Rio Tinto hit with record FCA fine and United States fraud charges


Rio Tinto said it meant to "vigorously defend itself" against the "unwarranted" USA charges and said that the action in the United Kingdom by the FCA had made "no findings of fraud, or of any systemic or widespread failure" by the company.

In a statement this morning, Rio Tinto confirmed the settlement with the FCA and also revealed that it has received notification that the US Securities and Exchange Commission (SEC) has alleged in a civil complaint that the FTSE 100-listed group committed fraud in relation to the disclosures and timing of the impairment of Rio Tinto Coal Mozambique (RTCM).

A lawsuit filed in the USA accuses Rio Tinto, its former chief executive Thomas Albanese and ex-chief financial officer Guy Elliott of failing to follow accounting standards and company policies to accurately value and record the assets.

The Financial Conduct Authority has fined Rio Tinto plc £27,385,400 for breaching Disclosure and Transparency Rules.

Guidance for Rio Tinto's expected share of 2017 production is unchanged at 7.2 - 7.8 million t of hard coking coal, 11.4 - 12.4 million t of iron ore pellets and concentrates, 0.5 million t of boric oxide equivalent production, 1.2 - 1.3 million t of titanium dioxide slag, and 6.5 - 7.5 million pounds of uranium.

"The FCA made no findings of fraud, or of any systemic or widespread failure by Rio Tinto". Instead, as the project began to suffer one setback after another resulting in the rapid decline of the value of the coal assets, they sought to hide or delay disclosure of the nature and extent of the adverse developments from Rio Tinto's Board of Directors, Audit Committee, independent auditors, and investors.

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As announced on 1 September 2017, Rio Tinto completed the sale of Coal & Allied to Yancoal Australia for total consideration of AUS$2.69 billion, which included Coal & Allied's interests in the Hunter Valley Operations, Mount Thorley and Warkworth mines.

'They tried to save their own careers at the expense of investors by hiding the truth, ' Mr Peikin said in a statement on the SEC website.

It also said that the purchase of the Mozambique coal assets was based on an incorrect assumption that the miner "could inexpensively mine, transport, and sell large quantities of high-quality coal, chiefly using barges for shipping".

So instead, the SEC alleges, "they concealed the adverse developments, allowing Rio Tinto to release misleading financial statements days before a series of USA debt offerings". The complaint alleges Albanese then repeated and reinforced the false positive outlook for the project in public statements. Rio Tinto's financial reporting was therefore inaccurate and misleading.

Rio Tinto has been handed a £27m fine by the financial regulator over a "serious lack of judgement" in reporting the value of mining assets in Mozambique.

The FCA acknowledges not only the considerable assistance but also the collaboration of the U.S. Securities and Exchange Commission and the Australian Securities & Investments Commission in this matter.