Rio Tinto Limited (RIO) Share Price

RIO Company Profile

Rio Tinto is one of the world's leading mining and exploration companies. We find, mine and process the earth's mineral resources - metals and minerals essential for making thousands of everyday products that meet society's needs and contribute to improved living standards.

Our activities span the world with production from every continent. Our products include aluminium, copper, diamonds, energy products, gold, industrial minerals and iron ore.

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, with executive offices in Melbourne.

The two companies are joined in a dual listed companies (DLC) structure as a single economic entity, called the Rio Tinto Group.

The Group finds, mines and processes the earth's mineral resources - metals and minerals essential for making thousands of everyday products that meet society's needs and contribute to improved living standards.

To deliver superior returns to shareholders over time, Rio Tinto takes a long term and responsible approach to the Group's business. This means concentrating on the development of first class ore bodies into large, long life and efficient operations, capable of sustaining competitive advantage through business cycles.

The Group's major products include aluminium, copper, diamonds, energy products, gold, industrial minerals (borates, titanium dioxide, salt and talc), and iron ore. Its activities span the world but are strongly represented in Australia and North America. There are also significant businesses in South America, Asia, Europe and southern Africa.

Wherever Rio Tinto operates, health and safety is the first priority. Group businesses also put sustainable development at the heart of their operations. They work as closely as possible with host countries and communities, respecting their laws and customs. For Rio Tinto it is important that the environmental effects of its activities are kept to a minimum and that local communities benefit as much as possible from operations.

Our products Rio Tinto discovers, mines, processes and supplies a wide range of metals and minerals that are essential to humanity and to the improvement of living conditions for communities throughout the world.  Our operations and activities are located worldwide: in Australia, North America, South America, Asia, Europe and Southern Africa. Our major products include aluminium, copper, diamonds, energy products, gold, industrial minerals (borates, titanium dioxide, salt and talc), and iron ore.

Strategy

Rio Tinto aims to maximise the overall return to its shareholders by finding, mining and processing mineral resources - areas of expertise in which we have a clear competitive advantage. A fundamental part of this is to deliver value while operating in an ethically and socially responsible manner, and remaining committed to long term sustainable development. How do we do this? We constantly seek new sources of competitive advantage and wherever possible, institutionalise them within our business in ways that cannot be easily replicated by competitors. We concentrate on large scale mining operations that have a long life and are cost effective. Furthermore, we invest in these assets throughout their lives so that they maintain their competitive position. In pursuing greater economic value, all capital expenditure - on new projects and replacement expenditures alike - is subjected to rigorous analysis. We make investments only on their potential ability to create value - not the pursuit of a particular geographical or commodity mix, or market share. At Rio Tinto, there is always a suite of quality projects under development or appraisal, and a portfolio of global exploration projects to ensure profitable development opportunities for the future.

Half year results 2008

Record results underline strong earnings and performance momentum.

Record underlying EBITDA* of $11,408 million, 73 per cent above first half 2007. Record underlying earnings* of $5,474 million, 55 per cent above first half 2007. Record net earnings* of $6,914 million, 113 per cent above first half 2007. Cash flow from operations up 54 per cent to a record of $8,860 million - a run rate of approximately $1.5 billion of cash flow per month. Half year production records achieved in iron ore, bauxite, alumina, aluminium, borates, titanium dioxide and thermal coal (on a like for like basis). Record capital expenditure of $3.7 billion, 91 per cent higher than first half 2007, on investments in value adding growth projects. New capital commitments of over $6 billion (100 per cent basis) announced during the year, including substantial expansions of iron ore operations in Australia, Brazil and Canada. Rio Tinto Alcan integration is making good progress, and remains on track to deliver $1.1 billion of after tax synergies from the end of 2009. Interim dividend increased 31 per cent to 68 US cents, with a continued commitment to increase the total 2008 and 2009 dividends by at least 20 per cent in each year. The divestment programme made good progress with $3 billion of sales announced to date. The Group remains on track to announce $10 billion of divestments in 2008.

Timeline

Rio Tinto is a combination of two companies: Rio Tinto plc, based in the UK, and Rio Tinto Limited, based in Australia. The British based Rio Tinto Company was formed by investors in 1873 to mine ancient copper workings at Rio Tinto near Huelva in southern Spain. The Consolidated Zinc Corporation was incorporated in 1905 to treat zinc bearing mine waste at Broken Hill, New South Wales, Australia.

The RTZ Corporation (formerly The Rio Tinto-Zinc Corporation) was formed in 1962 by the merger of The Rio Tinto Company and The Consolidated Zinc Corporation. CRA Limited (formerly Conzinc Riotinto of Australia Limited) was formed at the same time by a merger of the Australian interests of The Consolidated Zinc Corporation and The Rio Tinto Company.

RTZ and CRA were unified in December 1995. Directed by a common board of directors, the companies operate as a single entity even though they maintain separate shareholder lists in the UK and Australia. This places the shareholders of both companies in substantially the same position as if they held shares in a single enterprise owning all of the assets of both companies.

In June 1997, The RTZ Corporation became Rio Tinto plc and CRA Limited became Rio Tinto Limited, together known as the Rio Tinto Group. Rio Tinto plc is listed on the London and New York Stock Exchanges. Rio Tinto Limited is listed on the Australian Stock Exchange. Since the 1995 merger, the Group has continued to invest in developments and acquisitions in keeping with its strategy.

Communities

Good community relations are as necessary for our business success as the effective management of our operations. This belief is at the heart of our overall approach to communities and is why we set out to build a good quality of relationships with the people in whose areas we mine. Not only do we respect their cultural heritage and environment.  We also work in partnership with the communities in which we operate on a long term basis, and make sure that we optimise the economic effects of our activities on their livelihoods as well as the overall economy. How we work with communities We work closely with local representatives to secure the widest possible understanding of community concerns and priorities, and use these findings to design agreed programmes of assistance that reflect local priorities. Through ongoing consultation and two-way communication, we aim to understand and respond to changing circumstances and concerns so that informed judgements can be made. We see this as the best way to maximise benefits to our neighbouring communities and reduce negative consequences.

Such active partnerships, reflecting our long-term commitment, are the means for ensuring that our business and its communities remain mutually informed and involved with each other throughout the life of the mine.

At the end of 2004, we introduced our Communities Standard to support the implementation of our Communities Policy. We have also instituted multi-year rolling communities plans that integrate into closure planning, and which define agreed programmes of assistance with our neighbouring communities. Community assistance is the 'value adding' that businesses contribute to the community. These provisions may include enterprise development, training, and employment, community-based health, and social and cultural heritage initiatives. Our focus in all instances is to ensure such programmes contribute to sustainable development and avoid creating dependency. All our operations update these plans annually as an integral part of the overall operations plan. In developing countries, we are often asked to support infrastructure and social services programmes and, in collaboration with others, we help where practical.

Our community relations programmes are implemented by locally-based practitioners in each of the operations.  They receive support from our corporate Community Relations team who co-ordinate their work with specialists from other parts of our company.

Sustainable Development

We believe that our contribution to sustainable development is not just the right thing to do. We also understand that it gives us business reputational benefits that result in greater access to land, human and financial resources.

Our objective is to maximise the overall long term return to our stakeholders through a strategy of investing in large, cost competitive mines and associated activities. This is driven by the overall quality of each opportunity, and not the choice of commodity. 

Our way forward

Our approach to sustainable development embedded through all levels of our organisation from our Chief executive and Chairman through to the day to day operations. We try to minimise the adverse effects of our activities and improve every aspect our performance.  In addition, wherever we operate, we hold the health and safety of our employees and the environment to be a core value.

We work as closely as possible with our host countries and communities, respecting their laws and customs and ensuring a fair share of benefits and opportunities.

Climate change economics

We believe that the activities of people and companies are causing emissions of greenhouse gas which are contributing to climate change.

We also understand that meeting the challenge of climate change will impose costs on us as we work to find ways to reduce greenhouse gas emissions. It will also require us to change the way we use energy, particularly coal.

However, we also believe we must invest in technologies to reduce greenhouse gas emissions and energy use, to ensure our continued access to markets and retain our licence to operate.

The cost of climate change abatement

Our climate change position is based on identifying and addressing risks and capturing opportunities. Since 2003, it has been structured around three core themes:

Reducing emissions from our operations Developing low emission product pathways by working with others on supply chain emissions and breakthrough technologies Engaging with governments and stakeholders to advocate sound and efficient policies

Building on that strategy, we have instituted a three-year Climate Change Plan that takes a stepped, Group-wide approach to addressing each theme.

We actively and routinely identify energy saving opportunities, some of which we are able to implement immediately. Other projects require significant capital expenditure and have long design and construction lead times.

But in the wider world, we believe that technology should be developed to meet the energy challenge. We hope that companies, governments and society will work together on all fronts - fossil fuels, nuclear and renewable energy sources - with the goal of continually discovering increasingly cleaner processes.

Our results

We continue to publicly report under the Carbon Disclosure Project. The Climate Disclosure Leadership Index (CDLI) is comprised of 68 FT500 companies that show distinction in their responses to the Climate Disclosure Project survey based on their reporting of greenhouse gas emissions and assessment of a company's climate change strategy. 

In 2007 Rio Tinto achieved the maximum CDLI score of 100, Rio Tinto was again rated highest in the metals, mining and steel sector.

Fourth quarter 2008 operations review

Chief executive Tom Albanese said: "Production for the quarter was in line with expectations. We are taking firm action in response to the global economic downturn and, given the resilience of Rio Tinto's low cost assets, expect to remain well positioned when recovery comes."

Quarterly global production of iron ore down 18 per cent on the fourth quarter of 2007 following a ten per cent reduction in the Pilbara annualised production in line with guidance provided on 10 November 2008.

Annual iron ore production (100 per cent basis) from the Pilbara operations of 175 million tonnes (142 million tonnes on an attributable basis) up seven per cent on 2007. Pilbara iron ore shipments for 2008 of 171 million tonnes (100 per cent basis), up seven per cent on 2007, in line with previous guidance.

Bauxite production up 19 per cent, alumina up 26 per cent and aluminium up 21 per cent, compared with the fourth quarter of 2007, reflecting the completion of the Alcan acquisition with effect from 24 October 2007. On a proforma basis the respective increases for bauxite and alumina were six per cent and three per cent while aluminium declined by two per cent, primarily due to production cutbacks in France, New Zealand and the UK.

Continued recovery in copper grades at Kennecott Utah Copper offset by a further grade decline and operational difficulties at Escondida, leading to an overall decrease in mined copper of 18 per cent compared with the fourth quarter of 2007 and an associated increase in unit costs. 

Australian hard coking and thermal coal production up 40 per cent and 21 per cent respectively on the fourth quarter of 2007.

Uranium production up 20 per cent on the same quarter of 2007 due to higher grades.

The QMM mineral sands operation in Madagascar commenced ilmenite production on schedule at the end of December 2008.

Fourth quarter earnings at Rio Tinto Alcan will be negatively impacted by the sharp decline in the aluminium price. In addition, inventories are expected to be written down to reflect realisable values at the year end.

Copper provisional pricing expected to lower underlying earnings by approximately $360 million in the second half of 2008.

Estimated total exploration and evaluation expenditure of $1,135 million (pre-tax) for the year, including the write off of $176 million of project costs and undeveloped exploration properties.

All currency figures in this report are US dollars, and comments refer to Rio Tinto's share, unless otherwise stated

COMMITMENT TO REDUCE NET DEBT BY $10 BILLION BY END OF 2009

On 10 December 2008, Rio Tinto announced the following key initiatives and commitments to reduce net debt by $10 billion in 2009:

Reduction of net capital expenditure guidance for 2009 from over $9 billion to $4 billion, while retaining future growth options

Capital expenditure to be reduced to sustaining levels in 2010, absent an improvement in expected commodity market conditions

Commitment to reduce controllable operating costs by at least $2.5 billion per annum in 2010

Reduction in global headcount of 14,000 roles (8,500 contractor and 5,500 employee roles)

2008 dividend to be held at 2007 level of US 136 cents with no 20 per cent uplift in 2008 and 2009

Expanded scope of assets targeted for divestment including significant assets not previously highlighted for sale

During the remainder of January and early February there will be a series of local announcements about the impact of capital expenditure reductions on the Group's projects. These will be aggregated in the preliminary annual results release on 12 February.

For more information www.riotinto.com