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The FCA has fined Rio Tinto plc £27,385,400 for breaching the DTRs by failing to carry out an impairment test which, had it done so, would have required the value of its Mozambique coal mining assets to be significantly written down. The case emphasises the need for listed companies to adhere to the highest standards of disclosure and transparency to ensure that the markets function fairly and effectively.


Rio Tinto acquired coal mining assets in Mozambique in August 2011 for US$3.7 billion (£2.8 billion).  Underpinning its business plan was the assumption that it could inexpensively mine, transport and sell the coal by using barges to ship it to the coast for export.  During due diligence, the ability to barge was identified as a significant risk to the financial model  supporting the acquisition price. 

Within a few months of the acquisition, and prior to Rio Tinto completing its half-year accounts for 2012, it became apparent that it would not be able to barge coal as planned and that, consequently, higher cost transport alternatives would be needed.  When Rio Tinto ran these additional costs through the financial model it indicated that the assets in fact had a negative value. 

However, Rio Tinto decided not to carry out an impairment test, as required by international accounting standards.  It reasoned that there was still a lack of clarity as to how it would develop the mines and transport the coal to market.  As a result, they continued to value the assets at their original acquisition price until 17 January 2013 when they announced an impairment of more than $3 billion (more than 80%).  A few years later, the mining assets were ultimately sold for $50 million, billions of dollars below their original acquisition price.

FCA’s findings

The FCA considered that, given the indicators of impairment known to Rio Tinto prior to it completing its 2012 interim accounts, it should have carried out an impairment test at that time in accordance with International Accounting Standard 34 – and by failing to do so had breached DTR 4.2.4R(1). It should have been aware of these obligations – and had it complied with them the impairment would have been reported to the market in its 2012 interim results. By incorrectly continuing to record the coal mining assets at their original acquisition value, Rio Tinto had demonstrated “a serious lack of judgement” resulting in its 2012 interim results being “inaccurate and misleading”. 

The amount of the fine

The FCA imposed a financial penalty of £27,385,400 pursuant to section 91 of the Financial Services and Markets Act 2000.  The amount reflected Rio Tinto’s market capitalisation - and included a 30% reduction (from £39,122,007) for early settlement.  Whilst the FCA has imposed large fines in recent years for breaches of the DTRs, this fine is the largest imposed for such a breach and reflects the robust approach the FCA is prepared to take. 

US and Australian investigations

The Securities Exchange Commission (SEC) has separately investigated and charged Rio Tinto and two of its former senior executives, former CEO Thomas Albanese and former CFO Guy Elliott, with violating the antifraud, reporting, books and records and internal controls provisions of the federal securities laws.  The SEC is seeking permanent injunctions, return of allegedly ill-gotten gains plus interest, and civil penalties from all the defendants.  It is also seeking to bar the former senior executives from serving as public company officers or directors.

The SEC alleges that Rio Tinto and its senior executives sought to hide or delay disclosure of the nature and extent of the developments from its board of directors, audit committee, independent auditors and investors. It contends that this led Rio Tinto to release misleading financial statements and public statements prior to a series of US debt offerings pursuant to which Rio Tinto raised $5.5 billion from US investors (approximately $3 billion of which was raised after the negative developments had become known within Rio Tinto). 

Rio Tinto has said that it “intends to vigorously defend itself against the allegations” made by the SEC.  It has also emphasised that “the FCA made no findings of fraud, or of any systemic or widespread failure by Rio Tinto” and that it “believes that the SEC case is unwarranted and that, when all the facts are considered by the court, or if necessary by a jury, the SEC’s claims will be rejected”.

Separately, Rio Tinto has announced that the Australian Securities and Investment Commission has also filed a complaint regarding Rio Tinto’s disclosures and the timing of the coal mine impairment.  Rio Tinto has confirmed that it also “intends to vigorously defend itself against these allegations” and will update the market in due course.

Lessons to learn

The FCA’s investigation emphasises the need for listed companies to adhere to the highest standards of disclosure and transparency – and the size of the fine, the largest to date for breach of the DTRs, emphasises the robust approach that the FCA is prepared to take.  The complaints filed by the SEC and the Australian Securities and Investment Commission serve as a reminder that, for international corporates with multiple listings, the consequences may be far reaching.


This document provides a general summary and is for information/educational purposes only. It is not intended to be comprehensive, nor does it constitute legal advice. Specific legal advice should always be sought before taking or refraining from taking any action.