Solid financial results driven by record operational performance of iron ore division:

• Underlying earnings1 of $5.2 billion down 34 per cent largely due to lower prices. Net earnings1 of $5.9 billion down 22 per cent.
• Underlying EBITDA1 of $10.1 billion and cash flows from operations of $7.8 billion.
• Recognition within net earnings of a $1.0 billion deferred tax asset following the introduction of the Minerals Resource Rent Tax (MRRT) in Australia.
• Pilbara iron ore network in Western Australia now operating at increased capacity of 230 million tonnes per annum (Mt/a) following completion of second low capital debottlenecking project on time and on budget
• Shipped first cargo of premium hard coking coal from Benga mine in Mozambique.

Consistent delivery against clearly defined growth programme:

• Capital expenditure of $7.6 billion in 2012 first half. Expectations for capital expenditure for full year 2012 remain at $16 billion (Rio Tinto attributable share: $13.6 billion).
• Phase one Pilbara iron ore expansion to 283 Mt/a on track for completion by end of 2013.
• Second phase expansion to 353 Mt/a to be operational by the first half of 2015.
• Development of the Oyu Tolgoi copper-gold project in Mongolia remains on schedule for first commercial production in the first half of 2013.
• Completed agreement with Chalco to develop and operate Simandou, with first commercial production by mid-2015.

Further steps taken to shape the portfolio:

• Attained majority ownership and full management control of Turquoise Hill (formerly
• Ivanhoe).
• Announced doubling of stake in Richards Bay Minerals in South Africa to 74 per cent:
• transaction expected to complete in second half of 2012.
• Strategic review of diamond business including exploring a range of options for potential divestment.
• Interim dividend of 72.5 US cents declared, 34 per cent higher than 2011, in line with the Group’s dividend policy and previous guidance.
• $7 billion share buy-back programme completed at end of the first quarter.

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

Chairman’s comments

Chairman Jan du Plessis said “Lower prices were the main driver of a reduction in underlying earnings in the first half of 2012, but overall we continue to generate strong earnings and cash flows. This demonstrates the strength and resilience of our high quality assets and reaffirms the benefits of our consistent, clear and disciplined strategy of investing in and operating large, long-term, cost-competitive mines and businesses.

“Whilst we are mindful of short-term uncertainties we remain convinced of the strength of the long-term demand outlook. We have taken a considered approach to investment, committing capital only to projects that will deliver value for shareholders under any probable macroeconomic conditions.

“Our interim dividend increased by 34 per cent, in line with our policy and the increase announced six months ago. All capital allocation decisions take into account our aim of maintaining a strong balance sheet and a single A credit rating. We are mindful of balancing the high returns that can be achieved from investing in our superior growth pipeline with the desire for cash returns to shareholders, including our progressive dividend policy.”

Chief executive’s comments

Chief executive Tom Albanese said “We continue to generate strong margins despite falling prices, reflecting the low cost nature of our businesses and our first-rate operational performance. We are reaping the benefits of investing early in iron ore, which is producing consistently high returns.

“We have been signalling for some time that markets would remain volatile and we have seen challenging conditions in the first half. Although sentiment remains negative in Europe and the US recovery is still fragile, our order books are full and we expect Chinese GDP growth to be around eight per cent in 2012. We expect to see signs of improvements in Chinese economic activity by the end of the year, with growth picking up more strongly as Government stimulus measures announced in the second quarter begin to flow through to infrastructure investment.

Around 500 of these investment projects are slated to start later this year and in 2013. “We have some of the best quality growth projects in the world and the flexibility to phase investment plans. Many of our projects are close to completion and will start generating revenues in the near term. Benga has already made its first coking coal shipment, the Yarwun 2 alumina refinery is complete and ramping up, Oyu Tolgoi starts commercial production next year and we will increase Pilbara iron ore production capacity by more than 50 million tonnes a year by the end of 2013.

“Our Pilbara operations enjoy one of the highest margins in the industry, low relative capital intensity of investment and we have one of the strongest track records in the mining industry of completing projects on time and budget.

“Across the sector, miners are facing increasing costs and we are actively undertaking measures to tackle this challenge. Rio Tinto has a long-established track record of cost control and productivity improvement. While cost increases have abated somewhat, this remains a major area of focus as we continually seek to enhance our operational and financial performance. We are placing a high priority on productivity improvements at our operations, where around 90 per cent of our costs are incurred, and are implementing a programme to improve the efficiency and effectiveness of our support and service functions across the business.

“We have the added advantage of clear leadership in innovation, where we continue to make real progress in implementing step-change technologies. From autonomous trucks and trains to faster underground tunnelling and advanced mineral recovery, all of these initiatives are aimed at reducing costs and improving productivity. “With our confidence in the long-term outlook, superior assets and high quality growth pipeline, we remain well positioned to deliver shareholder value over the long term.”

Prices

The effect of price movements on all major commodities in 2012 first half was to decrease underlying earnings by $1,936 million compared with 2011 first half. Prices declined for nearly all of Rio Tinto’s major commodities, with the exception of gold which was up 14 per cent on 2011 first half, minerals (mainly borates and titanium dioxide feedstocks) and thermal coal.

Average thermal coal prices were higher in the 2012 first half compared with 2011 first half, although the 2012/13 Japanese fiscal year contract price, applicable from April 2012, is lower than the previous contract price. Copper prices were down 14 per cent, aluminium prices averaged 15 per cent lower and molybdenum was 17 per cent lower. The average Platts price for 62 per cent Pilbara fines declined by 21 per cent compared with 2011 first half.

Exchange rates

Compared with 2011 first half, on average, the US dollar was unchanged against the Australian dollar but strengthened by three per cent against the Canadian dollar, by seven per cent against the Euro and by 15 per cent against the South African Rand. The effect of all currency movements was to increase underlying earnings relative to 2011 first half by $200 million.

Volumes

Volume increases enhanced earnings by $366 million compared with 2011 first half. These were achieved primarily in iron ore, where sales volumes rose four per cent due to increased capacity at the Pilbara ports, and at Rio Tinto Coal Australia, in line with recently completed thermal coal expansions. Production of iron ore and coal benefited from a reduced impact from severe wet weather compared with 2011 first half. Volume declines lowered earnings by $584 million compared with 2011 first half. These were driven by copper and gold, with lower grades at Kennecott Utah Copper and no metal share from Grasberg.