RIO TINTO

Presentations in Hope Downs, Australia 18 June 2008

Alan Davies, Managing Director, Global Development & Chief financial officer

Presentations in Hope Downs, Australia 18 June 2008 Alan Davies, Managing director, Global Development & Chief financial officer

2 Today Id like to take you through a review of our financial strength in iron ore and also update you on our performance in delivering value to date. Firstly let me start with the traditional cautionary statement, after which Ill move onto the key messages. The iron group is a significant earnings contributor to Rio Tinto. In 2007 it represented close to 36% of the groups underlying earnings, up on its historical average of around 30%. Our ability to deliver expansion projects on time and on plan has underpinned our volume growth, predominantly in our Pilbara based assets. This has allowed us to benefit from the Chinese demand driven price increases that have occurred in recent years. We continue to reinvest our cash flows into the business with over $5 billion of capital expenditure over the last 3 years, predominantly in our integrated assets here in the Pilbara but also at the Iron Ore company of Canada and in Rio Tinto Brazil. We do remain excellently positioned at the bottom of the cost curve with our Pilbara assets well placed to serve the high growth Chinese demand. Cost containment remains a key focus for us, with our overall aim being one of value maximisation. Like the rest of the industry however we are subject to world pressures on prices and inputs for commodities, however we do leverage our group size to alleviate these impacts to the greatest extent we possibly can. In some cases weve chosen to invest where theres a value maximising opportunity available, particularly in contractors to increase short term production. We are moving forward at pace and later in my presentation Ill touch on some of the key achievements weve posted so far this year. As you can see from the two graphs on this slide the financial performance of Rio Tinto Iron Ore continues delivering record financial results. Firstly looking at the top graph youll see that EBITDA has grown at cumulative 40% annual growth rates since 2002, demonstrating the efficiency with which weve converted the strong market conditions into the bottom line. Our earnings growth shown in the

Presentations in Hope Downs, Australia 18 June 2008 Alan Davies, Managing director, Global Development & Chief financial officer

3 second graph at the bottom is a slightly better 43.5 % which was also referred to by Sam in his introduction and discussion. In fact in 2007 the iron ore group earnings at $2.7 billion were some 70% higher than the whole of Rio Tinto in 2002. We continue to explore all opportunities to maximise value in the future and many of our high return options come from the Brownfield expansions we have here in the Pilbara. As you will see over the next 2 days our $5 billion of capital expenditure over the last 3 years has delivered significant capacity expansion by investment in our ports, mines and rail system. Were also investing in our non-Australian based operations and as Sam mentioned in March we announced the approval of the $473 million increase in Iron Ore company of Canadas annual production of iron ore concentrate to 22 million tonnes per annum from 17 million tonnes per annum. Moving onto the subject of freight. As part of our marketing efforts, to offer a range of supply solutions to our customers were increasingly becoming involved in the provision of freight delivered sales, on a CFR basis. Throughout our group, through our group specialist company Rio Tinto Marine we are able to source competitive freight rates. In our results reporting, freight revenues are reported as gross sales in the revenue line whilst the freight costs form part of our operating costs. The top graph here in this slide shows the revenue position from 2004 with the incremental amount associated with freight revenues shown in orange. Increased freight revenues have been both a function of our CFR delivered volumes and the price of the underlying freight. The bottom graph in this slide shows the proportion of the increase of revenues between 2007 and 2006 due firstly to the underlying increase in iron ore prices and secondly the increase in sales volumes as a result of expanding the output of our business and also the freight component of our revenues. Now lets take this picture on revenue to look at our margins. Rio Tinto Iron Ore is a very high margin business, this graph shows the EBITDA margins of Rio

Presentations in Hope Downs, Australia 18 June 2008 Alan Davies, Managing director, Global Development & Chief financial officer

4 Tinto Iron Ores Pilbara operations since 2004. Ive split the graph into two sets of data. The first is reported EBITDA margins and the second in red and on the left are the same margins adjusted for freight. As we saw in the previous slide our delivered sales business has increased in size over recent years. The increased presence of freight in our gross revenues obviously distorts the underlying EBITDA margin because the freight business has not shared as high a level of margin as our iron ore sales. Our margins however remain extremely strong, despite being impacted by a range of cost factors. Some of these are external such as diesel costs, Pilbara specific price factors that is the Pilbara inflation effect and the depreciation of the Australian dollar. The 2007 margin change undoubtedly reflects some of the cost impacts which reflect the timing difference between rising costs and the adjustment to pricing for our products. Other cost increases which we have decided to take on relate to investment in our business. These include drilling costs, expansion studies, investments in our technology projects that will deliver future benefits like our recent announcement on the automated train operations, driverless trucks and the remote operation centre. I spoke earlier about the levels of reinvestment in our business. Id like to briefly touch on this again. We have been investing an increasing amount back into our iron ore business in recent years. In 2007 we invested just over $2 billion of capital in our worldwide iron ore operations. This graph shows that just over $1.8 billion of that investment was in our Pilbara business. Weve also obtained further significant capital approval so far in the first half of 2008. Were also on track for another strong year of capital investment in the Pilbara with our existing projects including mine developments at Mesa A/Warramboo, Brockman 4 and the expansion of Cape Lambert to 80 million tonnes per annum. I spoke a bit earlier about the CFR deliveries in our business. This chart shows the cost curve of iron delivered to China over the last 2 years and a projected

Presentations in Hope Downs, Australia 18 June 2008 Alan Davies, Managing director, Global Development & Chief financial officer

5 view of 2008. On the right hand side of the graph, the average spot prices in those periods and for April in the case of 2008. Starting with 2006 it shows that Rio Tinto is favourably positioned at the lowest quartile of the curve. The spot price is roughly around the 90th percentile at around $65 per tonne delivered. The Chinese domestic producers sit mostly at the top of this curve. Moving into 2007, rising costs of production and freight of ore delivered to China have been driving up spot prices. The market clearing price is $113 per tonne. Costs have risen for all supplies including Rio Tinto, but the relative position of Rio Tinto has improved. Were well positioned towards the bottom of the curve. This structural shift is likely to continue due to declining grades in China as Sam referred to and pressures on India to withhold ore for domestic use as Sam also referred to. Increasingly high spot prices are required to provide an incentive for the high cost suppliers in China and exporters from India. This is a hypothetical 2008 cost curve, some adjustments have been made for illustrative purposes including assuming an oil price of $125 dollars a barrel, further Renminbi revaluation and other cost pressures. As the cost curve undergoes a structural shift upwards it will provide fundamental cost base support to iron ore prices. For comparatively well positioned suppliers like Rio Tinto where we are actively managing our cost base, this is an environment where margins will remain strong and substantial value can be created through price and volume growth and of course appropriate cost containment. Now looking at our costs in the context of the Western Australia operating environment. Despite cost pressures we have continued to demonstrate an ability to manage these impacts. Most importantly were applying a combination of approaches to achieve this. Weve successfully maintained our focus on the underlying process improvement delivered through the implementation of the lean process including Project Drum Beat in our rail operations that Sam introduced. Well explain further in detail tomorrow.

Presentations in Hope Downs, Australia 18 June 2008 Alan Davies, Managing director, Global Development & Chief financial officer

This is combined with our functional approach to specialised areas such as strategic sourcing through Rio Tinto procurement and our CFR in logistic offerings through Rio Tinto Marine which I mentioned earlier. This is then combined with the innovative use of emerging and applied technologies that have the potential to deliver a favourable future cost position via automation and placing functions in the lower cost operating environments outside of the Pilbara, like what were doing with our remote operation centre in Perth. Id like to reflect for a moment on just some of the key milestones achieved within Rio Tinto Iron Ore so far in 2008. Our performance in the first quarter saw a record for Rio Tintos global production of iron ore which is up 16% on the first quarter of 2007. Our Pilbara operations also achieved record performance in the first quarter, up 15%. And this was despite being impacted by a number of cyclonic events. Our pace of identifying and developing value accretive capital projects has continued with a further approximately $2 billion of capital projects approved so far this year, including the large ore carriers, the automated train operations and the long lead time items for the 320 million tonne expansion, including studying Western Turner Syncline that Warwick will go into further detail in his presentation. So in summary Rio Tinto Iron Ore is performing strongly as a key contributor to Rio Tinto. We are delivering increased value to shareholders now with our cost competitiveness, high margin and high volume business, while ensuring that we remain a leader in the industry through significant investment in the future of the business. Thank you very much.