| Financial instruments and risk management | 29 Financial instruments and risk management In this note, except where stated, the information relates to the financial instruments of the parent companies and their subsidiaries and joint operations, and excludes those of equity accounted units. We have grouped the information in the following sections: A – Financial assets and liabilities by categories B – Derivative financial instruments C – Fair values A (a) Financial assets and liabilities by categories At 31 December 2021 Note Total Amortised Fair value through other Fair value Financial assets Cash and cash equivalents 20 12,807 8,669 — 4,138 Trade and other financial receivables (a)(b) 18 2,762 1,598 — 1,164 Equity shares and quoted funds 19 117 — 98 19 Other investments, including loans (c) 19 2,682 22 — 2,660 Derivatives related to net debt: designated as hedges (d) 19, 23 139 — — 139 Derivatives and embedded derivatives not related to net debt: not designated as hedges (d) 19 133 — — 133 Loans to equity accounted units including quasi equity loans 96 96 — — Total financial assets 18,736 10,385 98 8,253 Financial liabilities Trade and other financial payables (e) 24 (6,356) (6,289) (67) Short-term borrowings and bank overdrafts 21 (1,136) (1,136) — Medium-term and long-term borrowings 21 (12,395) (12,395) — Derivatives related to net debt: designated as hedges (d) 21, 23 (240) — (240) Derivatives and embedded derivatives not related to net debt: not designated as hedges (d) 21 (255) — (255) Embedded derivatives not related to net debt: designated as hedges (d) 21 (123) — (123) Other financial liabilities 21 (20) (20) — Total financial liabilities (20,525) (19,840) (685) At 31 December 2020 Note Total Amortised Fair value Fair value Financial assets Cash and cash equivalents 20 10,381 3,970 — 6,411 Trade and other financial receivables (a)(b) 18 3,286 1,479 — 1,807 Equity shares and quoted funds 19 75 — 64 11 Other investments, including loans (c) 19 2,899 138 — 2,761 Derivatives related to net debt: designated as hedges (d) 19, 23 388 — — 388 Derivatives and embedded derivatives not related to net debt: not designated as hedges (d) 19 204 — — 204 Embedded derivatives not related to net debt: designated as hedges (d) 19 73 — — 73 Loans to equity accounted units including quasi equity loans 153 153 — — Total financial assets 17,459 5,740 64 11,655 Financial liabilities Trade and other financial payables (e) 24 (5,847) (5,817) (30) Short-term borrowings and bank overdrafts 21 (584) (584) — Medium-term and long-term borrowings 21 (13,247) (13,247) — Derivatives related to net debt: designated as hedges (d) 21, 23 (140) — (140) Derivatives and embedded derivatives not related to net debt: not designated as hedges (d) 21 (24) — (24) Embedded derivatives not related to net debt: designated as hedges (d) 21 (20) — (20) Other financial liabilities 21 — — — Total financial liabilities (19,862) (19,648) (214) (a) Trade and other financial receivables comprise trade receivables, other financial receivables, receivables relating to net investments in finance leases and amounts due from equity accounted units within note 18. (b) Provisionally priced receivables are fair valued. (c) Other investments, including loans, includ e US$2,401 million ( 2020: US$2,538 million) of highly liquid financial assets in managed investment funds classified as held for trading. (d) These financial assets and liabilities in aggregate agree to the total derivative financial instruments disclosed in notes 19 and 21. (e) Trade and other financial payables comprise trade payables, other financial payables, accruals and amounts due to equity accounted units within note 24 . The trade and other payables held at fair value are valued using Level 2 inputs. A (b) Financial risk management Objectives and policy Our financial risk management objectives are: – to have in place a robust capital structure to manage the organisation through the commodity cycle; and – to allow our financial exposures to float with the market. Any exceptions to these require formal approval by the Board. The Group operates a floating prices and rates policy for the management of our key economic exposure to commodity price, foreign exchange and interest rates risks. We do not seek to hedge this floating exposure and will re-float, where possible, any material price or rates that are fixed. Where this is impossible (or sub-optimal) any non-floating price risks are managed within defined market risk tolerances. Derivatives are used as and when required in order to manage our exposure in accordance with this underlying financial risk management principle. In the paragraphs below, we summarise the risks that we are exposed to, and outline how our Treasury and Commercial teams manage these risks in accordance with agreed policies. These teams operate under a strong control environment, within approved limits. Our Board reviews and approves limits at least annually. (i) Capital and liquidity risk Our overriding objective when managing capital and liquidity is to safeguard the business as a going concern. Capital is allocated in a consistent and disciplined manner, prioritising sustaining capital expenditure, followed by the ordinary dividend and then an iterative allocation between investing in compelling growth opportunities, maintaining balance sheet strength and delivering further returns to shareholders. Our Board and senior management regularly review the capital structure and liquidity of the Group. They take into account our strategic priorities, the economic and business conditions, and any identified investment opportunities, along with the expected returns to shareholders. We expect total cash returns to shareholders over the longer term to be in a range of 40–60% of underlying earnings in aggregate through the commodity cycle. We consider various financial metrics when managing our risk, including net debt, gearing, the overall level of borrowings and their maturity profile, liquidity levels, total capital, future cash flows, underlying EBITDA and interest cover ratios. Our total capital as at 31 December was: Total capital Note 2021 US$m 2020 US$m Equity attributable to owners of Rio Tinto (see Group balance sheet) 51,432 47,054 Equity attributable to non-controlling interests (see Group balance sheet) 5,158 4,849 Net (cash)/debt 23 (1,576) 664 Total capital 55,014 52,567 Our net cash increased by US$2.2 billion to US$1.6 billion at 31 December 2021 from net debt of US$0.7 billion at 31 December 2020. This was driven by operating cash inflows, partially offset by capital expenditure and cash returns to shareholders during the year. At 31 December 2021 net gearing was (3)% (2020: 1%) and interest cover was 59 times (2020: 39 times). We have access to various forms of financing including our US Shelf Programme, European Debt Issuance Programme, Commercial Paper and credit facilities. On 28 October 2021, we issued US$1.25 billion 30-year fixed rate SEC-registered bonds with a coupon of 2.75%. The proceeds of the new issuance were used to fund the early redemption and extinguishment of the company’s US$1.20 billion 3.75% bonds due to mature in June 2025. On 16 November 2021, Rio Tinto Finance plc and Rio Tinto Finance Limited completed the renewal of our US$7.5 billion multi-currency revolving credit facility with a syndicate of banks. The facility is guaranteed by Rio Tinto plc and Rio Tinto Limited and has a five one US$6.2 billion denominated same day access swing-line facility. The new facility replaced the US$7.5 billion dual tranche revolving credit facility dated 15 November 2013, last amended in November 2020. The facility remained undrawn throughout the year. Our credit ratings, as provided by Standard & Poor’s and Moody’s investor services, as at 31 December were: 2021 2020 Long-term rating A/A2 A/A2 Short-term rating A-1/P-1 A-1/P-1 Outlook Stable/Stable Stable/Stable Our unified credit status is maintained through cross guarantees, which mean the contractual obligations of Rio Tinto plc and Rio Tinto Limited are automatically guaranteed by the other. 29 Financial instruments and risk management continued In the table below, we summarise the maturity profile of our financial liabilities on our balance sheet based on contractual undiscounted payments. When the amount payable is not fixed, the amount disclosed is determined by reference to the conditions existing at the end of the reporting period. This will therefore not necessarily agree with the amounts disclosed as the carrying value. Financial liability analysis At 31 December 2021 (Outflows)/Inflows Within 1 Between Between Between Between After Total Non-derivative financial liabilities Trade and other financial payables (a) (5,766) (31) (34) (18) (20) (406) (6,275) Expected lease liability payments (361) (266) (174) (133) (93) (704) (1,731) Borrowings before swaps (827) (746) (1,318) (604) (597) (8,112) (12,204) Expected future interest payments (a) (511) (486) (460) (439) (414) (3,485) (5,795) Other financial liabilities (20) — — — — — (20) Derivative financial liabilities (b) Derivatives related to net debt – gross settled (a) : – gross inflows 41 41 506 27 27 756 1,398 – gross outflows (44) (44) (590) (34) (34) (909) (1,655) Derivatives not related to net debt – net settled (186) (77) (40) (10) (3) (37) (353) Derivatives not related to net debt – gross settled: – gross inflows 1,302 — — — — — 1,302 – gross outflows (1,340) — — — — — (1,340) Total (7,712) (1,609) (2,110) (1,211) (1,134) (12,897) (26,673) At 31 December 2020 Within 1 Between Between Between Between After Total Non-derivative financial liabilities Trade and other financial payables (a) (5,251) (53) (15) (34) (19) (394) (5,766) Expected lease liability payments (271) (231) (155) (101) (84) (724) (1,566) Borrowings before swaps (351) (667) (743) (1,256) (1,892) (7,477) (12,386) Expected future interest payments (a) (525) (522) (495) (469) (427) (2,999) (5,437) Other financial liabilities — — — — — — — Derivative financial liabilities (b) Derivatives related to net debt – gross settled (a) : – gross inflows 27 27 27 27 27 790 925 – gross outflows (34) (34) (34) (34) (34) (943) (1,113) Derivatives not related to net debt – net settled (20) (7) (2) (2) (2) (9) (42) Derivatives not related to net debt – gross settled: – gross inflows 290 — — — — — 290 – gross outflows (291) — — — — — (291) Total (6,426) (1,487) (1,417) (1,869) (2,431) (11,756) (25,386) (a) The interest payable at year end was removed from trade and other financial payables and is shown within expected future interest payments. Interest payments have been projected using interest rates applicable at the end of the applicable financial year. Where debt is subject to variable interest rates, future interest payments are subject to change in line with market rates. (b) The maturity grouping is based on the earliest payment date. Offsetting and enforceable master netting agreements When we have a legally enforceable right to offset our financial assets and liabilities and an intention to settle on a net basis, or realise the asset and settle the liability simultaneously, we report the net amount in the consolidated balance sheet. Agreements with derivative counterparties are based on the International Swaps and Derivatives Association master netting agreements that do not meet the criteria for offsetting, but allow for the related amounts to be set-off in certain circumstances. During the year, there were no material amounts offset in the balance sheet. (ii) Commodity price risk Our broad commodity base means our exposure to commodity prices is diversified. Our normal policy is to sell our products at prevailing market prices. Exceptions to this rule are subject to strict limits laid down by the Board, and to defined market risk tolerances and internal controls. We sell our products to customers under contracts which vary in tenure and pricing mechanisms, including some volumes sold in the spot market. Sales revenue may be subject to adjustment if product specifications do not conform to the terms specified in a sales contract. Pricing for iron ore is on a range of terms, the majority being either monthly or quarterly average pricing mechanisms. We sell a smaller proportion of iron ore volumes on the spot market. We generally sell copper and aluminium under contracts which vary in tenure and pricing mechanisms, with some volumes sold in the spot market. The prices are determined by reference to prevailing market prices on terminal markets, such as the London Metal Exchange (LME) and the Commodities Exchange (COMEX) in New York. Prices fluctuate widely in response to changing levels of supply and demand but, in the long run, prices are related to the marginal cost of supply. Gold is also priced in an active market in which prices respond to daily changes in quantities offered and sought. Newly mined gold is only one source of supply; investment and disinvestment can be important elements of supply and demand. At the date revenue is recognised, certain of our products are provisionally priced, based on the amount we expect to receive in the future. After initial recognition of revenue, we record any change in revenue relating to market prices separately in “Other revenue” (refer to note 3). Substantially all iron ore and aluminium sales are reflected at final prices at each reporting period. Final prices for copper concentrate, however, are normally determined between 30 and 180 days after delivery to our customer. At 31 December 2021, we had 201 million pounds of copper sales, including share of equity accounted unit (31 December 2020: 261 million pounds), that were provisionally priced at US 436 cents per pound (2020: US 336 cents per pound). The final price of these sales will be determined during the first half of 2022. A 10% change in the price of copper realised on the provisionally priced sales, all other factors held constant, would increase or reduce net earnings by US$54 million (2020: US$58 million). For some products, particularly aluminium, we are also exposed to fluctuations in power prices. Hedging strategy We do not generally consider that using derivatives to fix commodity prices would provide a long-term benefit to our shareholders. However, for certain physical commodity transactions for which the price was fixed at the contract date, we enter into derivatives to achieve the prevailing market prices at the point of revenue recognition. To mitigate our exposure to changes in the relationship between aluminium prices and power prices, we have a number of electricity purchase contracts which are directly linked to the daily official LME cash ask price for high grade aluminium (“LME price”) and to the US Midwest Transaction Premium (“Midwest premium”). In accordance with IFRS 9, we apply hedge accounting to two embedded derivatives within our power contracts. The embedded derivatives (notional aluminium forward sales) have been designated as the hedging instrument. The forecasted aluminium sales, priced using the LME price and the Midwest premium, represent the hedged item. The hedging ratio is 1:1, as the quantity of sales designated as being hedged matches the notional amount of the hedging instrument. The hedging instrument’s notional amount, expressed in equivalent metric tonnes of aluminium, is derived from our expected electricity consumption under the power contracts as well as other relevant contract parameters. When we designate such embedded derivatives as the hedging instrument in a cash flow hedge, we recognise the effective portion of the change in the fair value of the hedging instrument in other comprehensive income, and it is accumulated in the cash flow hedge reserve. The amount that is recognised in other comprehensive income is limited to the lesser of the cumulative change in the fair value of the hedging instrument and the cumulative change in the fair value of the hedged item, in absolute terms. On realisation of the hedges, realised amounts are reclassified from reserves to consolidated sales revenue in the income statement. We recognise any ineffectiveness relating to the hedging relationship immediately in the income statement. Sources of ineffectiveness include: differences in the timing of the cash flows between the hedged item and the hedging instrument, non-zero initial fair value of the hedging instrument, the existence of a cap on the Midwest premium in the hedging instrument and counterparty credit risk. We held the following notional aluminium forward sales contracts embedded in the power contracts: At 31 December 2021 Total Within 1 year Between 1 and 5 years Between 5 and 10 years After 10 years Notional amount (in tonnes) 573,653 72,555 289,867 211,231 — Notional amount (in US$ millions) 1,377 162 683 532 — Average hedged rate (in US$ per tonne) 2,401 2,234 2,355 2,520 — At 31 December 2020 Total Within 1 year Between 1 Between 5 After 10 years Notional amount (in tonnes) 640,963 72,548 287,587 280,828 — Notional amount (in US$ millions) 1,522 159 663 700 — Average hedged rate (in US$ per tonne) 2,375 2,189 2,305 2,495 — 29 Financial instruments and risk management continued The impact on our financial statements of these hedging instruments and hedging items are: Aluminium embedded derivatives separated from the power contract (Hedging instrument) (a) Highly probable forecast aluminium sales (Hedged item) Nominal Carrying amount Change in fair value in the period Cash flow hedge reserve (b) US$m Change in fair value in Total hedging Hedge ineffective-ness in the period gains/(losses) (c) US$m Losses/(gains) reclassified from reserves to income statement (d) US$m 2021 1,377 (124) (201) (11) 300 (211) 10 17 2020 1,522 46 23 184 (49) 27 (4) (40) (a) Aluminium embedded derivatives (forward contracts and options) are contained within certain aluminium smelter electricity purchase contracts.2021: nil (2020: US$66 million) of the carrying value is shown within “Other financial assets” and US$124 million (2020: US$20 million) shown within “Other financial liabilities”. (b) The difference between this amount and the total cash flow hedge reserve of the Group (shown in note 28) relates to our cash flow hedge on the sterling bond (refer to interest rate risk section). (c) Hedge ineffectiveness is included in net operating costs (raw materials, consumables, repairs and maintenance) in the income statement. (d) On realisation of the hedge, realised amounts are reclassified from reserves to consolidated sales revenue in the income statement. There was no cost of hedging recognised in 2021 or 2020 relating to this hedge relationship. We set out details of our commodity derivatives that are not designated as hedges in section B. Sensitivities Our commodity derivatives are impacted by changes in market prices. The table below summarises the impact that changes in aluminium market prices have on aluminium forward and option contracts embedded in power supply agreements outstanding at 31 December 2021. Any change in price will result in an offsetting change in our future earnings. Change in 2021 US$m 2020 US$m Effect on net earnings +10 % (78) (19) (10) % 73 19 Effect on equity +10 % (98) (98) (10) % 95 100 We exclude our “own use contracts” from this sensitivity analysis as they are outside the scope of IFRS 9. Our business units continue to hold these types of contracts to satisfy their expected purchase, sale or usage requirements. (iii) Credit risk We are exposed to credit risk in our operating activities (primarily from customer trade receivables); and from our investing activities that primarily include government securities (primarily US Government), corporate and asset-backed securities, reverse re-purchase agreements, money market funds, and balances with banks and financial institutions. We are also exposed to credit risk arising from our interest rate and currency derivative contracts. Credit risks related to receivables Our Commercial team manages customer credit risk subject to our established policy, procedures and controls. The team establishes credit limits for all of our customers. Where customers are rated by an independent credit rating agency, these ratings are used as a guide to set credit limits. Where there are no independent credit ratings available, we assess the credit quality of the customer through a credit rating model and assign appropriate credit limit. The Commercial team monitors outstanding customer receivables regularly and highlights any credit concerns to senior management. Receivables to high risk customers are often secured by letters of credit or other forms of credit enhancement. The expected credit loss on our trade receivable portfolio is insignificant (see note 18). Credit risk related to financial instruments and cash deposits Our Treasury team manages credit risk from our investing activities in accordance with a Board-approved credit risk framework which sets the risk appetite. Our Board reviews this annually. We make investments of surplus funds only with approved investment grade (BBB- and above) counterparties who have been assigned specific credit limits. The limits are set to minimise the concentration of credit risk and therefore mitigate the potential for financial loss through counterparty failure. The maximum credit risk exposure arising on our financial assets at the balance sheet date is as follows: Note 2021 US$m 2020 US$m Cash and cash equivalents 20 12,807 10,381 Trade and other financial receivables 18 2,762 3,286 Investments 19 2,682 2,899 Derivative assets 19 272 665 Loans to equity accounted units — 41 Total 18,523 17,272 (iv) Foreign exchange risk The broad geographic spread of our sales and operations means that our earnings, cash flows and shareholders’ equity are influenced by a wide variety of currencies. The majority of our sales are denominated in the US dollar. Our operating costs are influenced by the currencies of those countries where our mines and processing plants are located, and by those currencies in which we buy imported equipment and services. The US dollar, the Australian dollar and the Canadian dollar are the most important currencies influencing our costs. In any particular year, currency fluctuations may have a significant impact on our financial results. A strengthening of the US dollar against the currencies in which our costs are partly denominated has a positive effect on our underlying earnings. However, a strengthening of the US dollar reduces the value of non-US dollar denominated net assets, and therefore total equity. Our external borrowings and cash are mainly denominated in US dollars, either directly or through the use of derivatives, as we consider the US dollar the most appropriate currency for financing our operations. In most cases our debt and other financial assets and liabilities, including intragroup balances, is held in the functional currency of the relevant subsidiary. There are instances where these balances are held in currencies other than the functional currency of the relevant subsidiary. This means we recognise exchange gains and losses in our income statement (except where they can be taken to equity) as these balances are translated into the functional currency of the relevant subsidiary. Our income statement also includes exchange gains and losses arising on US dollar net debt and intragroup balances. On consolidation, these balances are retranslated to our US dollar presentation currency and there is a corresponding and offsetting exchange difference recognised directly in the currency translation reserve. There is no impact on total equity. The table below summarises, by currency, our net cash/(debt), after taking into account relevant cross currency interest rate swaps and foreign exchange contracts: Net cash/(debt) by currency Total Lease liabilities Derivatives Cash and Other Net cash/(debt) Net cash/(debt) US dollar (11,707) (410) (101) 12,018 2,401 2,201 (141) Australian dollar (282) (493) — 276 — (499) (286) Canadian dollar (172) (192) — 44 — (320) (333) South African rand — (3) — 118 — 115 140 Other (5) (265) — 349 — 79 (44) Total (12,166) (1,363) (101) 12,805 2,401 1,576 (664) Hedging strategy Under normal market conditions, we do not consider that active currency hedging of transactions would provide long-term benefits to shareholders. We review our exposure on a regular basis and will undertake hedging if deemed appropriate. We may deem currency protection measures appropriate in specific commercial circumstances. Capital expenditures and other significant financial items such as acquisitions, disposals, tax and dividend cash flows may be economically hedged subject to strict limits laid down by the Board. Details of the cross-currency interest rate swaps and the currency forward contracts used to manage our currency risk exposures at 31 December 2021 are in section B. 29 Financial instruments and risk management continued Sensitivities The table below shows the estimated retranslation effect on financial assets and financial liabilities, including intragroup balances, of a 10% strengthening in the closing exchange rate of the US dollar against significant currencies. We deem 10% to be the annual exchange rate movement that is reasonably probable (on an annual basis over the long run) for any of our significant currencies and therefore an appropriate representation. We calculate sensitivities in relation to the functional currencies of our individual entities. We translate the impact of these on net earnings and underlying earnings into US dollars at the exchange rates on which the sensitivities are based. The impact to net earnings associated with a 10% weakening of a particular currency, shown below, is broadly offset within equity through movements in the currency translation reserve and therefore generally has no impact on our net assets. The offsetting currency translation movement is not shown in the table below. The impact is expressed in terms of the effect on net earnings, underlying earnings, and equity, assuming that each exchange rate moves in isolation. The sensitivities are based on financial assets and financial liabilities held at 31 December 2021, where balances are not denominated in the functional currency of the subsidiary or joint operation, and exclude financial assets and liabilities held by equity accounted unit s. These balances will not remain constant throughout 2021, and therefore the following information should be used with care. At 31 December 2021 Gains/(losses) associated with 10% strengthening of the US dollar Currency exposure Closing Effect on Of which Impact Australian dollar 73 379 (18) (1,044) Canadian dollar 78 (111) (3) — At 31 December 2020 Gains/(losses) associated with 10% strengthening of the US dollar Currency exposure Closing Effect on Of which Impact Australian dollar 77 625 (11) (1,105) Canadian dollar 78 (167) 6 — (v) Interest rate risk Our interest rate management policy is generally to borrow and invest at floating interest rates. The approach to floating rate borrowing is based upon; i) the lower cost of borrowing historically observed from maintaining a floating rate exposure and ii) the historical correlation between interest rates and commodity prices. In certain circumstances, we may elect to maintain a higher proportion of fixed-rate funding. Hedging strategy We enter into interest rate swaps to hedge the interest rate exposure from our fixed rate borrowings, and review these positions on a regular basis. The tenor of the interest rate swaps is sometimes shorter than the tenor of the bond which means, we remain exposed to long term fixed rate funding. In 2020 we entered into US$1.5 billion of interest rate swaps with a tenor of five years to hedge the Alcan bonds which had been historically held at fixed rates. In 2021, we issued a 30-year US$1.25 billion bond which was swapped to floating rates for a tenor of seven years. As interest rate swaps mature, new medium dated swaps are generally transacted to maintain this floating rate exposure. The economic characteristics of the interest rate swaps are shown in the table below. The interest rates swaps transacted in 2020 and 2021, were designated into fair value hedge relationships with the respective tranches of debt. For the fair value movements, in relation to all of our fair value hedged items and instruments, refer to note 8. At 31 December 2021 , US$6.0 billion (2020: US$5.9 billion) US dollar notional fixed-rate US dollar borrowings continue to be swapped to floating US dollar rates and €417 million ( 2020 : €417 million ) euro notional fixed-rate borrowings continue to be fully swapped to floating US dollar interest rates at an effective exchange rate of 1.3105 . Th ese swaps are designated in fair value hedge relationships. Since 2012, we have also held cross-currency interest rate swaps to convert the principal and annual fixed interest coupons of the Rio Tinto Finance plc £500 million Sterling Bond to a US dollar notional with fixed US dollar annual interest coupons. We applied cash flow hedge accounting to this relationship to limit our US dollar cash flow exposure on the principal and interest payments. The hedge was fully effective in the 2021 and 2020 financial years as the notional amount, maturity, payment and reset dates match. 2021 2020 Nominal amount Nominal amount Maturity Effective Loss in fair value of the hedged item Gain in fair value of the hedging instrument Gain in fair value of the hedged item Loss in fair value of the hedging instrument £500 million US$807 million November 2029 1.6132 (1) 1 7 (7) In 2019, we swapped the resulting fixed US dollar annual interest coupon payments to floating rates. Fair value hedge accounting has been applied to this relationship in addition to the pre-existing cash flow hedge. The effective interest rates of our borrowings, impacted by swaps, are summarised below. All nominal values are fully hedged unless otherwise stated: Borrowings in a hedge relationship Nominal value Nominal value Weighted average Swap maturity Carrying value Carrying value Rio Tinto Finance plc Euro Bonds 2.875% due 2024 546 546 3 month LIBOR +1.64% 2024 497 555 Rio Tinto Finance (USA) Limited Bonds 3.75% 2025 (a) — 1,200 3 month LIBOR +1.39% 2025 — 1,299 Rio Tinto Finance (USA) Limited Bonds 7.125% 2028 750 750 3 month LIBOR +3.27% 2028 934 1,005 Alcan Inc. Debentures 7.25% due 2028 100 100 3 month LIBOR +5.43% 2024 105 109 Rio Tinto Finance plc Sterling Bonds 4.0% due 2029 807 807 3 month LIBOR +2.65% 2024 682 717 Alcan Inc. Debentures 7.25% due 2031 (b) 400 400 3 month LIBOR +5.72% 2025 420 438 Alcan Inc. Global Notes 6.125% due 2033 (b) 750 750 3 month LIBOR +5.67% 2025 722 744 Alcan Inc. Global Notes 5.75% due 2035 (b) 300 300 3 month LIBOR +5.18% 2025 283 292 Rio Tinto Finance (USA) Limited Bonds 5.2% 2040 1,150 1,150 3 month LIBOR +3.79% 2022 1,156 1,173 Rio Tinto Finance (USA) plc Bonds 4.75% 2042 500 500 3 month LIBOR +3.42% 2023 495 501 Rio Tinto Finance (USA) plc Bonds 4.125% 2042 750 750 3 month LIBOR +2.83% 2023 735 743 Rio Tinto Finance (USA) Limited Bonds 2.75% 2051 (a) 1,250 — 6 month SOFR + 1.57% 2028 1,225 — (a) On 28 October 2021, the Group issued US$1.25 billion of 30-year fixed rate debt with a coupon of 2.75%. On settlement of the bond, we entered into interest rate swaps to convert the interest payable on these bonds from fixed to floating rates rate for the next seven (b) In 2020 we entered into new swaps to convert the interest payable in relation to these bonds from fixed to floating rates. The fair value of interest rate and cross currency interest rate swaps at 31 December 2021 was US$139 million ( 2020 : US$388 million ) asset and US$240 million ( 2020 : US$140 million ) liability, respectively. These are included within “Other financial assets” and “Other financial liabilities” in the balance sheet. The main sources of ineffectiveness of the fair value hedges include changes in the timing of the cash flows of the hedging instrument compared to the underlying hedged item, and changes in the credit risk of parties to the hedging relationships. Refer to note 8 for the changes in fair value of the bonds and the swaps as well as the ineffectiveness recognised in the period. Refer to note 1 “New standards Issued not yet effective” for the impacts of IBOR reform. Taking into account the interest and currency interest rate swaps, at 31 December 2021, US$11.6 billion (2020: US$11.7 billion) of our adjusted gross borrowings were at floating rates. This has resulted in a floating to fixed debt ratio of 85% floating to 15% fixed |
