Rio Tinto settles with FCA over Mozambique impairment, faces US fraud claims

The Financial Conduct Authority said in a statement overnight that Rio Tinto misled investors by failing to carry out an impairment test that would have resulted in a material impairment being made to its 2012 half year results, which it did not remedy until in January 2013 when it made a massive $3bn writedown.

Rio eventually sold the coal project in 2014 for $50m after realising it would be unable to ship coal downriver to port.

On Wednesday the company also received notification that the US Securities and Exchange Commission has alleged in a civil complaint that the FTSE 100 group committed fraud in relation to the disclosures and timing of the impairment of Rio Tinto Coal Mozambique, naming former chief executive Tom Albanese and chief financial officer Guy Elliott.

"The impairment was reflected in Rio Tinto's 2012 year-end accounts," said Rio, adding that it "intends to vigorously defend itself against these allegations".

The company believes 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".

It noted that in settling the case, the FCA "made no findings of fraud, or of any systemic or widespread failure by Rio Tinto" and that the UK case is now closed.

There is, however, also an investigation underway by the Australian Securities and Investments Commission.

Elliott, who has been a non-executive director at Royal Dutch Shell for seven years, resigned on Wednesday with immediate effect.

Shell chair Charles Holliday said: “We fully respect and appreciate Guy’s decision which is related to his involvement in legal proceedings regarding his former employment at Rio Tinto."

He added: "We sincerely hope he satisfactorily resolves those proceedings and, that in that event, he would like to be considered for rejoining the Board.”