- The main assumptions used to determine the provision for pensions and post retirement healthcare, and other information, including the expected level of future funding payments in respect of those arrangements, are given in note 49.
- The provision for other employee entitlements includes a provision for long service leave of US$107 million (2006: US$86 million), based on the relevant entitlements in certain Group operations. It also includes the provisions relating to the Group's cash-settled share-based payment plans of US$219 million (2006: US$43 million), which are described in note 48.
- The Group's policy on close down and restoration costs is described in note 1(k). Close down and restoration costs are a normal consequence of mining, and the majority of close down and restoration expenditure is incurred at the end of the relevant operation. Remaining lives of mines and infrastructure range from 1 to over 50 years with an average, weighted by closure provision, of around 19 years. Although the ultimate cost to be incurred is uncertain, the Group's businesses estimate their respective costs based on feasibility and engineering studies using current restoration standards and techniques. Provisions of US$5,271 million (2006: US$3,359 million) for close down and restoration costs and environmental clean up obligations, include estimates of the effect of future inflation and have been adjusted to reflect risk. These estimates have been discounted to their present value at an average rate of approximately five per cent per annum, being an estimate of the long term, risk free, pre-tax cost of borrowing. Excluding the effects of future inflation, and before discounting, this provision is equivalent to some US$8.1 billion (2006: US$4.7 billion).
- Some US$214 million (2006: US$50 million) of environmental clean up expenditure is expected to take place within the next five years. The remainder includes amounts for the operation and maintenance of remediation facilities in later years. The provision for environmental clean up expenditure includes the issue described in (e) below.
- In 1995, Kennecott Utah Copper ('KUC') agreed with the US Environmental Protection Agency ('EPA') and the State of Utah to complete certain source control projects and perform specific environmental studies regarding contamination of ground water in the vicinity of the Bingham Canyon mine. A remedial investigation and feasibility study on the South Zone ground water contamination, completed in March 1998, identified a range of alternative measures to address this issue. Additional studies were conducted to refine the workable alternatives. A remedial design document was completed in 2002. A joint proposal and related agreements with the State of Utah Natural Resource Damage Trustee, the State of Utah and the Jordan Valley Water Conservancy District were approved in 2004. KUC entered into a formal agreement with the EPA in 2007 on the remedial action. The provision was reduced by US$101 million during 2007 (2006: US$37 million) following a reassessment of the expected cost of remediation to reflect recent experience. The ultimate cost of remediation remains uncertain, being dependent on the responsiveness of the contamination to pumping and acid neutralisation.
- Other provisions deal with a variety of issues and include US$191 million relating to the Rio Tinto Alcan Foundation commitment in Canada, involving payments of C$200 million over a five year period.
- Provisions for close down, restoration and environmental obligations increased by US$279 million in 2006 as the result of a reduction in the discount rate. Of this amount, US$221 million is included in 'Amounts capitalised'.
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