Research Update:

Rio Tinto Outlook Revised To Negative On Uncertain Deleveraging Prospects; 'A-/A-2' Ratings Affirmed
Primary Credit Analyst: Andrey Nikolaev, CFA, Paris (33) 1-4420-7329; andrey_nikolaev@standardandpoors.com Secondary Contact: Karl Nietvelt, Paris (33) 1-4420-6751; karl_nietvelt@standardandpoors.com

Table Of Contents
Overview Rating Action Rationale Outlook Ratings List

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Research Update:

Rio Tinto Outlook Revised To Negative On Uncertain Deleveraging Prospects; 'A-/A-2' Ratings Affirmed
Overview
Global diversified mining group Rio Tinto's leverage has increased beyond our previous expectations. We see a risk that Rio Tinto's debt may rise further in 2013-2014, unless the company makes large disposals or iron ore prices stay well above $120/tonne CFR China. We are revising our outlook on Rio Tinto to negative from stable and affirming the 'A-/A-2' corporate credit ratings. The negative outlook reflects the risk of a downgrade in the next 12 to 18 months, if debt increases further and adjusted FFO to debt does not improve to 40% from a relatively low 30% in 2012.

Rating Action
On Feb. 25, 2013, Standard & Poor's Ratings Services revised its outlook on Rio Tinto PLC and its guaranteed subsidiaries to negative from stable. At the same time, the 'A-/A-2' long- and short-term corporate credit ratings on Rio Tinto were affirmed.

Rationale
The outlook revision reflects leverage, on Dec. 31, 2012, that was higher than we forecast. In our view, continued, albeit reduced capital expenditure (capex) and dividend payments will prevent Rio Tinto from deleveraging, unless it makes large disposals in 2013 and 2014. The negative outlook indicates a one-in-three chance of a downgrade, and may be mitigated by management's commitment to the current rating level, its substantial cost reduction program, and its commitment to reduce leverage, through disposals. Rio Tinto's reported gross debt increased heavily to $26.7 billion as of Dec. 31, 2012, from $21.5 billion at the beginning of the year, on the back of record high capex outlays of $17 billion and relatively weak cash flow generation. We estimate that this translates into adjusted debt of about $33 billion (as we add asset-retirement obligations, pensions, and operating leasing, and deduct surplus cash). This is above the level of $30 billion that we see as commensurate with the current rating. At the same time, 2012 cash flow generation weakened due to a combination of lower, although still healthy, prices for iron ore, and declining performance in copper, energy, and

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Research Update: Rio Tinto Outlook Revised To Negative On Uncertain Deleveraging Prospects; 'A-/A-2' Ratings Affirmed

aluminum business units. In addition, the company's funds from operations (FFO) were weakened by high income tax payments in the first half of the year that were related to 2011 profits. The adjusted FFO to debt ratio declined to about 30% according to our estimates, versus the 40% level that we see as commensurate with the rating and compared with 85% in 2011. Our base-case scenario factors in an iron ore price of $120/tonne CFR China in 2013 and $110/tonne in 2014, and capital expenditures of about $13 billion per year. Under such assumptions, we expect that free operating cash flow will be neutral. Given significant dividend payments of more than $3 billion, we expect discretionary cash flow to be negative, leading to further modest increases in debt. However, we expect higher FFO in 2013, on the back of lower tax payments and cost reduction efforts, which should result in an improved FFO-to-debt ratio of about 35%-40%. For 2014, the ratio could vary within a 30%-40% range under our scenario, depending on the impact of cost reductions and production growth. We believe the upper end of this range is achievable, in case of disposals, such as those planned in the Aluminium and Diamonds business units, but we have not explicitly factored in any potential disposals at this stage. The ratings continue to reflect our view of the group's "strong" business risk profile and "intermediate" financial risk profile as our criteria define the terms. Supportive factors for the business risk profile include Rio Tinto's portfolio of low-cost assets, healthy margins, and low country risk with the majority of assets located in OECD (Organization for Economic Cooperation and Development) countries, notably Australia. Offsetting these strengths to some extent are exposure to the volatile mining industry and high concentration on iron ore, which in 2012 generated about 90% of the company's adjusted EBITDA (80% of EBITDA taking into account financial results of joint ventures, which are reported using the equity method). Iron ore prices are currently at supportive levels, but are likely to fall in view of capacity additions in future years. The financial risk profile is supported by our assessment of moderate financial policy, a favorable debt maturity profile, and strong liquidity. Key constraints are Rio Tinto's substantial capex and increased albeit still moderate debt at year-end 2012.

Liquidity
We consider Rio Tinto's liquidity to be "strong," under our criteria. We estimate the ratio of liquidity sources to uses to be about 1.5x. The key sources of liquidity as of Dec. 31, 2012, included: Cash and short-term investments of $6.3 billion (excluding $0.7 billion that we consider to be tied to operations and $0.1 billion of restricted cash); About $8 billion available under committed credit lines, out of which $6 billion is maturing in 2015 and $2 billion in 2014, assuming the company's one year extension option is exercised; Cash flow from operations of about $13 billion projected for 2013 under our scenario.

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Research Update: Rio Tinto Outlook Revised To Negative On Uncertain Deleveraging Prospects; 'A-/A-2' Ratings Affirmed

The key potential uses of liquidity included: Debt maturities of about $2.2 billion in 2013; Capex of $13 billion as announced by the company; and Dividends of about $3.2 billion. We also note a well-spread debt maturity profile with annual bond maturities below $2.5 billion and generally prudent liquidity management. The group has no financial covenants in its debt facilities.

Recovery analysis
Rio Tinto's reported gross debt of $26.7 billion on Dec. 31, 2012, primarily comprised bonds. The group's principal bond issuers are Rio Tinto Finance (USA) Ltd., a wholly owned, directly held subsidiary of Rio Tinto Ltd., and Rio Tinto Finance (USA) PLC a wholly owned, directly held subsidiary of Rio Tinto PLC. Debt obligations of both are guaranteed by Rio Tinto PLC and Rio Tinto Ltd. Rio Tinto Alcan Inc. (A-/Negative/A-2; formerly Alcan Inc.), a wholly owned, indirectly held subsidiary of Rio Tinto PLC, also has approximately $3.05 billion of bonds currently outstanding. These bonds are not guaranteed by Rio Tinto. We equalize the 'A-' corporate credit ratings on Rio Tinto Alcan Inc. and the issue ratings on its bonds with the corporate credit and issue ratings on Rio Tinto PLC. This equalization reflects our opinion that the parent-subsidiary relationship is strong. In our view, notwithstanding the potential disposal of some of the aluminum assets, Rio Tinto Alcan Inc. is a strategically important operating company, and, with its subsidiaries, represents the substantial part of Rio Tinto's aluminum segment. Furthermore, Rio Tinto Alcan Inc. is wholly owned by Rio Tinto PLC and draws on the name. Therefore, we factor into our view that Rio Tinto PLC would support Rio Tinto Alcan Inc. in repaying its obligations, if needed. We have also assessed the extent of potential structural subordination, and consider no notching to be warranted. Priority liabilities, including subsidiary debt, trade payables, and other liabilities, are moderate, in our view, and are mitigated by the group's size and diversification

Outlook
The negative outlook indicates a one-in-three chance of lowered in the next 12 to 18 months, if leverage is not adjusted ratio of FFO to debt does not revert to 40% on This could for example be triggered by further increase iron ore prices to $120/tonne or below. the rating being reduced and the a consistent basis. in debt or declining

We may, however, revise the outlook back to stable, if the company is able to

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Research Update: Rio Tinto Outlook Revised To Negative On Uncertain Deleveraging Prospects; 'A-/A-2' Ratings Affirmed

reduce its adjusted debt, such that the ratio of FFO to debt is above 40% under our price assumptions. That would likely require reduction in absolute debt, coming from disposals or iron ore prices remaining materially above our working assumption of $120/tonne in 2013.

Ratings List
Ratings Affirmed; CreditWatch/Outlook Action To Rio Tinto PLC Rio Tinto Ltd. Rio Tinto Canada Inc. Rio Tinto America Inc. Rio Tinto Alcan Inc. Corporate Credit Rating A-/Negative/A-2 Ratings Affirmed Rio Tinto PLC Senior Unsecured Rio Tinto PLC Rio Tinto (Commercial Paper) Ltd. Rio Tinto (Commercial Paper) PLC Rio Tinto America Inc. U.S. Borax Inc. Commercial Paper (1) Rio Tinto Alcan Inc. Senior Unsecured Rio Tinto Finance (USA) Ltd. Senior Unsecured (2) Rio Tinto Finance (USA) PLC Senior Unsecured (2) From

A-/Stable/A-2

A-

A-2

A-

A-

A-

Rio Tinto Finance Ltd. Commercial Paper (2) Rio Tinto Finance PLC Senior Unsecured (1) Commercial Paper (2)

A-2

AA-2

(1) Guaranteed by Rio Tinto PLC (2) Guaranteed by Rio Tinto PLC and Rio Tinto Ltd.

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N.B. This list does not include all rating affected.

Additional Contact: Industrial Ratings Europe; CorporateFinanceEurope@standardandpoors.com

Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.

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