Rio Tinto slammed with £27m fine

Rio Tinto slammed with £27m fine

The FTSE 100 company and two of its top former executives were charged in the United States of hiding losses by inflating the value of assets in Mozambique, which Rio bought in 2011 for $3.7bn ($2.8bn) and sold a few years later for $50m.

Based on the SEC's civil complaint to the court for the southern district of New York, Rio Tinto plc, Rio Tinto Limited, Albanese, and Elliott are charged with violating the antifraud, reporting, books and records and internal controls provisions of federal securities laws.

In 2011, Rio Tinto purchased the Mozambique coal assets for $3.7bn and sold them for $50m in 2014.

"They tried to save their own careers at the expense of investors by hiding the truth", Paikin said.

Similarly, UF FCA found in that Rio Tinto breached the Disclosure Rules by failing to carry out an impairment test and to recognise an impairment loss on the value of mining assets in Mozambique. He resigned as CEO of another mining giant, Vedanta Resources, in August.

As a result of the charges, Mr Elliott stood down from his role as a non-executive director at oil group Royal Dutch Shell.

The lawsuit accuses the Australian-British multinational corporation and former company executives of 12 counts of federal securities violations.

The SEC has alleged in a civil complaint filed in the US District Court for the Southern District of NY that Rio Tinto committed fraud by not accurately disclosing the value of Rio Tinto Coal Mozambique and not impairing it when Rio Tinto published its 2011 year-end accounts in February 2012 or its interim results in August 2012.

"We sincerely hope he satisfactorily resolves those proceedings and, that in that event, he would like to be considered for rejoining the board", said Charles Holliday, Shell's chairman.

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Despite internal financial modelling by Rio indicating this had destroyed the value of the acquisition, the company decided not to carry out an impairment test as it was meant to do under global accounting standards.

Rio Tinto was separately fined £27.4m by the UK's financial watchdog for breaching disclosure and transparency rules over its handling of the Mozambique mining assets. This continued until 17 January 2013 when Rio Tinto announced an impairment of the Mozambique assets, writing off approximately 80 per cent of the value of the investment in the Mozambique mine.

The FCA said that Rio Tinto, had it complied with its obligation to carry out an impairment test, would have impaired RTCM in its August 2012 half year results.

Morgan Stanley set a GBX 3,700 ($49.16) price objective on Rio Tinto plc (LON:RIO) in a research report report published on Tuesday.

The FCA maintained that the penalty would have been a larger £39.1 million, yet had been reduced because Rio Tinto had agreed to settle more promptly.

Rio said it would "vigorously defend itself against these allegations".

"Rio Tinto and its top executives allegedly failed to come clean about an unsuccessful deal that was made under their watch", Steven Paikin, co-director of the the commission's enforcement division, said in a statement. "The case is now closed".

The company allegedly anticipated exporting 40 million tons of coal per year by barging the majority of the coal product down the Zambezi River to a port on the Indian Ocean, but the Mozambique government rejected Rio Tinto's proposal to barge coal down the river.

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