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Sample IBISworld Company Report
Sample IBISworld Company Report
Sample IBISworld Company Report
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CONTENTS
Rio Tinto Plc - Rio Tinto Limited
Contents
Details ............................................................................................................................................................ 3
SYNOPSIS................................................................................................................................................................................... 3
Introduction................................................................................................................................................................................... 3
History/Background ...................................................................................................................................................................... 3
Brands/Businesses/Products ....................................................................................................................................................... 4
Company Snapshot...................................................................................................................................................................... 7
Personnel ....................................................................................................................................................... 8
OTHER DIRECTORSHIPS .......................................................................................................................................................... 8
Financials ....................................................................................................................................................... 9
Industry Financial Averages ......................................................................................................................... 12
Segments ..................................................................................................................................................... 13
OPERATING DIVISIONS........................................................................................................................................................... 13
GEOGRAPHIC LOCATIONS ..................................................................................................................................................... 15
Competitive Environment.............................................................................................................................. 17
B1101 BLACK COAL MINING IN AUSTRALIA.......................................................................................................................... 17
B1311 IRON ORE MINING IN AUSTRALIA............................................................................................................................... 18
B1312 BAUXITE MINING IN AUSTRALIA ................................................................................................................................. 20
B1313 COPPER ORE MINING IN AUSTRALIA ........................................................................................................................ 22
B1421 DIAMOND AND GEMSTONE MINING IN AUSTRALIA ................................................................................................. 23
B1429 SALT AND OTHER MINERAL MINING IN AUSTRALIA ................................................................................................ 24
B1513 MINERAL EXPLORATION IN AUSTRALIA.................................................................................................................... 26
C2721 ALUMINA PRODUCTION IN AUSTRALIA ..................................................................................................................... 27
C2722 ALUMINIUM SMELTING IN AUSTRALIA....................................................................................................................... 28
B1315 MINERAL SAND MINING IN AUSTRALIA ..................................................................................................................... 30
B1319 MANGANESE AND OTHER MINERAL MINING IN AUSTRALIA .................................................................................. 31
Shareholders ................................................................................................................................................ 32
Subsidiaries.................................................................................................................................................. 33
Service Providers ......................................................................................................................................... 35
News ............................................................................................................................................................ 36
Details
Company Details
Company Registered Name Rio Tinto Plc - Rio Tinto Limited
Commonly Used Name Rio Tinto
Major Business Line B131 - Metal Ore Mining in Australia
ACN Number 004 458 404
ABN Number 96 004 458 404
ASX Code RIO
Incorporated In Victoria
Incorporation Date 17/12/1959
Company Type Public Company
Ownership Type Local
Sector Non Government
Listed on Stock Exchange? Yes
IBISWorld Top 2000 Rank 1
SYNOPSIS
Introduction
Rio Tinto is a leading international mining group, combining Rio Tinto plc, a London listed public company
headquartered in the UK, and Rio Tinto Limited, which is listed on the Australian Stock Exchange under the code
RIO, and the Stock Exchange of New Zealand, code RIO. The two companies are joined in a dual listed company
(DLC) structure, which was formed in 1995, as a single economic entity called the Rio Tinto Group. Rio Tinto
explores, mines, and processes mineral and metal resources worldwide. Rio Tinto's main products are iron ore, coal,
uranium, industrial minerals, aluminium, copper, gold and diamonds. Rio Tinto's Australian headquarters are based in
Melbourne, Victoria.
History/Background
2008 - February: BHP Billiton formalised its offer to acquire the whole of the issued share capital of Rio Tinto plc at an
exchange ratio of 3.4 BHP Billiton shares per Rio Tinto plc share, consisting of 80% BHP Billiton plc shares and 20%
BHP Billiton Limited shares, and the whole of the issued share capital of Rio Tinto Limited at an exchange ratio of 3.4
BHP Billiton Limited shares per Rio Tinto Limited share. The Rio Board rejected BHP Billiton's pre-conditional offer as
not being in the best interests of shareholders.
July: Rio Tinto agrees to sell the Kintyre uranium project located in Western Australia. November: BHP Billiton
formally withdraws its bid for Rio Tinto.
2007 - October: Rio Tinto acquired Alcan Inc. for US$38.1 billion. Rio Tinto Alcan emerged out of Alcan Inc. and Rio
Tinto's existing aluminium businesses.
December: Rio Tinto invested US$300 million in the development of Eagle, a high-grade nickel and copper mine in
Michigan, USA.
2006 - Norilsk Nickel and Rio Tinto created RioNor Exploration, a joint exploration and development company in
Russia.
2005 - July: Rio Tinto reached agreement with Hancock Prospecting Pty Ltd to purchase a 50% interest in the Hope
Downs iron ore assets. The development and ongoing operation of the assets will be managed by Rio Tinto.
November: Rio Tinto sold its 14.46% shareholding in Lihir Gold.
2003 - October: Rio Tinto has announced the completion of the sale of its 50 per cent interest in Kaltim Prima Coal,
Indonesia to PT Bumi Resources.
1997 - June: The RTZ Corporation became Rio Tinto plc and CRA Limited became Rio Tinto Limited, together known
as the Rio Tinto Group.
1993 - The Nerco and Cordero coal mining businesses in the US was acquired.
1987 - Major strategic review undertaken, resulted in a decision to re-focus the company on mining activities.
1962 - The RTZ Corporation, originally The Rio Tinto-Zinc Corporation, was formed by the merger of The Rio Tinto
Company and The Consolidated Zinc Corporation.
CRA Limited, originally Conzinc Riotinto of Australia Limited, was formed by a merger of the Australian interests of
The Consolidated Zinc Corporation and The Rio Tinto Company.
1905 - The Consolidated Zinc Corporation was incorporated to treat zinc bearing mine waste at Broken Hill, New
South Wales, Australia.
1873 - The British-based Rio Tinto Company was formed to mine ancient copper workings at Rio Tinto near Huelva in
southern Spain.
Brands/Businesses/Products
Rio Tinto explores mines and processes mineral and metal resources worldwide through a number of wholly or partly-
owned subsidiaries, joint ventures, associated companies and other joint arrangements. Rio Tinto's operations are
divided into eight major areas:
Iron Ore
Rio Tinto Iron Ore (RTIO) operations are the group's largest operating segment with operations located in Australia,
Brazil and Canada and development projects in Guinea and India.
In Western Australia, Hamersley Iron operates eight mines, six wholly owned mines and it also operates two other
joint venture mines; a 60% share in the Channar mine and a 54% share in the Eastern Range mine. RTIO also has a
53% share in Robe River Iron Associates, which operates two open pit mining operations, West Angelas and
Pannawonica, in Western Australia.
RTIO is the operator of the Iron Ore Company of Canada (IOC); RTIO has a 58.7% share in the joint venture. IOC
operates an open pit mine, concentrator and pellet plant at Labrador City, Newfoundland.
RTIO has a 100% interest in Mineracao Corumbaense Reuinda, known as Corumba, in Brazil. The iron ore is
exported to South America and Europe.
RTIO has a 60% share in the Hlsmelt iron making project at Kwinana, Western Australia. The Hlsmelt process is a
direct iron smelting technology that converts iron ore fines into high quality pig iron.
The Energy group comprises thermal and coking coal, and uranium operations. Rio's coal operations are represented
by Rio Tinto Coal Australia and Coal & Allied in Australia and by Rio Tinto Energy America operations in the US. Rio's
uranium operations consist of Energy Resources of Australia and the Rssing Uranium mine in Namibia.
Rio Tinto Energy America (RTEA), formerly Kennecott Energy, is a wholly owned subsidiary. It has four open cut coal
mines in the Powder River Basin of Montana and Wyoming. RTEA has a 50% non-operational interest in the Decker
mine in Montana and a 20% interest in Colowyo Coal in Colorado. RTEA sales are made under contracts to electricity
generators predominantly in the mid-western and southern states of the US.
Rio Tinto Coal Australia (RTCA), formerly Pacific Coal, is wholly owned by the company and manages the group's
Australian coal interests. This consists of Blair Athol (71% interest), Kestrel (80% interest), Tarong (100% interest),
Hail Creek (82% interest) and the Clermont deposit (50% interest). RTCA also provides management services to Coal
& Allied Industries, (75.7% interest), for the operation of four mines in the Hunter Valley, New South Wales.
Rio has a 68.6% interest in Rossing Uranium, which produces and exports uranium oxide from Namibia to electricity
producers in Europe, US and the Asia Pacific.
Rio has a 68.4% interest in Energy Resources, which produces uranium oxide at the Ranger open pit mine in
Northern Territory.
Industrial Minerals
Rio Tinto's Industrial Minerals business comprises Rio Tinto Minerals and Rio Tinto Iron & Titanium. Rio Tinto
Minerals is made up of Rio Tinto Borax and Luzenac Talc operations in the US, South America, Europe and Australia,
and Dampier Salt in Australia, which produce borates, industrial salt and talc. Rio Tinto Iron & Titanium has
operations in North America, South Africa and Madagascar, which produce titanium dioxide feedstock.
Rio Tinto Borax operations are at the Boron mine in California's Mojave Desert. Borates are used for vitreous
applications such as fibreglass, bleach or in ceramics, fertilisers, flame retardants, wood preservatives and corrosion
inhibitors.
Luzenac Talc operations are primarily in France. There are also processing facilities in Australia, Austria, Belgium,
Canada, France, Italy, Japan, Mexico, Spain, the UK and the US. Talc is used in paper, paints, cosmetics, ceramics,
agricultural and plastics industries.
Rio has a 64.9% interest in Dampier Salt and Rio manages Dampier's three salt operations, Dampier, Port Hedland
and Lake MacLeod, in Western Australia. Dampier's salt is sold principally to the chemical industry in Asia.
Rio Tinto Iron & Titanium comprise the wholly owned QIT-Fer et Titane in Quebec, Canada and the 50% interest in
Richards Bay Minerals (50%) in KwaZulu-Natal, South Africa. Both operations produce titanium dioxide feedstock via
an ilmenite smelter. Titanium dioxide is used in pigment manufacture.
Aluminium
Rio Tinto's Aluminium product group is the wholly owned, integrated aluminium subsidiary, Rio Tinto Aluminium,
(formerly Comalco) which owns and manages operations located in Australia, New Zealand and the UK. The
Aluminium group has two operating business units - Mining & Refining, and Smelting.
Rio Tinto Aluminium owns a bauxite mine at Weipa on the Cape York Peninsula, Queensland. The Bauxite mined
from Weipa is shipped to refineries in Gladstone, Queensland.
Rio Tinto Aluminium also holds ownership interests in smelters that primarily produce aluminium which include Bell
Bay (100% interest) in Tasmania, Boyne Island Smelters (59% interest) in Queensland, Queensland Alumina (39%),
Anglesey Aluminium (51% interest) in Wales, and Tiwai Point (79% interest), in New Zealand. The group also holds a
42% interest in a thermal power station as part of Gladstone Power Station in Australia.
Diamonds
The Diamond group comprises Rio's 60% interest in the Diavik Diamonds mine in Canada, the wholly owned Argyle
mine in Western Australia, and a 78% interest in the Murowa mine in Zimbabwe. Rio has diamond sales offices in
Antwerp, Belgium, and Mumbai, India.
Copper
The Copper group also produces gold and molybdenum as significant co-products. The Copper group comprises the
wholly owned Kennecott Utah Copper, which operates the Bingham Canyon mine, Copperton concentrator and
Garfield smelter complex in the US. The Copper group also has interests in the copper mines of Escondida (30%
interest) in Chile, Grasberg (40% of joint venture) in Indonesia, Northparkes (80% interest) in Australia, and Palabora
(58% interest) in South Africa.
The Copper group manages Kennecott Minerals Company in the US, which has interests in the Greens Creek mine
(70% interest) in Alaska, the Rawhide mine (51% interest) in Nevada, and the Cortez joint venture (40% interest).
These operations produce the gold, silver, zinc and silver co-products.
The Copper group has the following copper projects, Resolution (55% interest) in Arizona, Oyu Tolgoi (9.9% interest)
Mongolia, La Granja (100% interest) in Peru, and Pebble (20% interest) in Alaska.
Exploration
Rio Tinto Exploration seeks mineral resources that will contribute to the growth of the Rio Tinto Group and replace
depleting deposits. The Exploration group is organised into five geographically based teams in North America, South
America, Australasia, Asia and Africa/Europe and a sixth project generation team that searches the world for new
opportunities and provides specialised geological, geophysical and commercial expertise to the regional teams.
Operational and Technical Excellence, previously the Technology group, has bases in the UK, US and Australia, and
is made up of four subdivisions:
• Centres of Excellence
• Evaluation
• Shared Expertise
• Support
There are Centres of Excellence for Mining, Processing, Assets Integrity, Health, Safety and Environment, Projects,
Strategic Planning and Innovation.
Company Snapshot
Rio Tinto Plc - Rio Tinto Limited is a Public Company that is ranked number 1 out of the top 2000 companies in
Australia. The company generates the majority of its income from the Metal Ore Mining in Australia industry.
In 2008 the company generated total revenue of $78,907,790,000 including sales and other revenue. In 2008 Rio
Tinto Plc - Rio Tinto Limited had 39326 employees in Australia including employees from all subsidiaries under the
company's control.
The Chief Executive of Rio Tinto Plc - Rio Tinto Limited is Mr Tom Albanese whose official title is Chief
Executive. The Chairman of Rio Tinto Plc - Rio Tinto Limited is Mr Paul Skinner whose official title is Non-Executive
Chairman.
Personnel
Salutation Initials Full Name Title Position Type
Mr PD Paul Skinner Non-Executive Chairman* Chairman
Mr T Tom Albanese Chief Executive* Chief Executive
Mr GR Guy Elliott Finance Director* Financial Controller
Mr JP Jan du Plessis Non-Executive Director* Non-Executive Director
Mr M Michael Fitzpatrick Non-Executive Director* Non-Executive Director
Mr DL David Mayhew Non-Executive Director* Non-Executive Director
Mr AF Andrew Gould Non-Executive Director* Non-Executive Director
Sir DC David Clementi Non-Executive Director* Non-Executive Director
Lord J John Kerr Non-Executive Director* Non-Executive Director
Ms V Vivienne Cox Non-Executive Director* Non-Executive Director
Mr RR Richard Goodmanson Non-Executive Director* Non-Executive Director
Sir RI Roderick Eddington Non-Executive Director* Non-Executive Director
Mr PM Paul Tellier Non-Executive Director* Non-Executive Director
Mr LY Yves Fortier Non-Executive Director* Non-Executive Director
Mr RB Dick Evans Chief Executive Rio Tinto Alcan* Executive Director
Mr SJ Stephen Consedine Joint Company Secretary Company Secretary
Mr B Ben Mathews Joint Company Secretary Company Secretary
Ms D Debra Valentine Global Head of Legal Legal Officer
Mr D Doug Ritchie Managing Director Strategy Sales Manager
Mr A Andrew Vickerman Head of Communication & External Relations Marketing Manager
Mr H Hugo Bague Head of Human Resources Personnel Manager
Mr J John Becker Head of IT Computing/IT Manager
Mr SE Stephen Creese Managing Director Rio Tinto Australia Other
* Appointed to the Board of Directors
Date Information Verified: 19 September, 2008
OTHER DIRECTORSHIPS
Name Company Position Title
Sir Roderick Eddington Allco Finance Group Limited Non-Executive Director
Mr Richard Goodmanson Qantas Airways Limited Non-Executive Director
Financials
Balance Date 31-Dec-2008 31-Dec-2007 31-Dec-2006 31-Dec-2005 31-Dec-2004
Accounting Period Date 12 Months 12 Months 12 Months 12 Months 12 Months
Currency Units AUD000 AUD000 AUD000 AUD000 AUD000
BALANCE SHEET
Current Assets
Cash At Bank 1,710,915 2,383,112 840,500 3,018,000 537,000
Trade Debtors 7,824,429 9,416,550 2,426,000 2,195,000 1,820,000
Inventory 8,122,861 7,818,634 2,900,400 2,598,000 2,675,000
Other Current Assets 9,048,580 12,153,144 1,683,700 1,679,000 1,151,000
Total Current Assets 26,706,785 31,771,440 7,850,600 9,490,000 6,183,000
Non Current Assets
Receivables 1,609,506 2,584,481 1,122,500 892,000 0
Investments 7,320,281 8,321,333 2,552,100 2,895,000 2,976,000
Property & Plant Equipment 60,487,571 60,799,042 25,358,200 22,351,000 22,912,000
Intangible Assets 29,815,695 40,431,768 1,398,800 1,573,000 1,732,000
Other Non Current Assets 3,886,862 2,542,468 1,106,500 604,000 2,246,000
Total Non Current Assets 103,119,915 114,679,092 31,538,100 28,315,000 29,866,000
Total Assets 129,826,700 146,450,532 39,388,700 37,805,000 36,049,000
Current Liabilities
Trade Creditors 10,426,294 9,462,908 3,075,200 1,338,000 1,204,000
Interest Bearing Debt 14,323,297 11,747,508 1,701,400 1,525,000 1,172,000
Provisions 1,196,626 1,109,704 417,900 407,000 264,000
Net Profit After Tax Net Profit After Tax Growth Rate
Companies included in Industry Averages Calculations operate in the Metal Ore Mining in Australia industry.
Segments
Balance Date: 31 December, 2008
Profit Definition: Earnings Before Interest & Tax
OPERATING DIVISIONS
Revenue Profits Assets
Segment Name
AUD000 AUD000 AUD000
Iron Ore 23,942,665 13,184,619 19,392,298
Energy & Minerals 15,267,849 6,338,063 14,281,285
Aluminium 33,231,729 -9,009,465 62,977,886
Copper & Diamonds 6,123,655 4,696,685 10,000,376
Exploration & Evaluation N/A -228,895 N/A
Other 46,359 -212,959 2,290,395
Equity Accounted Associates N/A N/A 8,066,362
Unallocated 295,535 N/A 12,818,098
Aluminium 42.1%
Other 0.1%
Unallocated 0.4%
Aluminium 48.5%
Other 1.8%
Unallocated 9.9%
GEOGRAPHIC LOCATIONS
Revenue Profits Assets
Segment Name
AUD000 AUD000 AUD000
Australia & New Zealand 35,713,352 N/A 37,751,673
North America 24,004,959 N/A 50,565,425
Europe & Other Countries 17,042,507 N/A 15,256,260
South America 3,956,400 N/A 1,264,715
Africa 3,324,767 N/A 3,479,777
Indonesia 76,781 N/A 856,182
Unallocated -5,210,974 14,768,048 20,652,668
Total 78,907,790 14,768,050 129,826,700
Africa 4.0%
Indonesia 0.1%
Africa 2.7%
Indonesia 0.7%
Unallocated 15.9%
Competitive Environment
B1101 BLACK COAL MINING IN AUSTRALIA
Industry Statistics
Industry Size 2007/2008 Million Dollars 78,484
Industry Turnover Growth Rate 2007/2008 116.13
Industry Concentration Level Low
Estimated Rio Tinto Market Share (%) 7.80
Number of Enterprises in Industry 100
Rio Tinto is one of the world's leading mining and exploration companies. It combines Rio Tinto plc, a London listed
public company headquartered in the UK, and Rio Tinto Limited, which is listed on the Australian Stock Exchange.
The two companies are joined in a 'dual listed companies' (DLC) structure as a single economic entity, called the Rio
Tinto Group. In addition to coal, Rio Tinto's major products worldwide include iron ore, aluminium, copper, diamonds,
uranium, gold and industrial minerals (borates, titanium dioxide, salt and talc).
Rio Tinto has substantial coal operations in Australia, located in both New South Wales and Queensland. In
Queensland, Rio Tinto Coal Australia operates the Blair Athol, Hail Creek and Kestrel Mines and the Clermont Mine
Project. In New South Wales, Rio Tinto Coal Australia manages Coal & Allied's operations at Mount Thorley
Warkworth, Hunter Valley Operations and Bengalla.
Rio Tinto Coal Australia mines hard coking coal the Hail Creek (82% Rio Tinto) and Kestrel (80% Rio Tinto) mines,
both of which are located in Queensland. The Kestrel mine also produces steaming coal. The company mines
steaming coal at the Blair Athol mine (57.2% Rio Tinto) and is developing the nearby Clermont steaming coal mine,
which is due to reach full capacity in 2013. Blair Athol is due to close in 2015, when its reserves will be depleted, but
the Clermont mine will utilise Blair Athol's stockpiling and rail facilities. Until the end of January 2008, Rio Tinto Coal
Australia also owned and operated the Tarong steaming coal mine in Queensland. The mine, which is the sole
supplier of coal to the adjacent Tarong Power Station, was purchased by the Queensland State Government.
Rio Tinto holds 75.7% of Coal & Allied, which is managed by Rio Tinto Coal Australia. Coal & Allied, has three mining
operations in the Hunter Valley of New South Wales: the Hunter Valley Operations (100% ownership); Mount Thorley
Warkworth (80% Coal & Allied); and Bengalla (40% Coal & Allied). The operations produce mainly thermal coal and
some semi-soft coking coal. Coal & Allied is also developing the nearby Mount Pleasant Project and the Lower Hunter
Lands Project.
Rio Tinto's Australian coal mine production amounted to 29.5 million tonnes in 2008 (26.1 million tonnes in 2007),
consisting of 7.4 million tonnes of hard coking coal (6.2 million tonnes in 2007) and 22.1 million tonnes of semi-soft
coking and steaming coal (19.9 million tonnes in 2007). Production increased in 2008, despite the sale of the Tarong
steaming coal mine, effective end-January 2008. The company produced 37.1 million tonnes of coal in 2006,
consisting of 5.9 million tonnes of hard coking coal and 31.2 million tonnes of semi-soft coking coal and steaming
coal. The decline was largely due to heavy rain that disrupted coal mining activity. Rio Tinto's coal production from its
Australian operations amounted to 38.1 million tonnes in 2005, 39.7 million tonnes in 2004 and 34 million tonnes in
2003.
In early November 2007, BHP Billiton made merger overtures to Rio Tinto Ltd, offering three BHP shares for each Rio
Tinto share. Rio Tinto rejected the proposed offer, stating that it undervalued the company. The Chinese Government
owned Chinalco, which has substantial operations in the aluminium sector, purchased a 9% stake in Rio Tinto in early
February. It is unclear whether Chinalco's aim is to secure a bargaining position regarding a possible future sale of
the combined entity's aluminium assets (assuming the merger proceeds), or whether it will seek to block the merger.
Chinese buyers of iron ore and, to a lesser extent, coal, have expressed their concern over the increase in
concentration represented by a possible merger between BHP Billiton and Rio Tinto. In the wake of the Chinalco
purchase, BHP Billiton lifted its offer for Rio Tinto to 3.4 of its own shares for each Rio Tinto share. The Rio Tinto
board rejected that offer, arguing that it significantly undervalued the company. The global financial crisis, together
with concern over Rio Tinto's debt levels, saw BHP Billiton withdraw its merger bid in December 2008.
In February 2009, Rio Tinto and Chinalco unveiled plans for Chinalco to increase its holding in Rio Tinto 18% and to
take direct ownership positions in some of Rio Tinto's metallic mineral assets. The planned acquisition must gain
approval from the Foreign Investment Review Board (FIRB) to proceed. The Australian Treasurer may also over-rule
the deal if it is deemed not to be in the national interest.
The accompanying table shows the financial performance of Rio Tinto's Australian coal mining operations. Revenue
soared on the back of higher output and, more particularly soaring coal prices. Revenue fell in 2007, due to lower
production levels, a much stronger Australian dollar and lower US dollar prices. That decline follows gains over the
previous three years. A small increase in revenue was made in 2006, as lower US dollar coal prices fell offset most of
the boost to revenue provided by higher output and a marginally weaker Australian dollar. Larger increases in
revenue occurred in 2005 and 2004 as production rose, although the appreciation of the Australian dollar reduced the
benefits flowing from higher US dollar prices.
Shifts in earnings before interest and tax (EBIT) were more marked than those in revenue. Most of the increase in
revenue in 2008 flowed directly into profit. In 2007 Rio Tinto reported that EBIT was reduced by increases in the cost
of basic materials, fuel, explosives and labour. EBIT fell in 2006 due mainly to higher energy and demurrage costs,
but large gains made in 2004 and 2005 on the back of rising revenue.
Rio Tinto Ltd participates in this industry via Hammersley Iron Pty Ltd (a wholly-owned subsidiary) and the Robe River
joint venture (53% Rio Tinto).
Hammersley Iron is Australia's largest producer of iron ore. Ore is mined at several sites in Western Australia before
being transported to the company's port at Dampier for export. Most operations other than the Channar mine (60%
Hammersley and 40% China Metallurgical Import and Export Corporation) are wholly owned by Rio Tinto. Total output
from these mines amounted to 110 million tonnes in 2008, compared with 107.9 million tonnes in 2007, 93.3 million
tonnes in 2006, 86.1 million tonnes in 2005 and 78.1 million tonnes in 2004.
In August 2000, Rio Tinto acquired North Ltd, one of Australia's other major iron ore miners and the major participant
in the Robe River joint venture. The other joint venture partners are Mitsui Iron Ore Development Pty Ltd (33%),
Nippon Steel Australia Pty Ltd (10.5%) and Sumitomo Metal Australia Pty Ltd (3.5%). The acquisition by Rio Tinto
was prompted by the desire to extract synergies from mine development and production and reduce costs.
The Robe River operations mine ore at the East Deepdale deposits at Pannawonica, and rail it to Cape Lambert,
where it is crushed and screened prior to being exported as fines - material less than 6mm in diameter. After acquiring
Robe River, Rio Tinto pursued cost savings and operational benefits from integrating aspects of that operation and
Hammersley. In 2002, the Hammersley power grid was extended to include Robe River's new West Angelas mine
and the Pilbara Rail Company was formed to integrate the rail networks of the two operations. The West Angelas
mine at Robe River began supplying high grade Marra Mumba ore during 2002, with shipments being made under
contract to steel mills in Japan and Korea and trial cargoes being sent to mills in China and Europe. The Robe River
operation contributed 26.6 million tonnes of iron ore to Rio Tinto's total production in 2008, compared with 27.3 million
tonnes in 2007, 28.1 million tonnes in 2006, 27.7 million tonnes in 2005 and 25.7 million tonnes in 2004.
Rio Tinto holds a 50% stake in the Hope Downs mine, located just 50 kilometres from its Yandi and West Angelas
operations. Work on the 22 million tonnes per year project commenced in April 2006 at a cost of US$1 billion and
production commenced in late 2007. In August 2007 Rio Tinto announced that it was embarking on a fast-tracked
expansion of the project. At the completion of the expansion, expected by early 2009, the mine will have a capacity of
30 million tonnes per annum. Rio Tinto's share of output from Hope Downs in 2008 was 5.5 million tonnes.
Overall, Rio Tinto's output from its iron ore mines in Australia amounted to 142.1 million tonnes in 2008, compared
with 135.2 million tonnes in 2007. Nonetheless, production for 2008 is lower than originally envisaged by Rio Tinto.
The global financial crisis caused the miner to slash its planned iron ore output in the final quarter of 2008.
Rio Tinto lifted the nameplate capacity of the Cape Lambert port from 55 to 80 million tonnes of iron ore per year in
2008. As a result, the company's mine, rail and port capacity in the Pilbara is matched, and capable of exporting 220
million tonnes per year. A decision on further expansion of the port was delayed in the wake of the softening iron ore
market and Rio Tinto's own need to refinance debt. Rio Tinto had previously outlined plans to boost its capacity in the
Pilbara, including the port, to 320 million tonnes by 2012 at a cost of about US$10 billion.
The accompanying table shows Rio Tinto's revenue and earnings before interest and tax from its Australia iron ore
operations, converted from US dollars at the average exchange rate for each year. Revenue surged in 2008,
reflecting higher tonnages and much the much higher iron ore prices applying from April 1, 2008. Rio Tinto and BHP
Billiton secured price rises of about 85% at that time. A large part of the increase in revenue flowed through to
earnings before interest and tax. Revenue expanded strongly in 2007 and 2006, reflecting both a substantial increase
in output and much higher prices. Earnings before interest and tax followed a similar path to revenue. Revenue
surged in 2005 on the back of booming iron ore prices and a 14% increase in output, having already expanded in
2004 due to higher production and higher prices.
In November 2007, BHP Billiton made merger overtures to Rio Tinto Ltd, offering three of its own shares for each Rio
Tinto share. Rio Tinto rejected the proposed offer and subsequent higher offers, stating that they undervalued the
company. The Chinese Government-owned firm, Chinalco, which has substantial operations in the aluminium sector,
purchased a 9% stake in Rio Tinto in February 2008 (currently 9.9%). Chinese buyers of iron ore and, to a lesser
extent, coal, expressed their concern over the increase in concentration represented by a possible merger between
BHP Billiton and Rio Tinto. The global financial crisis, together with concern over Rio Tinto's debt levels, saw BHP
Billiton withdraw its merger bid in December 2008.
In February 2009, Rio Tinto and Chinalco unveiled plans for Chinalco to increase its holding in Rio Tinto 18% and to
take direct ownership positions of 15% to 50% Rio Tinto's iron ore, bauxite, alumina and aluminium projects. The plan
also involves Chinalco entering into a strategic alliance with Rio Tinto in its iron ore, copper and aluminium
businesses and becoming an equal partner in an iron ore marketing company that will sell 30% of the output from the
Hamersley iron ore operations. If the deal proceeds, Chinalco plans to appoint two directors to the Rio Tinto boards in
Australia and Britain. The planned acquisition must gain approval from the Foreign Investment Review Board (FIRB)
to proceed. The Australian Treasurer may also over-rule the deal if it is deemed not to be in the national interest.
Financial Performance - Rio Tinto Plc - Rio Tinto Limited Australian Iron Ore Operations
Billion Dollars Percent Growth Billion Dollars Percent Growth Units Percent Growth
Years Revenue Growth EBIT Growth Employees Growth
2004 3.36 N/C 1.15 N/C 3108 N/C
2005 5.90 75.6% 3.13 172.2% 3479 11.9%
2006 7.70 30.5% 4.22 34.8% 4839 39.1%
2007 9.29 20.6% 4.72 11.8% 5679 17.4%
2008 16.11 73.4% 9.91 110.0% N/A N/C
Source: Annual Report
Rio Tinto is one of the world's leading mining and exploration companies. It combines Rio Tinto plc, a London listed
public company headquartered in the UK, and Rio Tinto Limited, which is listed on the Australian Stock Exchange.
The two companies are joined in a 'dual listed companies' (DLC) structure as a single economic entity, called the Rio
Tinto Group. Rio Tinto's major products include iron ore, aluminium, copper, diamonds, energy products, gold and
industrial minerals (borates, titanium dioxide, salt and talc.
Rio Tinto owns and operates the Weipa and Andoom mines on the Cape York Peninsula in Queensland and, since
late October 2007, the Gove mine on the Gove Peninsula of the Northern Territory. The Gove mine was formerly
owned by Alcan Inc, which was acquired by Rio Tinto in a US$38 billion takeover. The takeover made Rio Tinto the
world's largest producer of aluminium and bauxite, but also burdened it with a substantial amount of debt. Rio Tinto's
aluminium business, including its bauxite operations, is run from Brisbane.
Production from the mines at Weipa has been lifted progressively from about 11.9 million tonnes in 2003 to 20 million
tonnes in 2008. Rio Tinto's decision to construct the Yarwun Alumina Refinery (which commenced operations in
Gladstone in the last quarter of 2004) was accompanied by a decision to expand the operation at Weipa to provide
the necessary bauxite input. Rio Tinto approved an expansion at the Yarwun refinery in mid 2007 that will lift its
capacity from 1.4 million tonnes of alumina per year to about 3.4 million tonnes. The US$1.8 billion expansion is
expected to come on stream by 2011. In mid 2008, the company approved a feasibility study into the development of
a new bauxite operation south of the existing Weipa bauxite mine and port. If approved, the new operation would lift
Weipa's total bauxite production to 35 million tonnes.
Until the completion of the Yarwun Alumina Refinery in 2004, most of the bauxite produced at Weipa was refined
domestically at Queensland Alumina Ltd's refinery in Gladstone. Queensland Alumina Ltd is owned by Rio Tinto
(80%) and the Russian-based firm Rusal (20%). Rio Tinto's holding increased from 38.6% in late 2007 when it
acquired Alcan and its 41.4% holding in the refinery. Rio Tinto sells bauxite mined at Weipa to the other participant in
the smelter and any additional output is exported.
Gove has bauxite reserves of about 190 million tonnes and produced about 5.2 million tonnes of bauxite in 2008, up
from 4.4 million tonnes in 2006-07. The increase in output was due to mine expansion. About 5.4 million tonnes of
bauxite was mined in 2005-06, 5.8 million tonnes in 2004-05 and 6 million tonnes in both 2003-04 and 2002-03. In
addition to the bauxite mine, the complex also includes an alumina refinery, which is being expanded from an output
level of 2 million tonnes per year to three million tons per year. Bauxite not refined on-site is exported.
The performance of Rio Tinto's aluminium, alumina and bauxite businesses reflect the interaction of production
volumes and prices. The large increase in revenue in 2008 and to a lesser extent, 2007, reflects both higher prices
and the acquisition of Alcan in late 2007. The large jump in revenue in 2008 also led to a substantial increase in
earnings before interest and tax (EBIT), but in the previous year EBIT fell, due mainly to cost pressures and much
higher depreciation charges. Revenue and profit rose strongly over 2004 to 2006 on the back of stronger US dollar
aluminium prices (although the benefit of the higher price was partly offset by a firmer Australian dollar, especially in
2004) and higher output. The increase follows falls in the sector's performance in 2003 and 2002 that were due to the
firmer Australian currency and, in 2002, lower US dollar prices.
In November 2007, BHP Billiton made merger overtures to Rio Tinto Ltd, offering three of its own shares for each Rio
Tinto share. Rio Tinto rejected the proposed offer and subsequent higher offers, stating that they undervalued the
company. The Chinese Government-owned firm, Chinalco, which has substantial operations in the aluminium sector,
purchased a 9% stake in Rio Tinto in February 2008 (currently 9.9%). Chinese buyers of iron ore and, to a lesser
extent, coal, expressed their concern over the increase in concentration represented by a possible merger between
BHP Billiton and Rio Tinto. The global financial crisis, together with concern over Rio Tinto's debt levels, saw BHP
Billiton withdraw its merger bid in December 2008.
In February 2009, Rio Tinto and Chinalco unveiled plans for Chinalco to increase its holding in Rio Tinto 18% and to
take direct ownership positions of 15% to 50% Rio Tinto's iron ore, bauxite, alumina and aluminium projects. The plan
also involves Chinalco entering into a strategic alliance with Rio Tinto in its iron ore, copper and aluminium
businesses and becoming an equal partner in an iron ore marketing company that will sell 30% of the output from the
Hamersley iron ore operations. If the deal proceeds, Chinalco plans to appoint two directors to the Rio Tinto boards in
Australia and Britain. The planned acquisition must gain approval from the Foreign Investment Review Board (FIRB)
to proceed. The Australian Treasurer may also over-rule the deal if it is deemed not to be in the national interest.
Financial Performance - Rio Tinto Plc - Rio Tinto Limited Bauxite, Alumina and Aluminium Segment
Million Dollars Million Dollars Units
Years Revenue Percent Growth EBIT Percent Growth Employees Percent Growth
2004 3221 N/C 680 N/C 4077 N/C
2005 3600 11.8% 762 12.1% 4293 5.3%
2006 4635 28.8% 1458 91.3% 4347 1.3%
2007 8713 88.0% 1291 -11.5% 11428 162.9%
2008 27720 218.1% 2751 113.1% N/A N/C
Source: Annual Report
Note: Employment is the total for Rio Tinto's aluminium sector.
Rio Tinto Ltd produces copper at its Northparkes mine (of which it owns 80%) in New South Wales. The other 20% of
Northparkes is owned by the Sumitomo Group of Japan. Copper concentrates produced at Northparkes are
transported by rail to Port Kembla for export and shipped under long term contracts to smelters in Japan (74%), China
(13%) and India (13%).
Copper concentrate production from the Northparkes mine commenced during the second half of 1996 (prior to that
time, the mine had been producing gold only from an open cut pit). Underground operations were developed in two
stages, known as Lift 1 and Lift 2. The Lift 1 operation commenced production in December 1996 and by 2001, the
mine was producing 55,100 tonnes of copper in concentrate form
Copper production at Northparkes fell to 24,800 tonnes in 2008, down from 43,100 tonnes in 2007, 83,300 tonnes in
2006 and lower than the 54,000 tonnes mined in 2005. Output was 30,000 tonnes in 2004. Lower output in 2008 was
due the continued processing of lower grade material which commenced in 2007. Rio Tinto reported that lower
production at Northparkes in 2007 and a consequently weaker performance occurred due to the premature shutdown
of the Lift 2 underground area during the first half of the year, resulting in the processing of low grade open pit
stockpiles and increased costs. Rising production in 2005 and 2006 was due to an increase in the volume of ore
mined and milled, as well as higher ore grades associated with the commencement of mining at Lift 2. That orebody
constitutes an ore reserve of 25 million tonnes grading 1.2% copper and 0.48 grams of gold per tonne gold. In late
2008, Rio Tinto announced a number of measures designed to reduce its debt by US$10 billion in 2009. These
measures include the suspension of the $229 million E48 block cave project at Northparkes. Current plans involve
work on E48 recommencing when conditions improve. The E48 development was approved in 2006 and is designed
to extend the life of the mine to 2016.
The accompanying table shows financial information for Rio Tinto business segments including Northparkes.
Northparkes was grouped under 'other' within Rio Tinto's copper operations until 2006, when it was listed separately
(with separate results also stated for 2005). For years prior to 2005, the associated table quotes revenue and
earnings before interest and tax figures for Rio Tinto's 'other' copper category, which includes ventures other than
Northparkes in Australia and overseas, namely Rio Tinto's interests Somincor and Zinkgruvan (prior to their sale in
the first half of 2004) and the Peak gold mine in Australia and the Alumbrera operation (prior to their sale in the first
half of 2003). In addition, Rio Tinto quotes revenue and earnings before interest and tax in US dollars, and these have
been converted into Australian dollars at the average exchange rate for the year.
Revenue and earnings before interest and tax fell in 2008, reflecting the lower production levels described above, the
slump in US dollar copper prices in the second half of the year and a firming of the Australian dollar. Performance had
already weakened in 2007 as a result of lower output and a stronger Australian dollar, which combined more than
offset the favourable effect of higher US dollar copper prices. The large performance gain in 2006 was due to both
much higher levels of production at Northparkes, as well as substantially higher copper prices. Declines in revenue for
2004 reflect the sale of operations.
Financial Performance - Rio Tinto Pld - Rio Tinto Limited Other Operations, Including Copper Mining
Million Dollars Million Dollars Units
Years Revenue Percent Growth EBIT Percent Growth Employees Percent Growth
2004 230 N/C 92 N/C N/A N/C
2005 229 -0.4% 100 8.7% 203 N/C
2006 580 153.3% 396 296.0% 220 8.4%
Rio Tinto owns the Argyle diamond mine (the largest diamond mine in the world), making it by far the most substantial
player in this industry. The mine is operated by Argyle Diamond Mines Pty Ltd and output is marketed by Argyle
Diamond Sales Ltd. Both of these operations are wholly owned by Rio Tinto.
Until 2000, the Argyle mine was owned and operated by a joint venture between Rio Tinto (59.7%) and Aston Mining
Ltd (40.3%). However, Rio Tinto acquired Ashton Mining in late 2000, in the wake of a failed takeover bid for the
company by the South African De Beers group.
Although Argyle is the largest diamond mine in the world, it has a relatively low proportion of high quality stones. Only
5% of output is of gem quality and a further 70% is of near gem quality. The remaining 25% of output consists of
industrial diamonds. Worldwide, diamond output averages 17% gem, 40% cheap gem and 43% industrial quality
diamonds. The presence of rare dark pink gems at Argyle partly compensates for the low percentage of gem quality
stones. As a result of their relative scarcity, good quality pink diamonds can fetch more than twice as much as blue-
white stones of comparable grade and purity. All gem and near gem diamonds produced at Argyle are sold as
polished stones and account for more than 95% of the value of Argyle's rough diamond sales.
The open pit mine at Argyle is based around the AK1 pipe, a vertical geological formation consisting of diamond-
bearing lamproite (although geologists initially believed the diamond-bearing rock to be kimberlite). The AK1 open pit
is two kilometres long, one kilometre wide and covers an area of almost 300 hectares. Diamond-bearing ore is
transported 2.5 kilometres to a primary crusher to commence the diamond extraction process in the main recovery
plant. In the past, Argyle also conducted alluvial mining of ancient creek beds where diamonds had been washed
down from the AK1 pipe over millions of years. This source of diamonds is now largely depleted.
Production at Argyle has typically fluctuated in the range 20 million to 30 million carats, depending on the grade of ore
mined and also on weather conditions (extremely heavy rain can slow production rates).
At the end of 2005, Rio Tinto announced that it would spend US$760 million on an underground mine at Argyle, as
well as an additional US$150 million on a related open pit cut-back. The Western Australian State Government had
introduced a lower royalty rate for diamonds mined underground (5%, compared with 7.5%) and softened
downstream processing obligations earlier in the year in order to facilitate the transformation of Argyle to an
underground operation. Under the new arrangements, Argyle's fancy pink stones are still cut and polished in Perth.
The underground and cut-back developments will extend the mine's life from 2008 to 2018. The open-pit cutback will
also help to maintain production levels during the transition period (and beyond) as the open pit operation is wound
down and the underground mine is ramped up. However, Rio Tinto has indicated that variability in production levels is
anticipated as the open pit reaches the end of its life and the transition to underground operations are made. The
underground mine, which is expected to commence production in 2010, will make use of block caving techniques,
which involve undercutting the orebody to leading to fracture and then collapse of the ore. Once the underground
mine is in full production, output from Argyle is expected to amount to about 20 million carats per year.
As a result of its acquisition of Ashton, Rio Tinto gained the Merlin diamond mine in the Northern Territory. This mine
was commissioned in early 1999 and on average, produced stones of much higher quality than Argyle. Merlin
production grades 35% gemstone and 65% near gem quality. Production from Merlin amounted to 55,000 carats in
2001 and rose to 117,000 carats in 2002. However, output fell back to 62,000 carats in 2003 due to resource
depletion. Merlin, including the associated mining lease, was sold to North Australian Diamonds Limited in 2004.
The accompanying table shows the financial performance of Rio Tinto's Australian diamond operations, with figures
converted from US dollars to Australian dollars at the average exchange rate for the year. Revenue and profit have
fluctuated markedly over the past five years, reflecting variations in production levels and diamond prices. Although
profit generated by the Argyle operation increased in 2007, this was due in part to a one-off tax benefit, as well as a
higher margin product mix. The fall in revenue in 2006 reflected Rio Tinto's decision to build up its stocks of rough
diamonds rather than sell into a softening market. By the end of the year, Argyle held in excess of US$100 million of
surplus rough diamonds in inventory. The impact of lower sales volumes and revenues on profit was partly offset by
higher prices for rough diamonds and lower depreciation due to the inclusion of underground reserves. Both revenue
and profit rebounded strongly in 2005 as production levels expanded. Lower revenue in 2004 was due to reduced
diamond output. Profit after tax was also reduced in 2004, as the processing of lower grade ore still resulted in
substantial costs.
Rio Tinto is by far the most substantial player in this industry, with large interests in salt, talc and gypsum.
Australia's largest salt producer, Dampier Salt Ltd, is owned by Rio Tinto Ltd (68.4%), Marubeni Corp (21.5%) and
Sojitz Corporation (10.1%). Rio Tinto's share increased from 64.9% in July 2007, when it and Marubeni acquired the
4.5% of Dampier Salt formerly held by the Japanese firm, C. Itoh. The company harvests salt at Dampier, Lake
MacLeod and Port Hedland, which have approximate output capacities of 4.0 million tonnes, 1.5 million tonnes and 3
million tonnes, respectively. Seawater is evaporated to produce salt at Dampier and Port Hedland, while at Lake
MacLeod, brine from an underground lake provides the salt. The operation at Port Hedland was acquired when
Dampier Salt purchased another producer, Cargill Salt Australia Ltd in July 2001. The purchase price was US$95
million, plus contingent performance-based payments of up to US$15 million, payable over a number of years. The
acquisition made Dampier Salt the world's largest salt exporter.
Dampier Salt's production is exported, primarily to the Japanese chemical industry. Other export markets include
Korea, Taiwan, China, Nigeria and the US. A small proportion of output is also used locally to produce caustic soda
for the alumina industry.
Dampier Salt's output amounted to 7.87 million tonnes in 2007 (Rio Tinto share 5.24 million tonnes), down from 8.32
million tonnes in 2006 and 8.48 million tonnes in 2005. Commissioning of a new process plant at Dampier
commenced in December 2004 and underpinned higher production in 2005. Production in 2004 was 7.38 tonnes, up
from 7.14 million tonnes in 2003. The fall in salt production in 2007 was due to the residual effects of cyclones that
disrupted operations. Rio Tinto does not expect Dampier Salt to return to full capacity output until 2010.
Most of Australia's talc production (over 95%) comes from Western Australia, where it is mined by Three Springs Talc
Pty Ltd. The operation was a subsidiary of WMC Ltd until it was sold to the Luzenac Australia Pty Ltd (a wholly-owned
subsidiary of Rio Tinto) in September 2001. The talc mine and processing plant are capable of producing up to
200,000 tonnes of talc product per year, although production varies substantially from year to year, depending on
customer demand. The operation consists of an open cut mine and a talc mill. The mill, which began operating in
2001, can process up to 40,000 tonnes per year of talc. It processes transform lump and fine grain talc into more than
20 high value products for the paper, paint, technical ceramics and plastics industries. Varying particle shapes, sizes,
chemistry and surface characteristics differentiate these products.
Rio Tinto entered the gypsum market in mid 1997 with the commissioning of its gypsum operations at Lake MacLeod
near Carnarvon in Western Australia. The gypsum produced (about 1.5 million tonnes per year) is exported to
customers in Japan, Korea, Taiwan and Indonesia.
The accompanying table shows the financial performance of Rio Tinto Minerals (which includes salt, gypsum and talc
produced in Australia) for 2007 and 2006 and Industrial Minerals for prior years. The segments are not directly
comparable as Industrial Minerals includes a broader range of activities. Financial information has been converted
from US dollars into Australian dollars using the average exchange rate for each year. The main factor behind the fall
in division revenue in 2007 was the firming of the Australian dollar.
Rio Tinto Limited was formed at the end of 1995, when the RTZ Corporation Plc and CRA Ltd merged. Rio Tinto has
a dual listed structure, with Rio Tinto Plc (formerly RTZ) listed on the London Stock Exchange and Rio Tinto Limited
(formerly CRA) listed on the ASX. Rio Tinto Group is one of the world's leading mining companies, with operations in
about 40 countries and about 32,000 employees.
Rio Tinto is a major producer of iron ore, coal, aluminium, gold and diamonds, with operations in Australia, New
Zealand, Indonesia, the United States, Canada, Chile and South Africa. The company also engages in significant
mineral exploration.
The accompanying table shows Rio Tinto's spending on exploration worldwide over recent years (converted from US
dollars into Australian dollars at the average exchange rate for each year). The company's key exploration focus has
been on advancing the most promising targets and spending in Australia has accounted for only a small part of the
overall figure. At the end of 2007, Rio Tinto was actively exploring in 30 countries and assessing opportunities in a
further 20 for a broad range of commodities including bauxite, copper, coking coal, iron ore, industrial minerals,
diamonds, nickel and uranium. Activity in Australia focussed on uranium and zircon. Further iron ore resources in the
Pilbara region of Australia were handed over to the iron ore group in early 2007. Exploration in Australia in 2005 and
2006 was largely limited to spending on iron ore and uranium.
Rio Tinto's exploration objective is to discover mineral resources that are world class in size and which can sustain
internationally cost competitive mining operations over a lengthy mine life. Basically, the company focuses its
exploration resources on projects most likely to deliver a world class deposit.
Rio Tinto is one of the world's leading mining and exploration companies. It combines Rio Tinto plc, a London listed
public company headquartered in the UK, and Rio Tinto Limited, which is listed on the Australian Stock Exchange.
The two companies are joined in a 'dual listed companies' (DLC) structure as a single economic entity, called the Rio
Tinto Group. Rio Tinto's major products include iron ore, aluminum, copper, diamonds, energy products, gold and
industrial minerals (borates, titanium dioxide, salt and talc.
Rio Tinto's alumina operations in Australia consist of the Yarwun refinery, near Gladstone in Queensland, the Gove
refinery in the Northern Territory and an 80% holding in Queensland Alumina Ltd (QAL).
Operations at Yarwun, which has nameplate capacity of 1.4 million tonnes of alumina per year, commenced in late
2004. The refinery processes ore mined by Rio Tinto at Weipa and has been designed to accommodate expansions
capable of lifting alumina production to 4 million tonnes per year. In July 2007, Rio Tinto approved a US$1.8 billion
expansion of the Yarwun Alumina Refinery. The expansion, known as Yarwun 2, will more than double annual
production, increasing alumina output by two million tonnes to 3.4 million tonnes by 2011. A concurrent expansion at
Rio Tinto's bauxite mine at Weipa in northern Queensland will provide the additional 4.5 million tonnes of feedstock
required by Yarwun 2. Yarwun's output amounted to 1.26 million tonnes of alumina in 2007, compared with 1.24
million tonnes in 2006 and 835,000 tonnes in 2005.
The Gove alumina refinery and associated bauxite mine was formerly owned by Alcan Inc, which was acquired by Rio
Tinto in a US$38 billion takeover in November 2007. The Gove refinery an extremely low-cost producer of alumina (in
the bottom quartile), due mainly to the high aluminium content of the bauxite mined at Gove. The alumina produced at
Gove is sold to local aluminium producers, and is also exported to countries in eastern and northern Europe, North
America, the Middle East and Asia.
In September 2004, Alcan committed to a $1.86 billion expansion of the Gove alumina refinery and bauxite mining
operation to expand refinery output from 2 million tonnes per year to 3.8 million tonnes per year. The refinery
expansion also entails an increase in mine output to about 8 million tonnes per year of bauxite. Commissioning of the
project expansion commenced in 2006 and the ramp-up to full production is continuing. Rio Tinto expects output to be
about 2.6 million tonnes in 2008, rising to between 3.4 million tonnes and 3.8 million tonnes in 2009.
QAL operates the world's largest alumina refinery in Gladstone, Queensland. Rio Tinto owns 80% of QAL, with the
remaining 20% owned by the Russian aluminium firm, Rusal. Rusal acquired its stake in the refinery in early 2005,
purchasing it from the US firm Kaiser Aluminum. Rio Tinto's holding increased from 38.6% when it acquired Alcan Inc
(and its 41.4% holding in QAL) in late 2007.
The QAL refinery has a nameplate output capacity of about 3.65 million tonnes of alumina per year (although actual
output routinely exceeds nameplate capacity) and processes bauxite extracted from the Weipa mine on Cape York
Peninsula in far north Queensland. It requires about 2.4 tonnes of bauxite for each tonne of alumina produced.
Alumina production at QAL amounted to 3.82 million tonnes in 2007, compared with 3.9 million tonnes in both 2006
and 2005, 3.78 million tonnes in 2004 and 3.73 million tonnes in 2003. QAL operates as a tolling operation, supplying
alumina to the owners in proportion to their equity in the consortium for a charge per tonne to cover the cost of
processing.
The performance of Rio Tinto's aluminium, alumina and bauxite businesses reflect the interaction of production
volumes and prices. The large increase in revenue in 2007 reflects both higher prices and the acquisition of Alcan.
Despite the gain, earnings before interest and tax fell, due mainly to cost pressures and much higher depreciation
charges. Revenue and profit rose strongly over 2004 to 2006 on the back of stronger US dollar aluminium prices
(although the benefit of the higher price was partly offset by a firmer Australian dollar, especially in 2004) and higher
output. The increase follows falls in the sector's performance in 2003 and 2002 that were due to the firmer Australian
currency and, in 2002, lower US dollar prices.
The performance of Rio Tinto's aluminium, alumina and bauxite businesses reflect the interaction of production
volumes and prices. The large increase in revenue in 2007 reflects both higher prices and the acquisition of Alcan.
Despite the gain, earnings before interest and tax fell, due mainly to cost pressures and much higher depreciation
charges. Revenue and profit rose strongly over 2004 to 2006 on the back of stronger US dollar aluminium prices
(although the benefit of the higher price was partly offset by a firmer Australian dollar, especially in 2004) and higher
output. The increase follows falls in the sector's performance in 2003 and 2002 that were due to the firmer Australian
currency and, in 2002, lower US dollar prices.
Rio Tinto is one of the world's leading mining and exploration companies. It combines Rio Tinto plc, a London listed
public company headquartered in the UK, and Rio Tinto Limited, which is listed on the Australian Stock Exchange.
The two companies are joined in a 'dual listed companies' (DLC) structure as a single economic entity, called the Rio
Tinto Group. Rio Tinto's major products include iron ore, aluminium, copper, diamonds, energy products, gold and
industrial minerals (borates, titanium dioxide, salt and talc.
The company owns one aluminium smelter in Australia and has substantial interests in another two.
Its wholly owned Bell Bay smelter in northern Tasmania processes alumina from the Queensland Alumina Limited
refinery (80% owned by Rio Tinto). The nameplate capacity of the smelter is about 167,000 tonnes of aluminium per
year, but it can produce well in excess of that level. Output amounted to 178,000 tonnes in 2008, compared with
177,000 tonnes in 2007, 179,000 tonnes in 2006, 173,800 tonnes in 2005 and 162,000 tonnes in 2004. In 1995,
Comalco committed to a take-or-pay contract for electricity that will keep the smelter operational through to 2014.
Rio Tinto has a 59.2% holding in the Boyne Island aluminium smelter, located near Gladstone in Queensland. The
other owners are: Sumitomo Light Metal Industries (17%), Ryowa Development Pty Ltd (11.65%), Yoshida Kogyo KK
(9.5%) and Sumitomo Chemical Co Ltd (2.46%).
The Boyne Island smelter initially had two 870 metre long potlines with 240 pots in each. The rated capacity of the
smelter was 260,000 tonnes of aluminium per year, but there was provision for smelter capacity to be substantially
increased with the construction of additional potlines. An expansion was undertaken in 1998, raising the capacity of
the smelter to 490,000 tonnes. Output has consistently exceeded nameplate capacity, amounting to 559,000 tonnes
in 2008, 550,300 tonnes in 2007, 547,140 tonnes in 2006, 549,000 tonnes in 2005 and 540,500 tonnes in 2004.
Alumina for the smelter is obtained from the QAL refinery and the aluminium produced is allocated to the participants
in accordance with their project shares. About 80% of output is cast as 22 kilogram ingots for export, with the
remainder being cast as billet or block for further processing in Australia. The smelter consumes about 20% of all
electricity generated in Queensland. Japan is the smelter's major customer, accounting for virtually all export sales,
either through equity off-take or long-term contracts. Rio Tinto has reviewed the possibility of lifting the capacity of the
Boyne Island smelter by a further 218,000 tonnes (at a cost of about $800 million), but this expansion is unlikely to be
undertaken in the foreseeable future.
The importance of energy (in particular, electricity) to the Aluminium Smelting industry is highlighted by the purchase
of the Gladstone power station by the Boyne Island participants in the early 1990s. Any electricity not required by the
Boyne Island smelter is sold back into the Queensland power grid.
Rio Tinto gained a 51.6% interest in the Tomogo smelter in New South Wales when it acquired the former owner of
that holding, Alcan Inc, in November 2007. Other participants are Gove Aluminium Finance Ltd (36.05%) and Hydro
Aluminium (12.4%). Gove Aluminium Finance is owned 70% by CSR Ltd and 30% by AMP Ltd. Alcan acquired the
holding in the smelter when it took over Pechiney Ugine Kuhlmann of France in late 2003.
The Tomogo smelter processes alumina from the Gove alumina refinery (100% Rio Tinto) and QAL. About 80% of
Tomago's output is exported to the Asian region, mostly to Japan. Domestic manufacturers process only a relatively
small quantity of aluminium and the remainder is exported to Europe.
In November 2003, participants in the Tomago smelter announced that they would proceed with a $210 million plan to
expand output to 525,000 tonnes per year by increasing the amperage of the electric current used in the smelter from
180 kiloamps to 225 kiloamps. The project was completed on time and by 2007, output was about 520,000 tonnes.
Rio Tinto became the subject of a takeover bid in late 2007, when BHP Billiton made merger overtures, offering three
of its own shares for each Rio Tinto share. Rio Tinto rejected the proposed offer and subsequent higher offers, stating
that they undervalued the company. Rio Tinto's share price fell sharply after BHP Billiton withdrew its bid and the
company announced major cost cutting initiatives in order to conserve its capital.
The Chinese Government-owned firm, Chinalco, which has substantial operations in the aluminium sector, purchased
a 9% stake in Rio Tinto in February 2008 (currently 9.9%). Chinese buyers of iron ore and, to a lesser extent, coal,
expressed their concern over the increase in concentration represented by a possible merger between BHP Billiton
and Rio Tinto. The global financial crisis, together with concern over Rio Tinto's debt levels, saw BHP Billiton
withdraw its merger bid in December 2008.
In February 2009, Rio Tinto and Chinalco unveiled plans for Chinalco to increase its holding in Rio Tinto 18% and to
take direct ownership positions of 15% to 50% Rio Tinto's iron ore, bauxite, alumina and aluminium projects. The plan
also involves Chinalco entering into strategic alliances with Rio Tinto in its iron ore, copper and aluminium businesses
and becoming an equal partner in an iron ore marketing company that will sell 30% of the output from the Hamersley
iron ore operations. If the deal proceeds, Chinalco plans to appoint two directors to the Rio Tinto boards in Australia
and Britain. The planned acquisition must gain approval from the Foreign Investment Review Board (FIRB) to
proceed. The Australian Treasurer may also over-rule the deal if it is deemed not to be in the national interest.
The performance of Rio Tinto's aluminium, alumina and bauxite businesses reflect the interaction of production
volumes and prices. Rio Tinto quotes data in US dollars and these figures have been converted into Australian dollars
using the average exchange rate for the year. The tripling of revenue in 2008 is due to the full year effect of the Alcan
acquisition, partly offset by a much stronger Australian dollar. Although costs also rose sharply due to the acquisition,
profit expanded. The large increase in revenue in 2007 reflects both higher prices and the acquisition of Alcan.
Despite the gain, earnings before interest and tax fell, due mainly to cost pressures and much higher depreciation
charges. Revenue and profit rose strongly over 2004 to 2006 on the back of stronger US dollar aluminium prices
(although the benefit of the higher price was partly offset by a firmer Australian dollar, especially in 2004) and higher
output.
Financial Performance - Rio Tinto Plc - Rio Tinto Limited Alumina and Aluminium Operations
Billion Dollars Million Dollars Units
Years Revenue Percent Growth NPAT Percent Growth Employees Percent Growth
2004 3.22 N/C 424 N/C 4077 N/C
2005 3.60 11.8% 516 21.7% 4293 5.3%
2006 4.64 28.9% 995 92.8% 4347 1.3%
2007 8.71 87.7% 1307 31.4% 11428 162.9%
2008 27.91 220.4% 1389 6.3% N/A N/C
Source: Annual Report
Note: Employment is company total in Australia and New Zealand
Shareholders
Shareholder Name Percentage Held Country of Incorporation State
Substantial Shareholders
Shining Prospect Pte Ltd 12.00 % Singapore Singapore
AXA SA 4.86 % France France
Legal & General Group Plc 4.59 % United Kingdom United Kingdom
Barclays Plc 4.02 % United Kingdom United Kingdom
Capital Group Companies Inc 3.90 % United States of America United States of America
Largest Shareholders
Tinto Holdings Australia Pty Ltd 37.45 % Australia Victoria
HSBC Custody Nominees (Australia) Limited 10.98 % Australia New South Wales
J P Morgan Nominees Australia Limited 8.18 % Australia New South Wales
National Nominees Limited 7.92 % Australia Victoria
Citicorp Nominees Pty Ltd 3.08 % Australia New South Wales
ANZ Nominees Limited 2.29 % Australia Victoria
Cogent Nominees Pty Limited 0.94 % Australia New South Wales
AMP Life Limited 0.81 % Australia New South Wales
UBS Wealth Management Australia Nominees Pty Ltd 0.56 % Australia Victoria
Australian Foundation Investment Co Ltd 0.53 % Australia Victoria
UBS Nominees Pty Ltd 0.37 % Australia New South Wales
Argo Investments Limited 0.34 % Australia South Australia
Queensland Investment Corporation 0.33 % Australia Queensland
Neweconomy.com.au Nominees Pty Limited 0.29 % Australia Victoria
Perpetual Trustee Company Limited 0.27 % Australia New South Wales
Tasman Asset Management Ltd 0.23 % Australia New South Wales
RBC Dexia Investor Services Australia Nominees Pty Ltd 0.22 % Australia New South Wales
Subsidiaries
Subsidiary Name Percentage Held Country of Incorporation State
Associated companies
Consorcio de AlumÃnio Maranhao 10 % Brazil
Ivanhoe Mines Ltd 10 % Canada
Mineracao Rio do Norte SA 12 % Brazil
Tisand (Pty) Limited 50 % South Africa
Holding company
Rio Tinto Plc - Rio Tinto Limited 100 % Australia Victoria
Joint ventures
Alcan Ningxia Aluminium Company Limited 50 % China
Anglesey Aluminium Metal Limited 51 % United Kingdom
Bengalla JV 30 % Australia New South Wales
Blair Athol Coal JV 71 % Australia Queensland
Boyne Smelters Limited 59 % Australia Queensland
Compagnie Camerounaise de l’Aluminum JV 47 % Cameroon
Decker Coal Company 50 % United States of America
Diavik JV 60 % Canada
Gladstone Power Station JV 42 % Australia Queensland
Grasberg Expansion JV 40 % Indonesia
Hail Creek JV 82 % Australia Queensland
Halco (Mining) Inc 45 % United States of America
HIsmelt JV 60 % Australia Western Australia
Hope Downs JV 50 % Australia Western Australia
Hydrogen Energy JV 50 % United Kingdom
Kestrel JV 80 % Australia Queensland
Leichhardt Coal Pty Limited 45 % Australia Queensland
Minera Escondida Limitada 30 % Chile
Mount Thorley JV 61 % Australia New South Wales
New Zealand Aluminium Smelters Limited 79 % New Zealand
Northparkes Mine JV 80 % Australia New South Wales
Pechiney Reynolds Quebec Inc 50 % United States of America
Queensland Alumina Limited 80 % Australia Queensland
Robe River Iron Associates JV 53 % Australia Western Australia
Sohar Aluminium Company LLC 20 % Oman
Sor-Norge Aluminium AS 50 % Norway
Tomago Aluminium JV 52 % Australia New South Wales
Warkworth JV 42 % Australia New South Wales
Subsidiaries
Argyle Diamond Mines 100 % Australia Australia
Bougainville Copper Limited 54 % Papua New Guinea
Coal & Allied Industries Limited 76 % Australia Australian Capital Territory
Dampier Salt Limited 68 % Australia Western Australia
Energy Resources of Australia Ltd 68 % Australia Australian Capital Territory
Hamersley Iron Pty Limited 100 % Australia Victoria
Service Providers
Service Provider Service Provider Type
ANZ Bank Banker
Commonwealth Bank Banker
National Australia Bank Ltd Banker
Westpac Banking Corp Banker
PricewaterhouseCoopers External Auditor
Not available Insurance Broker
Not available Internal Auditor
Allens Arthur Robinson Solicitor
Not available Telecommunication
News
Rousing Rio raising to cut debt by $19bn : 03-Jul-2009
Rio Tinto's rights issue was well supported by shareholders in London and Australia. It expects to gain almost $US15
billion ($A18.6 billion), which will be used to reduce its $US38 billion debt from its acquisition of Canadian aluminium
company, Alcan. Chinalco has maintained its nine per cent stake by taking up its full rights.
The Australian Financial Review, (17) : 03-Jul-2009
bid for Alcan. The Australian Securities & Investments Commission has only imposed the $A100,000 penalty twice.
Paul Nicols, of Allens Arthur Robinson, says recent fines ordered by the regulator highlight the need for businesses to
have strong disclosure systems.
BRW, (79) : 26-Mar-2009
Energy Resources of Australia has announced plans to increase annual uranium production by more than 33 per
cent. The Rio Tinto subsidiary said it would use the heap-leach process to boost low-grade ore production in the
Northern Territory.
The Australian, (18) : 17-Mar-2009
Competition & Consumer Commission (ACCC) will examine the implications of the deal in terms of the provisions of
the Trade Practices Act concerning a reduction in competition. The deadline for submissions regarding the
$US19.5bn ($A30.3bn) deal was 5 March 2009, and the ACCC is expected to release the outcome of its review later
in the month.
The Age, (B3) : 06-Mar-2009
($A30.4bn) in new capital from Chinalco. Apart from $US12.3bn through partial asset sales, convertible bonds are to
bring in $US7.2bn. However, Chinalco is unhappy at recent calls by investors for them to gain access to the bond
issue as well, according to comments by new Chinalco chair Xiong Weiping.
The Age, (B3) : 02-Mar-2009
bonds.
The Sydney Morning Herald, (21) : 18-Feb-2009
much as $A24bn on asset purchases as well as a convertible bond placement. On 2 February 2009 Rio stock closed
$A2.30 higher at $A44.45. Chinalco is said to have the strong backing of the Chinese Government, keen to secure
the supply of raw materials.
The West Australian, (35) : 03-Feb-2009
Rio pulls the pin on $3b expansion of Brazil iron ore mine : 13-Jan-2009
Rio Tinto has announced the planned upgrade of its Brazilian iron ore asset, costed at $US2.15bn ($A3.09bn), will be
deferred due to the weaker commodities market. Meanwhile debt-laden OZ Minerals says it has new confidence it will
be able to reach an agreement with lenders, as its cost reductions bear fruit and its metals output fetches higher
prices.
The West Australian, (37) : 13-Jan-2009
Rio Tinto and BHP Billiton are about to start negotiations for the latest benchmark pricing of their iron ore exports from
Australia to China. The Asian steel producers are set to seek a price drop of 40%, after the increase of 85% due to
high demand in the previous year. Insiders expect the eventual outcome to be a reduction of 30%, as the Chinese
steel market contracts.
The Sydney Morning Herald, (11) : 12-Jan-2009
$102b Rio bid off, BHP set for next tilt : 28-Nov-2008
The 2008 AGM of BHP Billiton has heard that regulators in Europe have allowed it to let lapse its abandoned bid for
Rio Tinto immediately. Among the other possible uses for BHP's cash are now acquisitions elsewhere, a stock
repurchasing program or capital return via dividends.
The Sydney Morning Herald, (23) : 28-Nov-2008
More woe on the horizon for the major iron ore producers : 05-Nov-2008
Australian-listed resources groups BHP Billiton and Rio Tinto appear to have miscalculated on their iron ore exports.
Both had set aside a small percentage of output to sell on the more lucrative spot market rather than through fixed
contracts with Asian buyers at the negotiated benchmark price. However, due to the beginning economic slowdown,
the spot price for the commodity has declined significantly in early November 2008. There are also claims by Brazilian
rival Vale that Rio has started to assume some of the freight costs in its sales to Chinese buyers, with a negative
effect on its margin.
Iron still has awe: mid-term outlook good for Rio Tinto : 03-Nov-2008
Lyall Howard, in charge of government relations at Australian-listed mining group Rio Tinto, has left to work instead at
rival BHP Billiton. Combined with the announcement that Rio chair Paul Skinner plans to depart in late 2009 to head
BP, the impression has been created that Rio is now resigned to the takeover bid for it by BHP going ahead. The
investor perception that a slowing in Chinese demand will hurt the Australian resources sector is also contributing to
the feeling defeat is inevitable, but this is based on a misreading of the Chinese economy. While demand is
weakening, supply will be affected at an even faster rate, as smaller Chinese producers become unprofitable, leaving
the field to the likes of Rio. This applies to the iron ore and aluminium segments in particular.
The Age, (B1) : 03-Nov-2008
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