual general meeting for Rio Tinto Limited, Brisbane
July	Second quarter 2016 operations review
August	Announcement of half year results for 2016
October	Third quarter 2015 operations review

Dividends

Both Companies have paid dividends on their ordinary shares every year since incorporation in 1962. The rights of Rio Tinto shareholders to receive dividends are explained under the description of the Dual listed companies structure on page 234.

Dividend policy

The aim of Rio Tinto's progressive dividend policy is to maintain or increase the US dollar value of ordinary dividends per share. The rate of the total dividend, in US dollars per share, is determined taking into account the results for the past year and the outlook. The interim dividend is set at one half of the total ordinary dividend per share for the previous year.

Dividend determination

The majority of our sales are transacted in US dollars, making this the most appropriate measure for our global business performance. It is our main reporting currency and consequently the natural currency for dividend determination. Dividends determined in US dollars are translated at exchange rates prevailing two days prior to the declaration and payable in sterling by Rio Tinto plc and in Australian dollars by Rio Tinto Limited.

On request, shareholders of Rio Tinto plc can elect to receive dividends in Australian dollars, and Rio Tinto Limited shareholders can elect to receive dividends in sterling. If such an election is made, the dividend amounts received will be calculated by converting the declared dividend using the exchange rates applicable to sterling and Australian dollars five days prior to the dividend payment date.

Shareholders who wish to receive their dividends in any other currencies should contact the Companies' share registrars, who also offer payment services in other currencies, subject to a fee.

2014 dividends

The 2014 interim and final dividends were determined at 96 US cents and at 119 US cents per share respectively and the applicable conversion rates for the interim and final dividend were US\$1.6871 and US\$1.52595 to the pound sterling and US\$0.93125 and US\$0.77790 to the Australian dollar respectively. For those Rio Tinto plc shareholders who elected to receive their interim dividend in Australian dollars the applicable conversion rate was A\$1.74955 and for Rio Tinto Limited shareholders who elected to receive their dividend in sterling the applicable conversion rate was £0.57158.

Final dividends of 77.98 pence or 152.98 Australian cents per share will be paid on 9 April 2015. For those Rio Tinto plc shareholders requesting the 2014 final dividend be paid in Australian dollars, those holders of Rio Tinto plc American Depositary Receipts (ADRs – each representing one share) and those Rio Tinto Limited shareholders requesting the 2014 final dividend be paid in pounds sterling, the applicable conversion rates will be announced on 31 March 2015.

Dividend reinvestment plan (DRP)

Rio Tinto offers a DRP to registered shareholders, which provides the opportunity to use cash dividends to purchase Rio Tinto shares in the market. Due to local legislation the DRP cannot be extended to shareholders in the US, Canada and certain other countries.

Contact details

Registered offices

Rio Tinto plc

2 Eastbourne Terrace London W2 6LG Registered in England No. 719885

Telephone: +44 (0) 20 7781 2000 Fax: +44 (0) 20 7781 1800 riotinto.com

Rio Tinto Limited

Level 33 120 Collins Street Melbourne Victoria 3000 ABN 96 004 458 404

Telephone: +61 (0) 3 9283 3333 Fax: +61 (0) 3 9283 3707 riotinto.com

Rio Tinto's agent in the US is Cheree Finan, who

may be contacted at Rio Tinto Services Inc. 80 State Street Albany, NY 12207-2543

Shareholders

Please refer to the Investor Centre of the respective registrar if you have any queries about your shareholding.

Rio Tinto plc

Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZY

Telephone: +44 (0) 870 703 6364 Fax: +44 (0) 870 703 6119 UK residents only, freephone: 0800 435021 computershare.com

Holders of Rio Tinto American Depositary Receipts (ADRs)

Please contact the ADR administrator if you have any queries about your ADRs.

ADR administrator

JPMorgan Chase & Co PO Box 64504 St. Paul, MN 55164-0504

Telephone: +1 (651) 453 2128 US residents only, toll free general: (800) 990 1135 US residents only, toll free Global invest direct: (800) 428 4237 adr.com jpmorgan.adr@wellsfargo.com

Rio Tinto Limited

Computershare Investor Services Pty Limited GPO Box 2975 Melbourne Victoria 3001

Telephone: +61 (0) 3 9415 4030 Fax: +61 (0) 3 9473 2500 Australian residents only, toll free: 1800 813 292 New Zealand residents only, toll free: 0800 450 740 computershare.com

Former Alcan Inc. shareholders

Computershare Investor Services Inc. 9th Floor 100 University Avenue Toronto, ON M5J 2Y1 Ontario

Telephone: +1 416 263 9200 North American residents only, toll free: +1 (866) 624-1341 computershare.com

Investor Centre

Investor Centre is Computershare's free, secure, self service website, where shareholders can manage their holdings online. The website enables shareholders to:

• View share balances
• Change address details
• View payment and tax information
• Update payment instructions

In addition, shareholders who register their email address on Investor Centre can be notified electronically of events such as annual general meetings, and can receive shareholder communications such as the Annual report or Notice of meeting electronically online.

Rio Tinto plc shareholders investorcentre.co.uk/riotinto

Rio Tinto Limited shareholders investorcentre.com/rio

Printed by Park Communications on FSC® certified paper.

Park is EMAS certified company and its Environmental Management System is certified to ISO 14001.

100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled.

This document is printed on Explorer Offset, a paper containing 100% virgin fibre sourced from well managed, responsible, FSC® certified forests. The pulp used in this product is bleached using an elemental chlorine free (ECF) process.

Design and production by Black Sun Plc www.blacksunplc.com

Typeset by RR Donnelley

Rio Tinto is reducing the print run of this document to be more environmentally friendly. We encourage you to visit: riotinto.com/ar2014 to access a full library of PDFs of this Annual report.

Get more information online

Visit riotinto.com

• Find out more about our business and performance
• View our full 2014 Annual report: riotinto.com/ar2014
• View our full 2014 Sustainable development report