FTSE 100 mining giant Rio Tinto has been fined a record £27m by the City watchdog over “inaccurate and misleading” financial statements after an African coal investment turned sour.
The Financial Conduct Authority (FCA) said it was the highest fine it had issued to date for a breach of rules under which listed firms operate.
In the US, the Securities and Exchange Commission (SEC) has also separately charged the company and two of its former top executives with fraud.
Rio Tinto said it intended to “vigorously defend itself” against the “unwarranted” US charges and said that the action in the UK by the FCA had made “no findings of fraud, or of any systemic or widespread failure” by the company.
The FCA investigation concluded there had been a breach of disclosure and transparency rules following Rio Tinto’s 2011 purchase of mining assets in Mozambique for $3.7bn.
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.
It found that Rio Tinto failed to carry out an “impairment test” and recognise a write-down in the value of the assets when publishing half-year results in August 2012.
“Rio Tinto’s financial reporting was therefore inaccurate and misleading,” the FCA said.
It was not until January 2013 that the company announced an impairment, writing off about 80% of the value of the investment.
Mark Steward, the FCA’s executive director of enforcement and market oversight, said the penalty reflected the size of the company – which has a market value of £69bn.
He added: “This is the largest fine imposed to date by the FCA for a breach of rules related to a firm’s official listing and demonstrates how vitally important high standards of disclosure and transparency are to ensuring markets function fairly and efficiently.”
In the US, the SEC allegations also centre on its multi-billion dollar purchase of coal assets in Mozambique, sold a few years later for $50m.
It said the project suffered setbacks almost immediately as the company learned that there was less coal and of lower quality than expected and that Mozambique had rejected its barge application.
The SEC said misleading statements were made days before a series of debt offerings. Rio Tinto raised $5.5bn from US investors.
The US regulator has levelled charges against the company, its former chief executive Thomas Albanese, and its former finance director Guy Elliott.
Mr Albanese said: “There is no truth in any of these charges.”
A spokeswoman for Mr Elliott said he would vigorously contest the charges.