Rio Tinto flags risky technology investments

Eventual operational outcome or viability of the investments "cannot be assessed with certainty"

Rio Tinto (ASX:RIO )has flagged that some of its more risky technology investments remain unproven and could have a future negative impacts on the mining giant’s cost management and productivity.

Detailing the challenges in a style highly reminiscent of a legal disclaimer, the company said in its 2009 annual report that while the Group had invested and implemented information systems and operational initiatives, it was uncertain of what benefits or loses these would create.

“Some aspects of these technologies are unproven and the eventual operational outcome or viability cannot be assessed with certainty,” thereport reads. “The costs, productivity, value in securing business opportunities and other benefits from these initiatives, and the consequent effects on the Group’s future earnings and financial results may vary from expectation.”

“If the Group’s technology systems fail to realise the anticipated benefits, there is no assurance that this will not result in increased costs, interruptions to supply continuity, failure of the Group to realise its production or growth plans or some other adverse effect on operational performance,” the report added.

Rio’s IT is grouped with innovation under the Technology and Innovation (T&I) team and includes an Innovation Centre, Energy and Climate Strategy Centre, Mineral Technology Services Centre, Asset Management Centre, Mining Technology Centre Project Development Centre and Technical Risk Evaluation Centre.

Rio also said the total number of T&I employees declined from 351 at end of year 2008 to 267 at the end of 2009, with remaining staff now "focused on delivery of the most value accretive opportunities."

The gross cost for Rio's T&I declined during the year to US$134 million compared to US$158 million in 2008.

The company also reported underlying earinings of $US6.3 billion, down against US$10.3 billion in 2008, while net earnings were US$4.9 billion, up against US$3.7 billion in 2008.

The company also raised US$14.8 billion via a rights issue during the year.

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