Rio Tinto pays $28 million to settle SEC fraud case over Mozambique coal assets

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remained flat following the company’s announcement having risen 21% over the previous year. Investors often show a positive response to settlements due to the certainty that they provide. 

“Rio Tinto welcomes closure of the SEC case on appropriate and reasonable terms. With this settlement, all investigations of Rio Tinto regarding this matter have been finalised,” the company said. 

The SEC’s case says Rio Tinto’s top execs failed to reveal the Mozambican assets had lost value after it bought them from Riversdale Mining, as they feared that revealing the drop would hinder them from pursuing their acquisition strategy.

Rio Tinto in turn raised billions from investors in May 2012, after releasing misleading financial statements just days earlier, even after Elliott and Albanese had been told the Mozambican assets were likely worth a negative $680 million, the SEC said. 

The value of the coal assets was based on the assumption that Rio Tinto could transport large quantities of high-quality coal to market using barges to ship the commodity to Mozambique’s coast down the Zambezi River. 

Rio Tinto, however, failed to write down those assets after Mozambican authorities blocked the company from using barges on that river, and after it became aware that there was less and lower-quality coal in the mines than previously anticipated. 

The SEC alleged Albanese and Elliot hid the drop in value because they knew a public disclosure would call their strategy into question. The company had been forced to write down the value of its Canadian subsidiary Alcan twice, following a $38 billion acquisition in 2007.

The FTSE-100 mining company later wrote down the value of its Mozambican assets by more than $3 billion in 2013, before agreeing to sell the subsidiary to a consortium of Indian-owned companies for $50 million in 2014.  

In a statement, Rio Tinto said it had agreed to pay $28 million to settle the case, without admitting or denying the SEC’s charges. The company also said it had agreed to hire an independent consultant to advise on its current policies. 

Albanese, who led Rio Tinto from 2013 to 2017 during a period in which the mining company made a series of disastrous acquisitions, also agreed to pay $50,000 to settle charges brought against him, with either admitting or denying the allegations. 

The settlements with the SEC come after the U.K.’s Financial Conduct Authority fined Rio Tinto £27,385,400 for failing to report the drop in value of the Mozambican coal assets in its 2012 interim report. 

In 2022, Rio Tinto also agreed to pay AUD $750,000 (USD$ 492,450) to the Australian Securities and Investments Commission for similar charges relating to its reporting of the value of its Mozambican coal assets.