Rio Tinto and former bosses hit with United States fraud charges

Tom Albanese the former chief executive of Rio Tinto is alleged to have concealed the true value of a failed coal acquisition in Mozambique

According to the SEC's complaint, in 2011, Rio Tinto acquired coal assets in Mozambique shortly after disclosing huge losses associated with its previous large-scale acquisition of Alcan.

The SEC said that as RTCM began to suffer a series of setbacks with a concomitant decline in the value of the assets.

The US SEC said that Rio Tinto, soon after completion of the deal, found the projects would produce less coal, and of a lower quality, than expected. Rio Tinto raised $5.5 billion from US investors, approximately $3 billion of which was raised after May 2012, when executives at Rio Tinto Coal Mozambique had already told Albanese and Elliott that the subsidiary was likely worth negative $680 million. The consensus target price is 30.05GBX with 5 firms rating the stock a strong buy, 10 firms rating the stock a buy, 9 firms rating the stock a hold, 3 firms rating the stock a underperform, and finally 1 firm rating the stock a sell.

The company had planned to barge coal from the mines down the Zambezi river to the coast for export, but it became apparent that this would not be possible and higher cost alternatives would be needed, the watchdog said.

"As alleged in our complaint, Rio Tinto's top executives allegedly breached their disclosure obligations and corporate duties by hiding from their board, auditor, and investors the crucial fact that a multi-billion dollar transaction was a failure", Stephanie Avakian, co-director of the commission's enforcement division, said in a news release announcing the charges. "They tried to save their own careers at the expense of investors by hiding the truth", SEC Enforcement Division co-director Steven Peikin said.

The SEC demands that Rio Tinto, former CEO Thomas Albanese and former CFO Guy Elliott disgorge all ill-gotten gains, in addition to paying prejudgment interest and civil penalties. 2014 - Albanese named chief executive of Indian mining company Vedanta Resources Plc, where he serves until September 2017. Acrospire Investment Management LLC raised its stake in Rio Tinto PLC by 13.0% in the second quarter.

"We sincerely hope he satisfactorily resolves those proceedings and, that in that event, he would like to be considered for rejoining the board".

Rio Tinto says it will defend itself vigorously against the SEC's allegations.

The SEC's civil complaint to the US District Court for the Southern District of NY said the fraud occurred when it failed to impair the RTCM assets in its 2011 year-end accounts in February 2012 and its interim results in August 2012.

America's financial regulator, the Securities and and Exchange Commission, filed a complaint in federal court in Manhattan.

The FCA had determined that Rio Tinto should have carried out an impairment review in relation to RTCM for its 2012 interim results and, if it had done so, those results published in August 2012 would have reflected the impairment it recorded six months later. 2011 - Rio Tinto's chief executive for energy Doug Ritchie describes the Mozambique operations as the "greatest undeveloped seaborne coking coal region in the world".

Rio Tinto agreed to settle at an early stage of the FCA investigation, otherwise it would have been fined $51 million.

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. Rio Tinto's financial reporting was therefore inaccurate and misleading. As a outcome, Rio Tinto qualified for a 30% discount to the fine.

"Reflecting the size of the company", Steward added, "this is the largest fine imposed to date by the FCA for a breach of rules relating to a firm's official listing".

"I echo Rio Tinto's confidence that these will be proved baseless in court", Mr Albanese said.

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