20-F 1 b832238-20f.htm Prepared and filed by St Ives Financial

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 20-F

(Mark One)    
   
Registration statement pursuant to Section 12 (b) or 12(g) of the Securities Exchange Act of 1934  
     
    or  
   
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  For the financial year ended: 31 December 2005
     
    or  
   
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  For the transition period from:___________________ to ___________________   
     
    or  
   
Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  Date of event requiring this shell company report___________________

 

Commission file number: 1-10533 Commission file number: 0-20122
   
Rio Tinto plc Rio Tinto Limited
  ABN 96 004 458 404
(Exact name of Registrant as specified in its charter) (Exact name of Registrant as specified in its charter)
   
England and Wales Victoria, Australia
(Jurisdiction of incorporation or organisation) (Jurisdiction of incorporation or organisation)
   
6 St James’s Square Level 33, 55 Collins Street
London, SW1Y 4LD, England Melbourne, Victoria 3001, Australia
(Address of principal executive offices) (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class   Name of each exchange   Name of each exchange   Title of each class
    on which registered   on which registered    
             
American Depositary Shares*   New York Stock Exchange       None
             
Ordinary Shares of 10p each**   New York Stock Exchange        
             
             
* Evidenced by American Depository Receipts. Each American Depository Share Represents four Rio Tinto plc Ordinary Shares of 10p each.
** Not for trading, but only in connection with the listing of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission

Securities registered or to be registered pursuant to Section 12(g) of the Act:
Title of each class   Title of each class
None   American Depositary Shares***
    Ordinary Shares
     
*** Evidenced by American Depository Receipts. Each American Depository Share represents four Rio Tinto Limited Ordinary Shares.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None None

Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Title of each class   Number   Number   Title of each class
Ordinary Shares of 10p each   1,068,422,633   456,815,943   Shares
DLC Dividend Share of 10p   1   1   DLC Dividend Share
Special Voting Share of 10p   1   1   Special Voting Share

Indicate by check mark if the registrants are well-seasoned issuers, as defined in rule 405 of the Securities Act.

Yes   No

If this report is an annual or transition report, indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Yes   No

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days:

Yes   No

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, or non-accelerated filers. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   Accelerated filer   Non-accelerated filer
         

Indicate by check mark which financial statement item the registrants have elected to follow:

Item 17   Item 18
     

EXPLANATORY NOTE

The Rio Tinto Group is a leading international mining group, combining Rio Tinto plc and Rio Tinto Limited in a dual listed companies (‘DLC’) merger.
     The DLC merger has the effect that shareholders can be regarded as having interests in a single economic enterprise that is under common control and management. Accordingly this annual report on Form 20-F has been presented on a Group basis with certain exceptions such as the separate discussion and analyses that relate to the Rio Tinto plc and Rio Tinto Limited parts of the Group that have been provided as a supplement to the discussion of the Rio Tinto Group. Shares in Rio Tinto plc and Rio Tinto Limited both provide shareholders with an interest in the earnings and net assets of the total Group, as if they together were a single economic entity. In other words, a share in Rio Tinto plc provides an economic interest in the same fraction of the combined earnings and net assets of the Group as a share in Rio Tinto Limited.
     The 2005 Financial statements including reconciliation to US accounting principles of the Rio Tinto Group (“the Group”) and of the Rio Tinto plc and Rio Tinto Limited parts of the Group (“the 2005 Financial statements”) provide analysis of the total Group according to its legal structure, but these separate figures are not indicative of the economic interest of shareholders in either of the Listed Companies.
     Rio Tinto plc and Rio Tinto Limited also present their annual reports and financial statements to their shareholders, in accordance with both United Kingdom and Australian legislation and regulations, on a Group basis. The current such document is the 2005 Annual report and financial statements.
     The 2005 Financial statements and the 2005 Annual report and financial statements were both furnished with the Securities and Exchange Commission on Form 6-K for the month of March 2006 which was furnished on 6 April 2006. The 2005 Financial statements have been incorporated by reference under Item 18 herein.
     Rio Tinto plc and Rio Tinto Limited established separate ADR programmes prior to their merger and have maintained both but following a recent review it was concluded that the Rio Tinto Limited ADR programme should be terminated with effect from 10 April 2006 and a notice of termination was mailed to ADR holders. The Rio Tinto plc ADR programme will not be affected by this termination.

 

Rio Tinto 2005 Form 20-F 1

TABLE OF CONTENTS

    Page
   
PART I
Item 1. Identity of Directors, Senior Management and Advisers 3
     
Item 2. Offer Statistics and Expected Timetable 3
     
Item 3. Key Information 3
     
Item 4. Information on the Company 8
     
Item 4 A. Unresolved Staff Comments 36
     
Item 5. Operating and Financial Review and Prospects 36
     
Item 6. Directors, Senior Management and Employees 81
     
Item 7. Major Shareholders and Related Party Transactions 121
     
Item 8. Financial Information 123
     
Item 9. The Offer and Listing 125
     
Item 10. Additional Information 128
     
Item 11. Quantitative and Qualitative Disclosures about Market Risk 137
     
Item 12. Description of Securities other than Equity Securities 137
 
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies 137
     
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 137
     
Item 15. Controls and Procedures 137
     
Item 16 A. Audit Committee Financial Expert 137
     
Item 16 B. Code of Ethics 137
     
Item 16 C. Principal Accountant Fees and Services 138
     
Item 16 D. Exemptions from the Listing Standards for Audit Committees 138
     
Item 16 E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 138
 
PART III
Item 17. Financial Statements 139
     
Item 18. Financial Statements 139
     
Item 19. Exhibits 140

 

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RIO TINTO

PART I

Item 1. Identity of Directors, Senior Management and Advisers
   
Not applicable.
   
Item 2. Offer Statistics and Expected Timetable
   
Not applicable.
   
Item 3. Key Information
   
SELECTED FINANCIAL DATA FOR THE RIO TINTO GROUP for the period 2001 to 2005  
Dividends declared            
in respect of each            
year per share            
US cents   UK pence   Australian cents    
       
             

The special dividend of 110 US cents per share (61.89 pence or 145.42 Australian cents per share), declared
payable at the same time as the 2005 final dividend, has not been included above.

The selected consolidated financial data on pages 4 to 6 has been derived from the 2005 Financial statements of the Rio Tinto Group and of the Rio Tinto plc and Rio Tinto Limited parts of the Group incorporated by reference under Item 18. Financial statements, herein, restated where appropriate to accord with the current accounting policies and presentations. The selected consolidated financial data should be read in conjunction with, and qualified in their entirety by reference to, the 2005 Financial statements and notes thereto.
     The 2005 Financial statements were prepared in accordance with IFRS as adopted by the European Union, which differs in certain respects from US GAAP. Details of the principal differences between EU IFRS and US GAAP are set out in note 52 on pages A-92 to A-107 of the 2005 Financial statements.

 

Rio Tinto 2005 Form 20-F 3

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RIO TINTO GROUP

Income Statement Data        
For the years ending 31 December        
Amounts in accordance with EU IFRS (a)        
(US$ millions) 2004   2005  
         
Consolidated turnover 12,954   19,033  
Group operating profit (b) 3,327   6,922  
Profit for the year 3,244   5,498  
         
Group operating profit per share (US cents) 241.3   507.5  
Earnings per share (US cents) 239.1   382.3  
Diluted earnings per share (US cents) 238.7   381.1  
Dividends per share (US cents) (c) 66.0   83.5  
Dividends per share (pence) (c) 36.2   45.7  
Dividends per share (Australian cents) (c) 90.2   108.9  
Weighted average number of shares (millions) 1,379   1,364  
         
                     
Amounts in accordance with US GAAP                    
(US$ millions) 2001   2002   2003   2004   2005  
                     
Consolidated turnover (g) 8,348   8,719   9,545   11,814   19,033  
Group operating profit (g) 1,821   746   1,041   1,442   6,196  
Net earnings (d) 1,038   581   1,977   2,823   4,969  
                     
Earnings per share (US cents) 75.5   42.2   143.5   204.7   364.3  
Diluted earnings per share (US cents) 75.4   42.1   143.3   204.4   363.1  
         
Balance Sheet Data        
at 31 December        
Amounts in accordance with EU IFRS (a)        
(US$ millions) 2004   2005  
         
Total assets 26,308   29,803  
Share capital / premium 3,127   3,079  
Total equity / Net assets 12,591   15,739  
         
Amounts in accordance with US GAAP                    
(US$ millions) 2001   2002   2003   2004   2005  
                     
Total assets 22,102   22,600   26,959   28,938   31,899  
Share capital / premium 2,486   2,580   2,869   2,938   3,079  
Rio Tinto shareholders' funds (d) 9,571   9,517   12,044   14,462   17,214  

 

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RIO TINTO PLC - PART OF RIO TINTO GROUP

Income Statement Data        
for the years ending 31 December        
Amounts in accordance with EU IFRS (a)        
(US$ millions) 2004   2005  
         
Consolidated turnover 5,506   7,566  
Group operating profit (b) 1,422   2,596  
Profit for the year 2,336   3,651  
         
Group operating profit per share (US cents) 133.3   242.8  
Earnings per share (US cents) 229.1   337.1  
Diluted earnings per share (US cents) 228.6   336.1  
Dividends per share (US cents) (c) 66.0   83.5  
Dividends per share (pence) (c) 36.2   45.7  
Weighted average number of shares (millions) 1,067   1,069  
                     
Amounts in accordance with US GAAP                    
(US$ millions) 2001   2002   2003   2004   2005  
                     
Consolidated turnover (g) 3,783   3,993   4,072   5,298   7,566  
Group operating profit (g) 548   (481 ) (7 ) 162   2,176  
Net earnings (d) 618   (206 ) 949   2,010   3,448  
                     
Earnings per share (US cents) 58.1   (19.3 ) 89.0   188.3   322.5  
Diluted earnings per share (US cents) 58.0   (19.3 ) 88.9   188.0   321.6  
         
Balance sheet data        
at 31 December        
Amounts in accordance with EU IFRS (a)        
(US$ millions) 2004   2005  
         
Total assets 15,364   18,389  
Share capital / premium 1,994   2,060  
Total equity / Net assets 8,830   11,445  
                     
Amounts in accordance with US GAAP                    
(US$ millions) 2001   2002   2003   2004   2005  
                     
Total assets 13,735   13,941   15,180   17,375   19,791  
Share capital / premium 1,754   1,764   1,784   1,805   2,060  
Rio Tinto shareholders’ funds (d) 8,371   7,697   8,931   10,560   12,984  

 

Rio Tinto 2005 Form 20-F 5

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RIO TINTO LIMITED - PART OF RIO TINTO GROUP

Income Statement Data        
for the years ending 31 December        
Amounts in accordance with EU IFRS (a)        
(US$ millions) 2004   2005  
         
Consolidated turnover 7,448   11,467  
Group operating profit (b) 1,905   4,326  
Profit for the year 1,446   2,812  
         
Group operating profit per share (US cents) 381.8   916.5  
Earnings per share (US cents) 273.4   546.0  
Diluted earnings per share (US cents) 272.9   543.5  
Dividends per share (US cents) (c) 66.0   83.5  
Dividends per share (Australian cents) (c) 90.2   108.9  
Weighted average number of shares (millions) 499   472  
                     
Amounts in accordance with US GAAP                    
(US$ millions) 2001   2002   2003   2004   2005  
                     
Consolidated turnover (g) 4,575   4,726   5,473   6,516   11,467  
Group operating profit (g) 1,273   1,231   1,048   1,280   4,020  
Net earnings (d) 671   1,267   1,647   1,301   2,432  
                     
Earnings per share (US cents) 134.6   254.0   330.1   260.6   515.4  
Diluted earnings per share (US cents) 134.5   253.7   330.0   260.1   513.1  
         
Balance sheet data        
at 31 December        
Amounts in accordance with EU IFRS (a)        
(US$ millions) 2004   2005  
         
Total assets 15,636   17,309  
Share capital / premium 1,336   1,162  
Total equity / Net assets 6,153   6,442  
                     
Amounts in accordance with US GAAP                    
(US$ millions) 2001   2002   2003   2004   2005  
                     
Total assets 10,770   11,609   15,234   16,964   18,417  
Share capital / premium 865   964   1,280   1,336   1,162  
Rio Tinto shareholders' funds (d) 1,920   2,922   4,996   6,247   6,762  
                     
Notes
(a) In accordance with the General Instructions for Form 20-F, Section G, audited information under EU IFRS is presented for 2004 and 2005 only on the occasion of first time application of International Financial Reporting Standards.
(b) Operating profit under EU IFRS includes the effects of charges and reversals resulting from impairments and profit and loss on disposals of interests in businesses, including investments. Operating profit under US GAAP also includes the effects of charges but not reversals resulting from impairments but excludes profit and loss on disposals of interests in businesses, including investments. Both the EU IFRS and US GAAP operating profit amounts shown above exclude equity accounted operations.
(c) Dividends presented above are those paid in the year in accordance with EU IFRS.
(d) Amounts shown are attributable to equity shareholders of Rio Tinto.
(e) The results for all years relate wholly to continuing operations.
(f) There are no differences between International Financial Reporting Standards (IFRS) and IFRS adopted by the European Union (EU IFRS) that would impact the financial statements of the Rio Tinto Group for the years ended 31 December 2004 and 2005.
(g) Certain jointly controlled assets, which previously were equity accounted under UK and US GAAP, are proportionally consolidated under EU IFRS. The above US GAAP data for 2005 also include these units on the basis of proportional consolidation. Amounts presented for consolidated turnover and operating profit in the years 2001 through 2004 have not been restated and continue to incorporate these units on the equity accounting basis. If these units had been subject to equity accounting in 2005, Group consolidated turnover and operating profit, respectively, would have been $2.2 billion and $1.1 billion lower; Rio Tinto plc consolidated turnover and operating profit would have been $746 million and $425 million lower; and Rio Tinto Limited consolidated turnover and operating profit would have been $1.4 billion and $712 million lower. However, net earnings would have been unchanged.
(h) As a result of adopting IAS 32, IAS 39 and IFRS 5 on 1 January 2005, the Group changed its method of accounting for financial instruments and non-current assets held for sale. In line with the relevant transitional provisions, the prior period comparatives have not been re-stated. See Note 1 to the 2005 Financial statements for further discussion.

 

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RISK FACTORS

The following describes some of the risks that could affect Rio Tinto. There may be additional risks unknown to Rio Tinto and other risks, currently believed to be immaterial, could turn out to be material. These risks, whether they materialise individually or simultaneously, could significantly affect the Group’s business and financial results. They should also be considered in connection with any forward looking statements in this document and the cautionary statement on the following page.

Economic conditions
Commodity prices, and demand for the Group’s products, are influenced strongly by world economic growth, particularly that in the US and Asia. The Group’s normal policy is to sell its products at prevailing market prices. Commodity prices can fluctuate widely and could have a material and adverse impact on the Group’s asset values, revenues, earnings and cash flows. Further discussion can be found under Business environment and markets on page 13, and under Commodity prices on pages 49 to 51.

Exchange rates
The Group’s asset values, earnings and cash flows are influenced by a wide variety of currencies due to the geographic diversity of the Group’s customers and areas of operation. The majority of the Group’s sales are denominated in US dollars. The Australian and US dollars are the most important currencies influencing costs. The relative value of currencies can fluctuate widely and could have a material and adverse impact on the Group’s asset values, costs, earnings and cash flows. Further discussion can be found under Exchange rates, reporting currencies and currency exposure on pages 47 to 49.

Acquisitions
The Group has grown partly through the acquisition of other businesses. Business combinations commonly entail a number of risks and Rio Tinto cannot be sure that management will be able effectively to integrate businesses acquired or generate the cost savings and synergies anticipated. Failure to do so could have a material and adverse impact on the Group’s costs, earnings and cash flows. Furthermore, the Group could find itself liable for undisclosed past acts or omissions of the acquired businesses without any adequate right of redress.

Exploration and new projects
The Group seeks to identify new mining properties through an active exploration programme. There is no guarantee, however, that such expenditure will be recouped or that existing mineral reserves will be replaced. Failure to do so could have a material and adverse impact on the Group’s financial results and prospects.
     The Group develops new mining properties and expands its existing operations as a means of generating shareholder value. Increasing regulatory, environmental and social approvals are, however, required which can result in significant increases in construction costs and/or significant delays in construction. These increases could materially and adversely affect a project’s economics, the Group’s asset values, costs, earnings and cash flows.

Ore reserve estimates
There are numerous uncertainties inherent in estimating ore reserves and assumptions that are valid at the time of estimation may change significantly when new information becomes available.
     
Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being restated. Such changes in reserves could impact on depreciation and amortisation rates, asset carrying values, deferred stripping calculations and provisions for close down, restoration and environmental clean up costs. Further discussion can be found under Ore reserve estimates on page 52.

Political and community
The Group has operations in jurisdictions having varying degrees of political instability. Political instability can result in civil unrest, expropriation, nationalisation, renegotiation or nullification of existing agreements, mining leases and permits, changes in laws, taxation policies or currency restrictions. Any of these can have a material adverse effect on the profitability or, in extreme cases, the viability of an operation.
     Some of the Group’s current and potential operations are located in or near communities that may now, or in the future, regard such an operation as having a detrimental effect on their economic and social circumstances. Should this occur, it might have a material adverse impact on the profitability or, in extreme cases, the viability of an operation. In addition, such an event may adversely affect the Group’s ability to enter into new operations in the country.

Technology
The Group has invested in and implemented information system and operational initiatives. Several technical aspects of these initiatives are still unproven and the eventual operational outcome or viability cannot be assessed with certainty. Accordingly, the costs and benefits from these initiatives and the consequent effects on the Group’s future earnings and financial results may vary widely from present expectations.

 

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Land and resource tenure
The Group operates in several countries where title to land and rights in respect of land and resources (including indigenous title) may be unclear and may lead to disputes over resource development. Such disputes could disrupt relevant mining projects and/or impede the Group’s ability to develop new mining properties.

Health, safety and environment
Rio Tinto operates in an industry that is subject to numerous health, safety and environmental laws and regulations as well as community expectations. Evolving regulatory standards and expectations can result in increased litigation and/or increased costs all of which can have a material and adverse effect on earnings and cash flows.

Mining operations
Mining operations are vulnerable to a number of circumstances beyond the Group’s control, including natural disasters, unexpected geological variations and industrial actions. These can affect costs at particular mines for varying periods. Mining, smelting and refining processes also rely on key inputs, for example fuel and electricity. Appropriate insurance can provide protection from some, but not all, of the costs that may arise from unforeseen events. Disruption to the supply of key inputs, or changes in their pricing, may have a material and adverse impact on the Group’s asset values, costs, earnings and cash flows.

Rehabilitation
Costs associated with rehabilitating land disturbed during the mining process and addressing environmental, health and community issues are estimated and provided for based on the most current information available. Estimates may, however, be insufficient and/or further issues may be identified. Any underestimated or unidentified rehabilitation costs will reduce earnings and could materially and adversely affect the Group’s asset values, earnings and cash flows.

Non managed operations
Rio Tinto cannot guarantee that management of mining and processing assets not subject to its management control will comply with the Group’s standards and objectives, nor that effective policies, procedures and controls will be maintained over those assets. Improper management or ineffective policies, procedures or controls could materially affect the value of those assets.

CAUTIONARY STATEMENT ABOUT FORWARD LOOKING STATEMENTS

This document contains certain forward looking statements with respect to the financial condition, results of operations and business of the Rio Tinto Group. The words “intend”, “aim”, “project”, “anticipate”, “estimate”, “plan”, “believes”, “expects”, “may”, “should”, “will”, or similar expressions, commonly identify such forward looking statements. Examples of forward looking statements in this annual report on Form 20-F include those regarding estimated reserves, anticipated production or construction commencement dates, costs, outputs, demand, growth opportunities and productive lives of assets or similar factors. Forward looking statements involve known and unknown risks, uncertainties, assumptions and other factors set forth in this document that are beyond the Group’s control. For example, future reserves will be based in part on long term price assumptions that may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include the ability to produce and transport products profitably, demand for our products, the effect of foreign currency exchange rates on market prices and operating costs, and activities by governmental authorities, such as changes in taxation or regulation, and political uncertainty.
     In light of these risks, uncertainties and assumptions, actual results could be materially different from any future results expressed or implied by these forward looking statements which speak only as at the date of this report. Except as required by applicable regulations or by law, the Group does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information or future events. The Group cannot guarantee that its forward looking statements will not differ materially from actual results.

Item 4. Information on the Company

INTRODUCTION

Rio Tinto Limited and Rio Tinto plc operate as one business organisation, referred to in this report as Rio Tinto, the Rio Tinto Group or, more simply, the Group. These collective expressions are used for convenience only since both Companies, and the individual companies in which they directly or indirectly own investments, are separate and distinct legal entities.
     “Limited”, “plc”, “Pty”, “Inc”, “Limitada”, or “SA” have generally been omitted from Group company names, except to distinguish between Rio Tinto plc and Rio Tinto Limited.

 

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     Financial data in United States dollars (US$) is derived from, and should be read in conjunction with, the 2005 Financial statements which are in US$. In general, financial data in pounds sterling (£) and Australian dollars (A$) have been translated from the consolidated financial statements, and have been provided solely for convenience; exceptions arise where data, such as directors’ remuneration, can be extracted directly from source records.
      Rio Tinto Group turnover, profit before tax and net earnings and operating assets for 2004 and 2005 attributable to the product groups and geographical areas are shown in notes 32 and 33 to the 2005 Financial statements on pages A-52 to A-55. In the Operational review, operating assets and turnover for 2004 and 2005 are consistent with the financial information by business unit in note 51 to the 2005 Financial statements on pages A-90 to A-91.

     The tables on pages 15 to 29 show production for 2003, 2004 and 2005 and include estimates of proven and probable reserves. Words and phrases, often technical, have been used which have particular meanings; definitions of these terms are on in the Glossary on pages 143 to 145. The weights and measures used are mainly metric units; conversions into other units are shown on page 145.

AN OVERVIEW OF RIO TINTO

Rio Tinto is a leading international mining group, combining Rio Tinto plc and Rio Tinto Limited in a dual listed companies (DLC) structure as a single economic entity. Nevertheless, both Companies remain legal entities with separate share listings and registers. Rio Tinto plc is incorporated in England and Wales and Rio Tinto Limited is incorporated in Australia.
     Rio Tinto’s international headquarters are in London whilst the Australian representative office in Melbourne provides support for the operations, undertakes external and investor relations and fulfils statutory obligations. The registered office of Rio Tinto plc is at 6 St James’s Square, London, SW1Y 4LD (telephone: +44 20 7930 2399) and the registered office of Rio Tinto Limited is at Level 33, 55 Collins Street, Melbourne, Victoria 3000 (telephone: +61 3 9283 3333).
     For purposes of service, Rio Tinto’s agent in the US is Shannon Crompton, secretary of Rio Tinto’s US holding companies, who may be contacted at Rio Tinto Services Inc., 80 State Street, Albany, New York, 12207-2543. Investor relations in the US are provided by Makinson Cowell US Limited, One Penn Plaza, 250 W 34th St, Suite 1935, New York, NY 10119.

Objective, strategy and management structure
Rio Tinto’s fundamental objective is to maximise the overall long term return to its shareholders by operating responsibly and sustainably in areas of proven expertise where the Group has competitive advantage. Its strategy is to maximise net present value by investing in large, long life, cost competitive mines. Investments are driven by the quality of opportunity, not choice of commodity.
     Rio Tinto’s mining interests are diverse both in geography and product. The Group consists of wholly and partly owned subsidiaries, jointly controlled assets, jointly controlled entities and associated companies, the principal ones being listed in notes 38 to 41 of the 2005 Financial statements on pages A-68 to A-70.
     Rio Tinto’s management structure is designed to facilitate a clear focus on the Group’s objective. The management structure, which is reflected in this report, is based on principal product and global support groups:

Iron Ore
Energy
Industrial Minerals
Aluminium
Copper
Diamonds
Exploration, and
Technology.
The chief executive of each group reports to the chief executive of Rio Tinto.

Operational and Financial Review (OFR)
Rio Tinto provides a full description of its operational, financial and HSE performance under Item 5. on pages 36 to 80. This description broadly covers the requirements which would have arisen in the UK had the OFR been introduced as originally proposed.

2005 financial summary
On 31 December 2005, Rio Tinto plc had a market capitalisation of £28.4 billion (US$48.8 billion) and Rio Tinto Limited had a market capitalisation of A$19.7 billion (US$14.5 billion). The combined Group’s market capitalisation in publicly held shares at the end of 2005 was US$63.3 billion.

 

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     At 31 December 2005, Rio Tinto had total assets of US$29.8 billion: 49 per cent were located in Australia and New Zealand and 28 per cent in North America. Gross turnover in 2005 was US$20.7 billion (or US$19.0 billion excluding Rio Tinto’s share of jointly controlled entities and associates’ turnover). In 2005, the profit for the year and net earnings attributable to Rio Tinto shareholders were US$5,498 million and US$5,215 million, respectively.

History
The Rio Tinto Company was formed by investors in 1873 to mine ancient copper workings at Rio Tinto in southern Spain. The Consolidated Zinc Corporation was incorporated in 1905, initially 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. Between 1962 and 1995, RTZ and CRA discovered important mineral deposits, developed major mining projects and also grew through acquisition.
     RTZ and CRA were unified in December 1995 through a DLC structure. Directed by a common board of directors, this is designed to place 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. Since the 1995 merger, the Group has continued to invest in developments and acquisitions in keeping with its strategy.

RECENT DEVELOPMENTS

Share buy backs and issues 2005
On 3 February 2005 the Group announced, subject to market conditions, an intention to return up to US$1,500 million of capital to shareholders during the course of 2005 and 2006, and that this would include an off-market buy back of Rio Tinto Limited shares through a tender process.
     On 9 May 2005, Rio Tinto Limited bought back 27,294,139 shares, representing 8.7 per cent of its publicly held issued share capital, under an off-market tender and 16,367,000 shares held indirectly by Rio Tinto plc. All of these shares were purchased at a price of A$36.70 (US$28.36) per share, representing a 14 per cent discount to the relevant market price, and were cancelled.
     During the year Rio Tinto plc bought back 2,600,000 ordinary shares, representing less than one per cent of its issued share capital, on the open market for an aggregate consideration of US$103.2 million, to be held as treasury shares.
     Also during the year Rio Tinto plc issued 3,000,155 ordinary shares and Rio Tinto Limited issued 1,130,211 shares in connection with Rio Tinto’s share plans.
     On 2 February 2006, the Group announced an intention to return up to US$4,000 million of capital to shareholders, of which US$1,500 million would be paid out as a special dividend and, subject to market conditions, the remaining US$2,500 million would be applied to buy backs of either Rio Tinto Limited or Rio Tinto plc shares. This would replace the US$528 million remainder of the initiative announced on 3 February 2005.
     Between 1 January 2006 and 31 May 2006, Rio Tinto plc issued a further 2,102,943 ordinary shares in connection with employee share plans and bought back a further 16,375,000 shares to be held as treasury shares for an aggregate consideration of US$832.6 million. Of the shares issued 872,833 shares were issued from treasury. Rio Tinto Limited purchased and issued 1,258,673 shares in connection with employee share plans. As at 31 May 2006 there remained options outstanding over 6,736,565 Rio Tinto plc ordinary shares and over 5,414,193 Rio Tinto Limited shares.

Share buybacks and issues 2003-2004
In the years 2003 and 2004, neither Rio Tinto plc nor Rio Tinto Limited purchased any shares in either Company.
     
In 2003, Rio Tinto plc issued 1,193,000 ordinary shares and granted options over 2.7 million ordinary shares, and Rio Tinto Limited issued 240,000 shares and granted options over 1.6 million shares, in connection with employee share plans.
     In 2004, Rio Tinto plc issued 1,347,000 ordinary shares and granted options over 1.5 million ordinary shares, and Rio Tinto Limited issued 280,000 shares and granted options over 1.3 million shares, in connection with employee share plans.

Operations acquired and divested 2005
In March 2005, Rio Tinto’s wholly owned subsidiary QIT-Fer et Titane Inc sold its entire holding in the Labrador Iron Ore Royalty Income Fund (LIORIF) to RBC Capital Markets for net cash proceeds of US$130 million. LIORIF has an equity interest of 15.1 per cent in, and receives royalties from, Iron Ore Company of Canada (IOC), a subsidiary of Rio Tinto. The transaction had no effect on Rio Tinto’s 59 per cent direct interest in IOC.

 

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     Rio Tinto reached agreement with Hancock Prospecting Pty Ltd to purchase a 50 per cent interest in the Hope Downs iron ore assets in Western Australia.
     Rio Tinto reached agreement with Lihir Gold to relinquish its management agreement with Lihir, effective from October and subsequently sold its 14.5 per cent interest in November for US$295 million.

Operations acquired and divested 2003-2004
The sale of Rio Tinto’s 25 per cent interest in Minera Alumbrera Limited in Argentina, acquired as part of North Limited, together with its wholly owned Peak gold mine in New South Wales, Australia, was completed in March 2003. The cash consideration was US$210 million.
     The Framework Agreement signed with the Government of Indonesia in 2002 for divestment of 51 per cent of Kaltim Prima Coal (KPC) to Indonesian interests lapsed in 2003 when no assignment of KPC’s offer was made or accepted within the required timeframe. On 21 July 2003 Rio Tinto and BP announced that they had agreed to sell their interests in KPC for a cash price of US$500 million, including assumed debt, to PT Bumi Resources, a public company listed on the Jakarta and Surabaya Stock Exchanges. The sale was completed on 10 October 2003 and each company received 50 per cent of the net proceeds.
     In January 2004, Rio Tinto completed the sale of its 100 per cent interest in the nickel mining company Mineração Serra da Fortaleza Ltda to Votorantim Metais, a Brazilian controlled mining company. Including an adjustment for future nickel prices, the total cash consideration was approximately US$80 million.
     A 20 per cent interest in the Sepon project in Laos, comprising a gold operation and the Khanong copper project, was sold to Oxiana Limited for a cash consideration of US$85 million.
     In March 2004, Rio Tinto completed the sale of its shareholding in Freeport-McMoRan Copper & Gold Inc (FCX). Rio Tinto received net proceeds of US$882 million for its 23,931,100 FCX shares. Rio Tinto retains its 40 per cent joint venture interest in reserves discovered after 1994 at the Grasberg mine, which is managed by FCX. The sale of FCX shares does not affect the terms of the joint venture nor the management of the Grasberg mine.
     In June 2004, Rio Tinto completed the sale of its 100 per cent interest in Zinkgruvan Mining AB to South Atlantic Ventures. Zinkgruvan was acquired in 2000 as part of North Ltd.
     Rio Tinto and Empresa de Desenvolvimento Mineiro completed the sale of their interests in the Neves Corvo copper mine in Portugal to EuroZinc for a cash consideration and a participation in the average copper price in excess of certain thresholds. Rio Tinto’s share of the consideration for its 49 per cent share of the mine was US$70 million. The remaining price participation rights relating to copper production from Neves Corvo, which was sold in the first half of 2004, were themselves sold for US$22 million.
     In 2004, the directors of Rio Tinto Zimbabwe (RioZim) agreed to a restructuring of Rio Tinto’s 56 per cent shareholding in RioZim. The Murowa diamond project in Zimbabwe had been a 50:50 joint venture between Rio Tinto and RioZim. As a result of the restructuring, Rio Tinto owns a direct 78 per cent interest in Murowa and RioZim became an independent Zimbabwean controlled, listed company owning the remaining 22 per cent of Murowa. Rio Tinto ceased to be an ordinary shareholder in RioZim but retains a reduced cash participation in RioZim’s assets other than the Murowa diamond project for a period of ten years. The transaction had no material effect on Rio Tinto.
     The sale to Nippon Steel of an eight per cent interest in the Hail Creek Joint Venture, and the increase in the combined share of the original participants, Marubeni Coal and Sumisho Coal Development, by two per cent was completed in the fourth quarter of 2004. Rio Tinto will receive about US$150 million for the sale of these assets including the sale of a 47 per cent interest in the Beasley River iron ore deposits to its joint venture partners in Robe River, which includes Nippon Steel. The Hail Creek component of the sale is complete and arrangements for the Beasley River component are progressing.
     In December 2004, Rio Tinto Energy America (formerly Kennecott Energy) successfully bid for an additional 177 million tonnes of in-situ coal reserves at West Antelope at a cost of US$146 million. The sale of the Group’s 51 per cent interest in Rio Paracatu Mineração, the owner of the Morro do Ouro mine in Brazil, was completed on
31 December 2004 for US$250 million, subject to an adjustment for working capital.

Development projects 2005
Rio Tinto invested US$2.5 billion in the growth of the business in 2005.
     At the Diavik diamond mine in Canada construction began in 2005 of a second dike at a cost of US$190 million to enable mining of a third orebody. Also approved was an optimisation study costing US$75 million including construction of an exploration decline to investigate underground mining.
     A project to enlarge the Bingham Canyon open pit at Kennecott Utah Copper in the US was approved in February 2005. The East 1 pushback is expected to extend the life of the open pit to 2017. Capital expenditure on the project is budgeted to be US$100 million for mine facilities, a concentrator upgrade and mobile equipment, and US$70 million after 2008 for the relocation of the in pit crusher and dewatering facilities.
     First hot metal was produced in the second quarter of 2005 from the expanded US$200 million HIsmelt® plant at Kwinana in Western Australia. Construction began in January 2003 and cold commissioning commenced in late 2004. The full production rate of 800,000 tonnes per year is expected to be reached over three years.
     In April, Rio Tinto committed US$290 million to further expand existing Hamersley Iron mines in Western Australia. Expansion of the Mount Tom Price and Marandoo mines and the construction of new mine capacity at Nammuldi, which is adjacent to the existing Brockman operation, is expected to commence progressive commissioning

 

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from early 2006. These projects will add 15 million tonnes per annum to Hamersley Iron’s mine capacity for at least three years.
     In the first half expansion was completed of the upgraded slag (UGS) plant at QIT-Fer et Titane in Canada to 325,000 tonnes per year from 250,000 tonnes. The project was completed on time and within budget. Further expansion to 375,000 tonnes is scheduled for completion in the second half of 2006.
     Approval was given in August for construction of a US$775 million titanium dioxide project comprising a US$585 million mineral sands operation and port in Madagascar and a US$190 million upgrade of Rio Tinto’s ilmenite smelting facilities in Canada. First production from the Madagascar operation in the Fort Dauphin region is expected in late 2008 and the initial capacity will be 750,000 tonnes per year of ilmenite. The ilmenite will be smelted at Rio Tinto’s facilities at Sorel in Quebec. This will require an upgrade of storage and handling facilities as well as their associated ancillary services at the Sorel site.
     In October, Rio Tinto announced it will spend US$1.35 billion on further expansion of wholly owned Hamersley Iron’s Yandicoogina mine and Dampier port in Western Australia.
     Expansion of the Yandicoogina mine will increase its annual capacity from 36 million tonnes to 52 million tonnes at an estimated cost of US$530 million. The most recent expansion, from 24 to 36 million tonnes a year, was completed in August 2005. US$690 million will be invested in further expanding port facilities at Dampier, which will increase its annual shipping capacity from 116 million tonnes to 140 million tonnes. The most recent port expansion, to 116 million tonnes, was completed in 2005.
     In September, Rio Tinto approved its US$182 million share of the development costs of the Cortez Hills gold project in Nevada, which is 40 per cent owned by Rio Tinto and 60 per cent by Placer Dome.
     Comalco committed US$60 million to the addition of a new ship loader at the Weipa bauxite mine in Australia to ensure reliability of bauxite supply to customers. The new loader is expected to be commissioned by late 2006.
     The Argyle diamond mine block caving project was approved in late 2005 at a cost of US$910 million, and Rössing Uranium’s open pit is to be enlarged with the addition of mining equipment for a total incremental and sustaining capital cost of US$112 million.
     
Further detail on these investments and projects is provided under Item 5. on pages 36 to 80.
     Development projects have been funded using internally generated funds and proceeds of asset disposals.

Development projects 2003-2004
Construction of the Diavik diamond mine in the Northwest Territories of Canada was completed in January 2003 three months early and within budget. Initial production commenced from the contact zone above the orebody with the main orebody accessed during the second half of 2003.
     Development of the Escondida Norte satellite deposit at the 30 per cent owned Escondida copper mine in Chile was started in June 2003 to provide mill feed to keep Escondida’s capacity above 1.2 million tonnes of copper per year to the end of 2008. First production occurred in 2005. Commissioning of the new US$1,045 million, 110,000 tonnes of ore per day Laguna Seca concentrator was completed in the second quarter of 2003.
     In 2003, Rio Tinto Coal Australia completed development of the US$255 million Hail Creek coking coal project in Queensland, Australia with an initial capacity of 5.5 million tonnes annually.
     In December 2003, Hamersley Iron announced the US$920 million expansion of its port and mine capacity, with further expenditure on the rail network and power infrastructure being evaluated.
     The partners in the Robe River Joint Venture approved US$214 million (Rio Tinto share US$113 million) to dual track a significant part of the Hamersley Iron rail line due for completion in 2006. Hamersley Iron committed a further US$46 million to upgrade power infrastructure in the Pilbara. The port and mine expansions were completed by the end of 2005.
     In January 2004, Rio Tinto approved the expansion of QIT-Fer et Titane Inc’s upgraded slag (UGS) plant in Quebec, Canada. Total investment was US$76 million and capacity was increased from 250,000 tonnes per year to 325,000 tonnes per year.
     The owners of the Escondida copper mine in Chile approved expenditure of US$870 million (Rio Tinto share US$270 million) on a sulphide leach project to produce 180,000 tonnes (Rio Tinto share 54,000 tonnes) of copper cathode per annum for more than 25 years starting in the second half of 2006.
     Construction of the US$100 million second block cave at the underground Northparkes copper and gold mine in New South Wales, Australia was completed and production commenced in 2004.
     Development of the 54 per cent owned Eastern Range iron ore mine in Australia with a capacity of ten million tonnes per year was completed in 2004, with first shipments dispatched in the first half of the year.
     Expansion of the Weipa bauxite mine in Queensland, Australia, was completed, which will result in an increase in production capacity to 16.5 million tonnes per annum in coming years. This supports the requirements of the new Comalco Alumina Refinery. A key component of the US$150 million expenditure is a 9.5 million tonne beneficiation plant for ore from the Andoom deposit. In 2005, a new US$40 million power station was constructed and will be commissioned in 2006. The station will service the Weipa mining operations and surrounding communities.
     Construction of the first stage of Comalco’s new alumina refinery at Gladstone, Queensland commenced in January 2002 and was completed in late 2004, three months early and in line with its budget of US$750 million. Initial shipments from the 1.4 million tonnes per year plant started in early 2005.
     Approval was given in 2004 for expansion of the Hail Creek coal mine in Australia to eight million tonnes per year at a cost of US$157 million.

 

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     Kennecott Land’s Project Daybreak in Utah, US, a mixed use land development on a 1,800 hectare site, started in 2003, with the first land sales in 2004 that are expected to ramp up over a period of five to six years.

BUSINESS ENVIRONMENT AND MARKETS

Competitive environment
Rio Tinto is a major producer in all the metals and minerals markets in which it operates. It is generally among the top five global producers by volume. It has market shares for different commodities ranging from five per cent to 40 per cent. The competitive arena is spread across the globe, including eastern Europe, Russia and China.
     Most of Rio Tinto’s competitors are private sector companies which are publicly quoted. Several are, like Rio Tinto, diversified in terms of commodity exposure, but others are focused on particular commodity segments. Metal and mineral markets are highly competitive with few barriers to entry. They can be subject to price declines in real terms reflecting large productivity gains, increasing technical sophistication, better management, and advances in information technology.
     High quality, long life mineral resources, the basis of good financial returns, are relatively scarce. Rio Tinto’s ownership of or interest in some of the world’s largest deposits enables it to contribute to long term market growth.
     World production volumes are likely to grow at least in line with global economic activity. The emergence of China and eventually India as major economies requiring metals and minerals for development could mean even higher market growth.

Economic overview
World economic activity in 2005 grew by 4.3 per cent on a purchasing power parity basis compared with 5.1 per cent in 2004. This was led by the US and China which grew by 3.6 per cent and 9.5 per cent respectively. In Asia as a whole growth was 4.5 per cent while Japan grew by 2.5 per cent. Latin America grew by 4.1 per cent. European activity lagged showing growth of 1.6 per cent.
     Inflation generally remained low by historical standards in spite of the large rise in prices of oil and other commodities. This reflected fierce competition in the manufacturing sector and generally weak labour markets.
     During 2005 China’s growth continued to provide momentum to commodity demand offsetting more patchy demand conditions in some OECD countries. At the same time, with low stocks, production problems, increased input costs and heightened speculative activity in some commodities, the prices of most metals and minerals rose and remained well above the historical trend.
     The seaborne iron ore trade continued to grow strongly with China’s iron ore imports nearly 32 per cent above their 2004 level. Price increases of 71.5 per cent during the year underlined the tightness of the market.
     The cash cost of copper reached new record highs of over US$2 per pound in December 2005. Over the year the average spot price was US$1.66 per pound. Speculative activity over the course of the year led to surges in spot prices as market participants scrambled occasionally to meet immediate needs.
     Coking coal prices more than doubled with significant increases in Asian demand. Prices for Powder River Basin coal also more than doubled over the year due to the general tightness of US energy markets and transport issues. Prices for seaborne thermal coal rose by over 20 per cent. Uranium prices also rose strongly during 2005.
     Aluminium prices rallied strongly throughout the second half of 2005 averaging 86 US cents per pound for the year as a whole. The renewed upward momentum in prices has been driven in part by fund buying on the expectation of tighter markets in 2006. Factors such as record high alumina prices, announcements of power related smelter shutdowns and a slowdown in Chinese exports all contributed to the increasingly positive market sentiment.
     Demand for industrial minerals such as borates and titanium minerals continued to benefit from solid US demand.
     Gold prices escalated in the latter half of the year and averaged US$444 per ounce for 2005 as a whole. Many less widely traded metals also benefited from much higher prices, notably molybdenum, which averaged US$31 per pound, a 25 year high.
     A discussion of the financial results for the two years to 31 December 2005 is given in the Financial review on pages 39 to 57.
     Comments on the financial performance of the individual product groups for the two years to 31 December 2005 are included in the Operating review on pages 57 to 80. Details of production, reserves and information on Group mines are given on pages 15 to 35. Analyses of Rio Tinto’s revenues by product group, geographical origin and geographical destination have been set out in Notes 32 to 33 to the 2005 Financial statements on pages A-52 to A-55.

Marketing channels
Each business within each product group is responsible for the marketing and sale of their respective metal and mineral production.
     Consequently, Rio Tinto has numerous marketing channels, which now include electronic marketplaces, with differing characteristics and pricing mechanisms.
     In general, Rio Tinto’s businesses contract their metal and mineral production direct to end users under long term supply contracts and at prevailing market prices. Typically, these contracts specify annual volume commitments and an agreed mechanism for determining prices. For example, businesses producing non ferrous metals and minerals

 

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reference their sales prices to the London Metal Exchange (LME) or other metal exchanges such as the Commodity Exchange Inc (Comex) in New York. Businesses producing coal and iron ore would typically reference their sales prices to annually negotiated industry benchmarks. In markets where international reference market prices do not exist or are not transparent, businesses negotiate product prices on an individual customer basis.
     Fluctuations in these prices, particularly for aluminium, copper and gold, inevitably affect the Group’s financial results.
     Rio Tinto’s marketing channels include a network of regional sales offices worldwide. Some products in certain geographical markets are sold via third party agents.

Governmental regulations
Rio Tinto is subject to extensive governmental regulations affecting all aspects of its operations and consistently seeks to apply best practice in all of its activities. Due to Rio Tinto’s product and geographical spread, there is unlikely to be any single governmental regulation that could have a material effect on the Group’s business.
     Rio Tinto’s operations in Australia, New Zealand, and Indonesia are subject to state, provincial and federal regulations of general application governing mining and processing, land tenure and use, environmental requirements, workplace health and safety, trade and export, corporations, competition, access to infrastructure, foreign investment and taxation. Some operations are conducted under specific agreements with the respective governments and associated acts of parliament. In addition, Rio Tinto’s uranium operations in the Northern Territory, Australia and Namibia are subject to specific regulation in relation to mining and the export of uranium.
     US and Canada based operations are subject to local and national regulations governing land use, environmental aspects of operations, product and workplace health and safety, trade and export administration, competition, securities and taxation.
     The South African Mineral and Petroleum Resources Development Act 2002, as read with the Empowerment Charter for the South African Mining Industry, targets the transfer (for fair value) of 26 per cent ownership of existing South African mining assets to historically disadvantaged South Africans (HDSAs) within ten years. Attached to the Empowerment Charter is a “scorecard” by which companies will be judged on their progress towards empowerment and the attainment of the target transfer of 26 per cent ownership. The scorecard also provides that in relation to existing mining assets 15 per cent ownership should vest in HDSAs within five years of 1 May 2004. Rio Tinto anticipates that the government of South Africa will continue working towards the introduction of new royalty payments in respect of mining tenements, expected to become effective during 2009.

 

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METALS AND MINERALS PRODUCTION

      2003   2004   2005  
Production (a) Production (a) Production (a)














 
  Rio Tinto
  Total    Rio Tinto
  Total    

Rio Tinto

   Total    Rio Tinto
 
% share (b)   share   share   share














 
ALUMINA (’000 tonnes)                            
Comalco Alumina Refinery (Australia) (c) 100.0       175   175   835   835  
Eurallumina (Italy) 56.2   1,021   573   1,064   597   1,070   601  
Queensland Alumina (Australia) 38.6   3,731   1,440   3,778   1,459   3,953   1,526  














 
Rio Tinto total         2,014       2,231       2,963  














 
ALUMINIUM (refined) (’000 tonnes)                            
Anglesey (UK) 51.0   141.9   72.4   144.8   73.8   143.9   73.4  
Bell Bay (Australia) 100.0   166.6   166.6   162.0   162.0   173.8   173.8  
Boyne Island (Australia) 59.4   520.9   311.1   540.5   321.2   544.9   326.2  
Tiwai Point (New Zealand) 79.4   334.4   266.5   350.3   279.5   351.4   280.3  














 
Rio Tinto total         816.6       836.5       853.7  














 
BAUXITE (’000 tonnes)                            
Boké (Guinea) (d)   12,060   418   5,773   179      
Weipa (Australia) 100.0   11,898   11,898   12,649   12,649   15,474   15,474  














 
Rio Tinto total         12,316       12,828       15,474  














 
BORATES (’000 tonnes) (e)                            
Boron mine (US) 100.0   541   541   543   543   540   540  
Borax Argentina (Argentina) 100.0   17   17   22   22   20   20  














 
Rio Tinto total         559       565       560  














 
COAL – HARD COKING (’000 tonnes)                            
Rio Tinto Coal Australia (f)                            
Hail Creek Coal (Australia) (g) 82.0   883   812   5,104   4,633   5,900   4,838  
Kestrel Coal (Australia) 80.0   1,873   1,499   2,659   2,127   2,946   2,357  














 
Rio Tinto total hard coking coal         2,311       6,760       7,195  














 
COAL – OTHER* (’000 tonnes)                            
Rio Tinto Coal Australia (f)                            
Bengalla (Australia) 30.3   6,203   1,879   5,312   1,609   5,965   1,806  
Blair Athol (Australia) 71.2   12,480   8,890   12,229   8,712   10,600   7,551  
Hunter Valley Operations (Australia) 75.7   12,008   9,091   13,269   10,046   12,374   9,369  
Kestrel Coal (Australia) 80.0   1,449   1,159   623   499   774   619  
Mount Thorley Operations (Australia) 60.6   3,153   1,910   3,548   2,149   3,962   2,400  
Tarong Coal (Australia) 100.0   6,538   6,538   7,004   7,004   6,470   6,470  
Warkworth (Australia) 42.1   5,868   2,469   6,954   2,926   6,293   2,647  














 
Total Australian other coal         31,935       32,943       30,863  














 
Kaltim Prima Coal (Indonesia) (h)   12,655   6,327          














 
Rio Tinto Energy America (i)                            
Antelope (US) 100.0   26,806   26,806   26,928   26,928   27,174   27,174  
Colowyo (US) (i)   4,535   4,535   5,788   5,788   5,325   5,325  
Cordero Rojo (US) 100.0   32,671   32,671   35,233   35,233   34,234   34,234  
Decker (US) 50.0   7,358   3,679   7,831   3,916   6,288   3,144  
Jacobs Ranch (US) 100.0   32,418   32,418   34,979   34,979   33,823   33,823  
Spring Creek (US) 100.0   8,069   8,069   10,892   10,892   11,881   11,881  














 
Total US coal         108,177       117,734       115,580  














 
Rio Tinto total other coal         146,439       150,677       146,443  














 
   
* Coal – other includes thermal coal, semi-soft coking coal and semi-hard coking coal.
See notes on page 18

 

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METALS AND MINERALS PRODUCTION continued

     

2003

  2004
  2005
 
Production (a) Production (a) Production (a)














 
  Rio Tinto
  Total    Rio Tinto
   Total   Rio Tinto
   Total   Rio Tinto
 
% share (b)   share   share   share














 
COPPER (mined) (’000 tonnes)                            
Alumbrera (Argentina) (j)   34.9   8.7          
Bingham Canyon (US) 100.0   281.8   281.8   263.7   263.7   220.6   220.6  
Escondida (Chile) 30.0   992.7   297.8   1,207.1   362.1   1,270.2   381.1  
Grasberg – FCX (Indonesia) (k)   444.1   84.5   396.4   5.5      
Grasberg – Joint Venture (Indonesia) (k) 40.0   271.7   108.7   120.0   48.0   273.9   109.6  
Neves Corvo (Portugal) (l)   77.5   38.0   46.9   23.0      
Northparkes (Australia) 80.0   27.1   21.7   30.0   24.0   54.0   43.2  
Palabora (South Africa) (m) 47.2   52.4   25.8   54.4   26.8   61.2   30.0  














 
Rio Tinto total         867.0       753.1       784.4  














 
COPPER (refined) (’000 tonnes)                            
Atlantic Copper (Spain) (k)   247.1   38.1   58.4   7.0      
Escondida (Chile) 30.0   147.6   44.3   152.1   45.6   143.9   43.2  
Kennecott Utah Copper (US) 100.0   230.6   230.6   246.7   246.7   232.0   232.0  
Palabora (South Africa) (m) 47.2   73.4   36.1   67.5   33.2   80.3   39.3  














 
Rio Tinto total         349.1       332.6       314.5  














 
DIAMONDS (’000 carats)                            
Argyle (Australia) 100.0   30,910   30,910   20,620   20,620   30,476   30,476  
Diavik (Canada) 60.0   3,833   2,300   7,575   4,545   8,272   4,963  
Merlin (Australia)   62   62          
Murowa (Zimbabwe) (n) 77.8       47   36   251   195  














 
Rio Tinto total         33,272       25,202       35,635  














 
GOLD (mined) (’000 ounces)                            
Alumbrera (Argentina) (j)   124   31          
Barneys Canyon (US) 100.0   35   35   22   22   16   16  
Bingham Canyon (US) 100.0   305   305   308   308   401   401  
Cortez/Pipeline (US) 40.0   1,085   434   1,051   421   904   361  
Escondida (Chile) 30.0   184   55   217   65   183   55  
Grasberg – FCX (Indonesia) (k)   1,456   354   1,377   14      
Grasberg – Joint Venture (Indonesia) (k) 40.0   1,806   722   207   83   1,676   670  
Greens Creek (US) 70.3   99   70   86   61   73   51  
Kelian (Indonesia) 90.0   469   422   328   295   43   38  
Lihir (Papua New Guinea) (o)   551   88   599   87   424   61  
Morro do Ouro (Brazil) (p)   201   103   188   96      
Northparkes (Australia) 80.0   49   39   79   63   57   46  
Peak (Australia) (j)   20   20          
Rawhide (US) 51.0   64   32   50   25   35   18  
Rio Tinto Zimbabwe (Zimbabwe) (q)   25   14   11   6      
Others   14   7   13   7   15   7  














 
Rio Tinto total         2,731       1,552       1,726  














 
GOLD (refined) (’000 ounces)                            
Kennecott Utah Copper (US) 100.0   308   308   300   300   369   369  














 
IRON ORE (’000 tonnes)                            
Channar (Australia) 60.0   10,347   6,208   9,759   5,855   8,644   5,186  
Corumbá (Brazil) 100.0   1,074   1,074   1,301   1,301   1,410   1,410  
Eastern Range (Australia) (r)       2,970   2,970   6,559   6,559  
Hamersley Iron (Australia) 100.0   63,056   63,056   65,407   65,407   74,387   74,387  
Iron Ore Company of Canada (Canada) 58.7   14,225   8,353   11,139   6,541   15,647   9,188  
Robe River (Australia) 53.0   45,136   23,922   48,459   25,684   52,385   27,764  














 
Rio Tinto total         102,613       107,757       124,494  














 
See notes on page 18                            

 

Rio Tinto 2005 Form 20-F 16

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METALS AND MINERALS PRODUCTION continued

     

2003

  2004
  2005
 
Production (a) Production (a) Production (a)














 
  Rio Tinto
  Total    Rio Tinto
   Total   Rio Tinto
   Total   Rio Tinto
 
% share (b)   share   share   share














 
LEAD (’000 tonnes)                            
Greens Creek (US) 70.3   22.5   15.8   19.8   13.9   16.9   11.9  
Zinkgruvan (Sweden) (s)   31.8   31.8   11.2   11.2      














 
Rio Tinto total         47.6       25.1       11.9  














 
MOLYBDENUM (’000 tonnes)                            
Bingham Canyon (US) 100.0   4.6   4.6   6.8   6.8   15.6   15.6  














 
NICKEL (mined) (’000 tonnes)                            
Fortaleza (Brazil) (t)   6.0   6.0          














 
NICKEL (refined) (’000 tonnes)                            
Empress (Zimbabwe) (q)   6.2   3.5   2.9   1.6      














 
SALT (’000 tonnes)                            
Dampier Salt (Australia) 64.9   7,135   4,633   7,380   4,792   8,480   5,507  














 
SILVER (mined) (’000 ounces)                            
Bingham Canyon (US) 100.0   3,548   3,548   3,584   3,584   3,958   3,958  
Escondida (Chile) 30.0   4,728   1,418   5,747   1,724   6,565   1,970  
Grasberg – FCX (Indonesia) (k)   3,659   745   3,077   79      
Grasberg – Joint Venture (Indonesia) (k) 40.0   2,815   1,126   1,961   784   3,410   1,364  
Greens Creek (US) 70.3   11,707   8,226   9,707   6,821   9,664   6,791  
Zinkgruvan (Sweden) (s)   1,841   1,841   651   651      
Others   2,511   1,407   2,025   1,187   1,422   843  














 
Rio Tinto total         18,311       14,830       14,926  














 
SILVER (refined) (’000 ounces)                            
Kennecott Utah Copper (US) 100.0   2,963   2,963   3,344   3,344   3,538   3,538  














 
TALC (’000 tonnes)                            
Luzenac Group (Australia/Europe/N. America) (u) 100.0   1,358   1,357   1,444   1,443   1,364   1,364  














 
TIN (tonnes)                            
Neves Corvo (Portugal) (l)   203   100   120   59      














 
TITANIUM DIOXIDE FEEDSTOCK (‘000 tonnes)                            
Rio Tinto Iron & Titanium (Canada/South Africa) (v) 100.0   1,192   1,192   1,192   1,192   1,312   1,312  














 
URANIUM (tonnes U3 O8 )                            
Energy Resources of Australia (Australia) 68.4   5,134   3,512   5,143   3,517   5,903   4,037  
Rössing (Namibia) 68.6   2,401   1,647   3,582   2,457   3,711   2,545  














 
Rio Tinto total         5,158       5,974       6,582  














 
ZINC (mined) (’000 tonnes)                            
Greens Creek (US) 70.3   69.1   48.5   62.7   44.1   52.9   37.2  
Zinkgruvan (Sweden) (s)   64.5   64.5   29.7   29.7      














 
Rio Tinto total         113.0       73.8       37.2  














 
See notes on page 18                            

 

Rio Tinto 2005 Form 20-F 17

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METALS AND MINERALS PRODUCTION continued

Production data notes
(a) Mine production figures for metals refer to the total quantity of metal produced in concentrates or doré bullion irrespective of whether these products are then refined onsite, except for the data for iron ore and bauxite which represent production of saleable quantities of ore.
(b) Rio Tinto percentage share, shown above, is as at the end of 2005 and has applied over the period 2003 – 2005 except for those operations where the share has varied during the year and the weighted average for them is shown below. The Rio Tinto share varies at individual mines and refineries in the “others” category and thus no value is shown.
  Rio Tinto share %                
  Operation See Note   2003   2004   2005  
 







 
  Atlantic Copper (k)   15.4   12.0    
  Grasberg - FCX (k)   13.9   10.8    
  Hail Creek (g)   92.0   90.8   82.0  
  Lihir (o)   16.0   14.5    
  Palabora (m)   49.2   49.2   49.0  
 







 
(c) Comalco Alumina Refinery started production in October 2004.
(d) Rio Tinto completed the sale of its four per cent interest in the Boké mine on 25 June 2004. Production data are shown up to the date of sale.
(e) Borate quantities are expressed as B2O3.
(f) Rio Tinto Coal Australia manages all the Australian coal operations including the mines which were previously reported separately under the Coal & Allied name.
(g) Hail Creek commenced production in the third quarter of 2003. Rio Tinto reduced its shareholding in Hail Creek from 92.0 per cent to 82.0 per cent on 15 November 2004.
(h) Rio Tinto had a 50 per cent share in Kaltim Prima and, under the terms of its Coal Agreement, the Indonesian Government was entitled to a 13.5 per cent share of Kaltim Prima’s production. Rio Tinto’s share of production shown is before deduction of the Government share. Rio Tinto completed the sale of its interest in PT Kaltim Prima Coal on 10 October 2003. Production data are shown up to the date of sale.
(i) Rio Tinto Energy America was formerly known as Kennecott Energy. In view of Rio Tinto Energy America’s responsibilities under a management agreement for the operation of the Colowyo mine, all of Colowyo’s output is included in Rio Tinto’s share of production.
(j) Rio Tinto completed the sale of its 25 per cent interest in Minera Alumbrera together with its wholly owned Peak Gold Mine on 17 March 2003. Production data are shown up to the date of sale.
(k) From mid 1995 until 30 March 2004, Rio Tinto held 23.93 million shares of Freeport-McMoRan Copper & Gold (FCX) common stock from which it derived a share of production. This interest was sold to FCX on 30 March 2004. Also, through a joint venture agreement with FCX, Rio Tinto is entitled, as shown separately in the above tables, to 40 per cent of additional material mined as a consequence of expansions and developments of the Grasberg facilities since 1998.
(l) Rio Tinto completed the sale of its 49 per cent interest in Somincor on 18 June 2004. Production data are shown up to the date of sale.
(m) During the second half of 2005, the conversion of debentures into ordinary shares resulted in a dilution of Rio Tinto’s shareholding in Palabora from 49.2 per cent to 47.2 per cent.
(n) Ore mining and processing at Murowa commenced during the third quarter of 2004.
(o) Following a placement of shares on 13 November 2003 Rio Tinto’s interest in Lihir moved from 16.3 per cent to 14.5 per cent. On 30 November 2005, Rio Tinto sold its interest in Lihir Gold; it had agreed in September 2005 to relinquish the management agreement for Lihir. The production data are shown up to 30 September 2005, from which date the Rio Tinto interest in Lihir was held as an investment rather than being equity accounted.
(p) Rio Tinto sold its interest in Morro do Ouro on 31 December 2004. Production data are shown up to the date of sale.
(q) As a result of the corporate restructuring completed on 8 July 2004, Rio Tinto has ceased to be an ordinary shareholder in the renamed RioZim but will retain a reduced cash participation in its gold and nickel assets for a period of ten years.
(r) Rio Tinto’s share of production includes 100 per cent of the production from the Eastern Range mine, which commenced production in March 2004. Under the terms of the joint venture agreement, Hamersley Iron manages the operation and is obliged to purchase all mine production from the joint venture.
(s) Rio Tinto completed the sale of its 100 per cent interest in the Zinkgruvan mine on 2 June 2004. Production data are shown up to the date of sale.
(t) Rio Tinto completed the sale of its 100 per cent interest in the Fortaleza nickel mine on 16 January 2004. This was effective from 1 January 2004.
(u) Talc production includes some products derived from purchased ores.
(v) Quantities comprise 100 per cent of QIT and 50 per cent of Richards Bay Minerals’ production.

 

Rio Tinto 2005 Form 20-F 18

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ORE RESERVES
Under Industry Guide 7

Reserves have been prepared in accordance with Industry Guide 7 under the United States Securities Act of 1933 and the following definitions:
An ‘Ore Reserve’ means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserves determination. To establish this, studies appropriate to the type of mineral deposit involved have been carried out to estimate the quantity, grade and value of the ore mineral(s) present. In addition, technical studies have been completed to determine realistic assumptions for the extraction of the minerals including estimates of mining, processing, economic, marketing, legal, environmental, social and governmental factors. The degree of these studies is sufficient to demonstrate the technical and economic feasibility of the project and depends on whether or not the project is an extension of an existing project or operation. The estimates of minerals to be produced include allowances for ore losses and the treatment of unmineralised materials which may occur as part of the mining and processing activities. Ore Reserves are sub- divided in order of increasing confidence into Probable Ore Reserves and Proven Ore Reserves as defined below.
The term "economically", as used in the definition of reserves, implies that profitable extraction or production under defined investment assumptions has been established through the creation of a mining plan, processing plan and cash flow model. The assumptions made must be reasonable, including costs and operating conditions that will prevail during the life of the project.
Ore reserves presented in accordance with SEC Industry Guide 7 do not exceed the quantities that, it is estimated, could be extracted economically if future prices were to be in line with the average of historical prices for the three years to 30 June 2005, or contracted prices where applicable. For this purpose, contracted prices are applied only to future sales volumes for which the price is predetermined by an existing contract; and the average of historical prices is applied to expected sales volumes in excess of such amounts. Moreover, reported ore reserve estimates have not been increased above the levels expected to be economic based on Rio Tinto's own long term price assumptions.
The term "legally", as used in the definition of reserves, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for reserves to exist, there is reasonable assurance of the issuance of these permits or resolution of legal issues. Reasonable assurance means that, based on applicable laws and regulations, the issuance of permits or resolution of legal issues necessary for mining and processing at a particular deposit will be accomplished in the ordinary course of business and in a timeframe consistent with the Company’s current mine plans.
The term "proven reserves" means reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established. Proven reserves represent that part of an orebody for which there exists the highest level of confidence in data regarding its geology, physical characteristics, chemical composition and probable processing requirements.
The term "probable reserves" means reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. This means that probable reserves generally have a wider drill hole spacing than for proven reserves.
The amount of proven and probable reserves shown below does not necessarily represent the amount of material currently scheduled for extraction, because the amount scheduled for extraction may be derived from a life of mine plan predicated on prices and other assumptions which are different to those used in the life of mine plan prepared in accordance with Industry Guide 7.
The estimated ore reserve figures in the following tables are as of 31 December 2005. Metric units are used throughout. The figures used to calculate Rio Tinto's share of reserves are often more precise than the rounded numbers shown in the tables, hence small differences might result if the calculations are repeated using the tabulated figures. Commodity price information is given in Note (a) on page 28.

 

Rio Tinto 2005 Form 20-F 19

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ORE RESERVES continued
Under Industry Guide 7

          Total ore reserves at end              
  Type of       2005              
  mine      


      Interest   Rio Tinto  
  (b)       Tonnage   Grade      

%

  share  














 
                          Recoverable  
                          mineral  
          millions               millions  
BAUXITE (d)         of tonnes   %Al2 O3           of tonnes  
Reserves at operating mine                            
Weipa (Australia) O/P       1,211   53.7       100.0   1,211  














 
                             
                          Marketable  
                          product  
          millions               millions  
BORATES (e)
        of tonnes               of tonnes  
Reserves at operating mine                            
Boron (US)                            
– mine O/P       21.3           100.0   21.3  
– stockpiles (i) S/P       2.1           100.0   2.1  














 
Rio Tinto total                         23.5  














 
                         
      Coal type   Marketable   Marketable coal quality          
      (g)   reserves   (h)   (h)          
         




         
                          Marketable  
              Calorific   Sulphur       reserves  
          millions   value   content       millions  
COAL (f)         of tonnes   MJ/kg   %       of tonnes  
Reserves at operating mines                            
Rio Tinto Energy America (k)                            
Antelope (US) (j) O/C   SC   384   20.59   0.25   100.0   384  
Colowyo (US) (k) O/C   SC   20   24.48   0.40   100.0   20  
Cordero Rojo (US) O/C   SC   321   19.59   0.31   100.0   321  
Decker (US) O/C   SC   22   22.10   0.37   50.0   11  
Jacobs Ranch (US) O/C   SC   456   20.35   0.44   100.0   456  
Spring Creek (US) O/C   SC   213   21.75   0.33   100.0   213  














 
Total US coal                         1,405  














 
Rio Tinto Coal Australia                            
Bengalla (Australia) O/C   SC   155   28.30   0.50   30.3   47  
Blair Athol (Australia) O/C   SC   50   27.95   0.32   71.2   36  
Hail Creek (Australia) O/C   MC   184   32.20   0.35   82.0   151  
Hunter Valley Operations O/C   SC + MC   320   28.94   0.57   75.7   242  
(Australia)                            
Kestrel (Australia) U/G   SC + MC   116   32.20   0.65   80.0   93  
Mount Thorley Operations O/C   SC + MC   23   29.48   0.46   60.6   14  
(Australia)                            
Tarong-Meandu (Australia) O/C   SC   86   21.05   0.30   100.0   86  
Warkworth (Australia) O/C   SC + MC   262   28.87   0.45   42.1   110  














 
Total Australian coal                         779  














 
Rio Tinto total reserves at operating mines                         2,184  














 
Undeveloped reserves (l)                            
Rio Tinto Coal Australia                            
Clermont (Australia) O/C   SC   189   27.90   0.33   50.1   95  
Mount Pleasant (Australia) O/C   SC   350   26.73   0.51   75.7   265  
Tarong-Kunioon (Australia) O/C   SC   163   21.05   0.30   100.0   163  














 
Rio Tinto total undeveloped reserves                         523  














 
See notes on pages 28 to 29                            

 

Rio Tinto 2005 Form 20-F 20

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ORE RESERVES continued
Under Industry Guide 7

  Type of   Total ore reserves   Average          
at end 2005 mill
  mine  


  recovery   Interest   Rio Tinto  
  (b)   Tonnage   Grade   %   %   share  












 
COPPER     millions
  %Cu           Recoverable
 
metal
millions
of tonnes   of tonnes
Reserves at operating mines                        
Bingham Canyon (US)                        
– mine O/P   648   0.55   85   100.0   3.026  
– stockpiles (i) S/P   18   0.38   85   100.0   0.060  
Escondida (Chile)                        
– sulphide mine O/P   1,065   1.22   84   30.0   3.274  
– sulphide leach mine O/P   661   0.52   37   30.0   0.380  
– oxide mine O/P   37   0.56   82   30.0   0.052  
– sulphide stockpiles (i) S/P   18   1.23   84   30.0   0.055  
– sulphide leach stockpiles (i) S/P   203   0.65   37   30.0   0.143  
– oxide stockpiles (i) S/P   115   0.66   82   30.0   0.187  
Escondida Norte (Chile)                        
– sulphide mine O/P   573   1.38   89   30.0   2.108  
– sulphide leach mine O/P   332   0.59   33   30.0   0.191  
– oxide mine O/P   120   0.79   54   30.0   0.153  
– sulphide stockpiles (i) S/P   2.3   1.51   89   30.0   0.009  
– sulphide leach stockpiles (i) S/P   7.4   0.83   33   30.0   0.006  
– oxide stockpiles (i) S/P   10   0.46   54   30.0   0.008  
Grasberg (Indonesia) O/P + U/G   2,822   1.07   89   (m)   7.714  
Northparkes (Australia) (n)                        
– stockpiles (i) S/P   3.8   0.67   85   80.0   0.017  
– mine U/G   52   1.13   90   80.0   0.426  
Palabora (South Africa) (o)                        
– mine U/G   142   0.56   88   47.2   0.331  












 
Rio Tinto total                     18.140  












 
                         
DIAMONDS (d)     millions
  carats
          Recoverable
 
diamonds
millions
of tonnes per tonne of carats
Reserves at operating mines                        
Argyle (Australia)                        
– AK1 pipe mine O/P   25   2.9       100.0   73.5  
– AK1 pipe stockpiles (i) S/P   3.3   0.9       100.0   3.0  
Diavik (Canada) O/P + U/G   28   3.2       60.0   54.2  
Murowa (Zimbabwe) O/P   23   0.7       77.8   12.1  












 
Rio Tinto total                     142.8  












 
                         
GOLD     millions
  grammes
          Recoverable
 
metal
millions
of tonnes per tonne of ounces
Reserves at operating mines                        
Bingham Canyon (US)                        
– mine O/P   648   0.32  
63
  100.0   4.234  
– stockpiles (i) S/P   18   0.23  
63
  100.0   0.084  
Cortez/Pipeline (US) (p)                        
– mine O/P   233   1.38  
74
  40.0   3.050  
– stockpiles (i) S/P   1.7   3.89  
86
  40.0   0.072  
Grasberg (Indonesia) O/P + U/G   2,822   0.92  
74
  (m)   14.606  
Greens Creek (US) U/G   6.4   3.95  
69
  70.3   0.394  
Northparkes (Australia) (n)                        
– stockpiles (i) S/P   3.8   0.58  
76
  80.0   0.043  
– mine U/G   52   0.49  
76
  80.0   0.503  












 
Rio Tinto total                     22.986  












 
See notes on pages 28 to 29                        

 

Rio Tinto 2005 Form 20-F 21

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ORE RESERVES continued
Under Industry Guide 7

       Total ore reserves
  Average
         
Type of   at end 2005 mill
  mine  


  recovery   Interest   Rio Tinto  
  (b)   Tonnage   Grade   %   %   share  












 
IRON ORE (d)     millions
  %Fe           Marketable
 
product
millions
of tonnes   of tonnes
Reserves at operating mines and mines under construction                        
Channar (Australia)                        
– Brockman Ore O/P   109   63.5       60.0   65  
Corumbá (Brazil) O/P   216   67.2       100.0   216  
Eastern Range (Australia)                        
– Brockman Ore O/P   104   63.0       54.0   56  
Hamersley (Australia)                        
– Brockman 2 (Brockman Ore) (q) O/P   37   62.5       100.0   37  
– Brockman 4 (Brockman Ore) (q) O/P   579   62.2       100.0   579  
– Marandoo (Marra Mamba Ore) O/P   72   61.9       100.0   72  
– Mt Tom Price (Brockman Ore)                        
   –  mine O/P   138   64.6       100.0   138  
   –  stockpiles (i) S/P   12   64.5       100.0   12  
– Paraburdoo (Brockman Ore) O/P   15   63.8       100.0   15  
– Paraburdoo (Marra Mamba Ore) O/P   1.0   63.1       100.0   1  
– Nammuldi (Marra Mamba Ore) O/P   37   61.5       100.0   37  
– Yandicoogina (Pisolite Ore HG) (r)                        
   –  mine O/P   384   58.1       100.0   384  
    –  stockpiles (i) S/P   3.7   58.3       100.0   4  
– Yandicoogina (Process Product) (r)                        
   –  mine O/P   103   58.8       100.0   103  
Iron Ore Company of Canada O/P   427   65.0       58.7   251  
(Canada)                        
Robe River (Australia)                        
– Pannawonica (Pisolite Ore) (s)                        
   –  mine O/P   287   57.2       53.0   152  
   –  stockpiles (i) S/P   16   56.9       53.0   8  
– West Angelas (Marra Mamba Ore)                        
   –  mine O/P   393   62.2       53.0   209  
   –  stockpiles (i) S/P   1.0   59.7       53.0   1  












 
Rio Tinto total (t)                     2.339  












 
                         
LEAD     millions
  %Pb           Recoverable
 
metal
millions
of tonnes of tonnes
Reserves at operating mine                        
Greens Creek (US) U/G   6.4   3.93   67   70.3   0.119  












 
                         
                         
                         
                         
MOLYBDENUM     millions
  %Mo           Recoverable
 
metal
millions
of tonnes of tonnes
Reserves at operating mine                        
Bingham Canyon (US)                        
– mine O/P   648   0.043   59   100.0   0.164  
– stockpiles (i) S/P   18   0.034   59   100.0   0.004  












 
Rio Tinto total                     0.168  












 
See notes on pages 28 to 29                        

 

Rio Tinto 2005 Form 20-F 22

Back to Contents

ORE RESERVES continued
Under Industry Guide 7

      Total ore reserves   Average          
  Type of   at end 2005   mill          
  mine  


  recovery   Interest   Rio Tinto  
  (b)   Tonnage   Grade   %   %   share  












 
                      Recoverable  
SILVER                     metal  
      millions   grammes           millions  
      of tonnes   per tonne           of ounces  
Reserves at operating mines                        
Bingham Canyon (US)                        
– mine O/P   648   2.62   76   100.0   41.243  
– stockpiles (i) S/P   18   1.73   76   100.0   0.769  
Grasberg (Indonesia) O/P + U/G   2,822   4.02   67   (m)   70.235  
Greens Creek (US) U/G   6.4   505   73   70.3   53.273  












 
Rio Tinto total                     165.520  












 
                         
                      Marketable  
TALC (e)                     product  
      millions               millions  
      of tonnes               of tonnes  
Reserves at operating mines                        
Luzenac Group (Europe /                        
North America / Australia) O/P + U/G   48.7           100.0   48.7  












 
                         
                      Marketable  
TITANIUM DIOXIDE                     product  
FEEDSTOCK (e) (u)     millions               millions  
      of tonnes               of tonnes  
Reserves at operating mines                        
QIT (Canada) O/P   60.3           100.0   60.3  
QMM (Madagascar) D/O   12.4           80.0   9.9  
RBM (South Africa) D/O   25.9           50.0   13.0  












 
Rio Tinto total                     83.2  












 
                         
                      Recoverable  
URANIUM                     metal  
      millions               millions  
      of tonnes   %U3 08            of tonnes  
Reserves at operating mines                        
Energy Resources of Australia                        
(Australia)                        
– Ranger #3 mine O/P   12.9   0.231   89   68.4   0.0181  
– Ranger #3 stockpiles (i) S/P   9.9   0.149   86   68.4   0.0087  
Rössing (Namibia) (v)                        
– mine O/P   37   0.037   85   68.6   0.0080  
– stockpiles (i) S/P   1.1   0.031   85   68.6   0.0002  












 
Rio Tinto total                     0.0349  












 
                      Recoverable  
ZINC                     metal  
      millions               millions  
      of tonnes   %Zn           of tonnes  
Reserves at operating mine                        
Greens Creek (US) U/G   6.4   10.3   77   70.3   0.357  












 
See notes on pages 28 to 29                        

 

Rio Tinto 2005 Form 20-F 23

Back to Contents

ORE RESERVES continued
Under Industry Guide 7

  Type of   Proven ore reserves   Probable ore reserves  
  mine   at end 2005   at end 2005  
     




 




 
  (b)   Tonnage   Grade   Drill hole   Tonnage   Grade   Drill hole  
              spacing (c)           spacing (c)  














 
BAUXITE (d)     millions           millions          
      of tonnes   %Al2 O3        of tonnes   %Al2 O3       
Reserves at operating mine                        
Weipa (Australia) O/P   137   53.9   76m   1,074   53.7   400m  














 
BORATES (e)     millions           millions          
      of tonnes           of tonnes          
Reserves at operating mine                        
Boron (US)                        
– mine O/P   16.1       61m   5.3       61m  
– stockpiles (i) S/P   0.2         2.0        














 
                 
        % Yield to   Marketable Reserves  
      Recoverable   give  






 
      reserves   marketable       Drill hole       Drill hole  
      total     reserves   Proven    spacing (c)    Probable   spacing (c)  














 
COAL (f)     millions
      millions
      millions
     
of tonnes of tonnes of tonnes
Reserves at operating mines                        
Rio Tinto Energy America                        
Antelope (US) (j) O/C   384   100   384   max 450m        
Colowyo (US) (k) O/C   20   100   19   max 250m   0.9   max 365m  
Cordero Rojo (US) O/C   321   100   321   max 250m        
Decker (US) O/C   22   100   22   max 250m        
Jacobs Ranch (US) O/C   456   100   452   max 300m   4.3   max 450m  
Spring Creek (US) O/C   213   100   213   max 250m        
                         
Rio Tinto Coal Australia                        
Bengalla (Australia) O/C   190   81   92   350m   62   500m  
Blair Athol (Australia) O/C   51   99   49   150m   0.6   150m  
Hail Creek (Australia) O/C   291   63   104   300m   80   400m  
Hunter Valley Operations (Australia) O/C   469   68   247   300m   73   500m  
Kestrel (Australia) U/G   145   80   53   500m   63   1000m  
Mount Thorley Operations (Australia) O/C   35   66   20   125m   2.5   500  
Tarong-Meandu (Australia) O/C   128   68   79   200m   7.0   400m  
Warkworth (Australia) O/C   408   64   162   450m   100   max 1000m  
                         
Undeveloped reserves (l)                        
Rio Tinto Coal Australia                        
Clermont (Australia) O/C   197   96   163   220m   26   150m to 300m  
Mount Pleasant (Australia) O/C   459   76         350   125m to 500m  
Tarong-Kunioon (Australia) O/C   257   63         163   400m  














 
See notes on pages 28 to 29                          

 

Rio Tinto 2005 Form 20-F 24

Back to Contents

ORE RESERVES continued Under Industry Guide 7

  Type of   Proven ore reserves at end 2005   Probable ore reserves at end 2005  
  mine  
 
 
  (b)   Tonnage   Grade   Drill hole   Tonnage   Grade   Drill hole  
              spacing (c)           spacing (c)  














 
COPPER     millions           millions          
      of tonnes   %Cu       of tonnes   %Cu      
Reserves at operating mines                        
Bingham Canyon (US)                        
– mine O/P   315   0.62   max 90m   333   0.48   max 110m  
– stockpiles (i) S/P   4.6   0.34     14   0.40    
Escondida (Chile)                        
– sulphide mine O/P   536   1.37 ) 55m   529   1.06 ) 60m  
– sulphide leach mine O/P   263   0.52 ) to   398   0.53 ) to  
– oxide mine O/P   11   0.67 ) 60m   27   0.52 ) 110m  
– sulphide stockpiles (i) S/P   18   1.23              
– sulphide leach stockpiles (i) S/P   203   0.65              
– oxide stockpiles (i) S/P   115   0.66              
Escondida Norte (Chile)                        
– sulphide mine O/P   192   1.65 ) 48m   381   1.25 ) 60m  
– sulphide leach mine O/P   52   0.54 ) to 54m   281   0.60 ) to  
– oxide mine O/P             120   0.79 ) 125m  
– sulphide stockpiles (i) S/P   2.3   1.51              
– sulphide leach stockpiles (i) S/P   7.4   0.83              
– oxide stockpiles (i) S/P   10.3   0.46              
Grasberg (Indonesia) O/P + U/G   783   1.13   13m to 60m   2,040   1.03   42m to 102m  
Northparkes (Australia) (n)                        
– stockpiles (i) S/P   3.8   0.67              
– mine U/G             52   1.13   40 x 40 x 80m  
Palabora (South Africa) (o)                        
– mine U/G   112   0.67   75m   30   0.17   75m  














 
DIAMONDS (d)     millions   carats       millions   carats      
      of tonnes   per tonne       of tonnes   per tonne      
Reserves at operating mines                          
Argyle (Australia)                          
– AK1 pipe mine O/P   20   3.0   50m x 50m   4.9   2.7   50m x 50m  
– AK1 pipe stockpiles (i) S/P   0.3   1.9       3.0   0.8    
Diavik (Canada) O/P + U/G   14   3.4   27m to 30m   14   3.0   30m to 34m  
Murowa (Zimbabwe) O/P               23   0.7   25m  














 
GOLD     millions   grammes       millions   grammes      
      of tonnes   per tonne       of tonnes   per tonne      
Reserves at operating mines                            
Bingham Canyon (US)                            
– mine O/P   315   0.35   max 90m   333   0.29   max 110m  
– stockpiles (i) S/P   4.6   0.19       14   0.24      
Cortez/Pipeline (US) (p)                            
– mine O/P   86   1.94   30m to 43m   147   1.05   30m to 43m  
– stockpiles (i) S/P   1.7   3.89                  
Grasberg (Indonesia) O/P + U/G   783   1.01   13m to 60m   2,040   0.89   42m to 102m  
Greens Creek (US) U/G               6.4   3.95   15m to 30m  
Northparkes (Australia) (n)                            
– stockpiles (i) S/P   3.8   0.58                  
– mine U/G               52   0.49   40 x 40 x 80m  














 
See notes on pages 28 to 29

 

Rio Tinto 2005 Form 20-F 25

Back to Contents

ORE RESERVES continued
Under Industry Guide 7

  Type   Proven ore reserves   Probable ore reserves  
  of   at end 2005   at end 2005  
  mine  
 
 
  (b)   Tonnage   Grade   Drill hole   Tonnage   Grade   Drill hole  
              spacing (c)           spacing (c)  














 
IRON ORE (d)     millions            millions           
      of tonnes    %Fe        of tonnes    %Fe       
Reserves at operating mines                            
and mines under construction                            
Channar (Australia)                            
– Brockman Ore O/P   96   63.5   60m x 60m   13   63.6   max 120m  
Corumbá (Brazil) O/P   110   67.2   100m x 100m   106   67.2   200m x 400m  
Eastern Range (Australia)                            
– Brockman Ore O/P   75   63.0   60m x 60m   29   63.0   max 120m  
Hamersley (Australia)                            
– Brockman 2 (Brockman Ore) (q) O/P   28   62.5   50m x 50m   8.8   62.5   max 100m  
– Brockman 4 (Brockman Ore) (q) O/P               579   62.2   200m x 100m  
– Marandoo (Marra Mamba Ore) O/P   67   61.8   75m x 75m   4.9   61.9   max 150m  
– Mt Tom Price (Brockman Ore)                            
   – mine O/P   101   64.6   30m x 30m   37   64.8   60m x 30m  
   – stockpiles (i) S/P               12   64.5      
– Paraburdoo (Brockman Ore) O/P   11   63.8   30m x 30m   3.9   63.6   60m x 30m  
– Paraburdoo (Marra Mamba Ore) O/P               1.0   63.1   60m x 60m  
– Nammuldi (Marra Mamba Ore) O/P   6.5   61.8   60m x 60m   30   61.4   120m x 120m  
– Yandicoogina (Pisolite Ore HG) (r)                            
   – mine O/P   250   58.3   50m x 50m   133   57.8   100m x 50m  
   – stockpiles (i) S/P               3.7   58.3      
– Yandicoogina (Process Product) (r)                            
   – mine O/P   32   58.8   50m x 50m   70   58.8   100m x 50m  
Iron Ore Company of Canada O/P   346   65.0   122m x 61m   81   65.0   122m x 122m  
 (Canada)                            
Robe River (Australia)                            
– Pannawonica (Pisolite Ore) (s)                            
   – mine O/P   246   57.2   25m x 25m   41   57.1   max 200m x 50m  
   – stockpiles (i) S/P   2.8   57.0       13   56.9      
– West Angelas (Marra Mamba Ore)                            
   – mine O/P   134   62.8   25m x 25m   260   61.9   200m x 50m  
   – stockpiles (i) S/P   1.0   59.7                  














 
LEAD         millions       millions          
          of tonnes   %Pb   of tonnes   %Pb      
Reserves at operating mine                            
Greens Creek (US) U/G               6.4   3.93   15m to 30m  














 
MOLYBDENUM     millions            millions           
      of tonnes    %Mo        of tonnes    %Mo       
Reserves at operating mine                            
Bingham Canyon (US)                            
– mine O/P   315   0.040   max 90m   333   0.045   max 110m  
– stockpiles (i) S/P   4.6   0.035       14   0.033      














 
See notes on pages 28 to 29

 

Rio Tinto 2005 Form 20-F 26

Back to Contents

ORE RESERVES continued
Under Industry Guide 7

  Type of   Proven ore reserves   Probable ore reserves  
  mine   at end 2005   at end 2005  
  (b)  
 
 
    Tonnage   Grade   Drill hole   Tonnage   Grade   Drill hole  
              spacing (c)           spacing (c)  














 
SILVER     millions   grammes       millions   grammes      
      of tonnes   per tonne       of tonnes   per tonne      
Reserves at operating mines                            
Bingham Canyon (US)                            
– mine O/P   315   2.87   max 90m   333   2.38   max 110m  
– stockpiles (i) S/P   4.6   1.53       14   1.79      
Grasberg (Indonesia) O/P + U/G   783   3.95   13m to 60m   2,040   4.04   42m to 102m  
Greens Creek (US) U/G               6.4   505   15m to 30m  














 
TALC (e)     millions           millions          
      of tonnes           of tonnes          
Reserves at operating mines                            
Luzenac Group (Europe / North O/P + U/G   31.1       15m to 60m   17.6       15m to 100m  
America / Australia)                            














 
TITANIUM DIOXIDE     millions           millions          
FEEDSTOCK (e) (u)     of tonnes           of tonnes          
Reserves at operating mines                            
QIT (Canada) O/P   38.8       60m x 60m   21.5       100m x 100m  
QMM (Madagascar) D/O   12.0       200m x 100m   0.4       400m x 200m  
RBM (South Africa) D/O   6.2       50m x 50m   19.7       800m x 100m  














 
URANIUM     millions           millions          
      of tonnes   %U3 08        of tonnes   %U3 08       
Reserves at operating mines                      
Energy Resources of Australia                      
(Australia)                      
– Ranger #3 mine O/P   4.5   0.25   <30m   8.4   0.22   >30m x <70m  
– Ranger #3 stockpiles (i) S/P   9.9   0.15            
Rössing (Namibia) (v)                      
– mine O/P   3.7   0.048 20m x 20m   33.3   0.036 60m x 120m  
– stockpiles (i) S/P   1.1   0.031            














 
ZINC     millions           millions          
      of tonnes   %Zn       of tonnes   %Zn      
Reserves at operating mine                            
Greens Creek (US) U/G               6.4   10.3   15m x 30m  














 
See notes on pages 28 to 29

 

Rio Tinto 2005 Form 20-F 27

Back to Contents

ORE RESERVES continued
Under Industry Guide 7

Notes
(a) Commodity prices (based on a three year average historical price to 30 June 2005) used to test whether the reported reserve estimates could be economically extracted, include the following benchmark prices:
 
Ore reserve Unit   US$  




 
ALUMINIUM        
Weipa (Australia) pound   0.72  
         
COPPER        
Bingham Canyon (US) pound   1.05  
Escondida (Chile)* pound   0.94  
Escondida Norte (Chile)* pound   0.94  
Grasberg (Indonesia)* pound   0.90  
Northparkes (Australia) pound   1.05  
Palabora (South Africa) pound   1.05  
         
GOLD        
Bingham Canyon (US) ounce   381 .
Cortez / Pipeline (US)* ounce   381 .
Grasberg (Indonesia)* ounce   350 .
Greens Creek (US) ounce   381 .
Northparkes (Australia) ounce   381 .
         
LEAD        
Greens Creek (US) pound   0.31  
         
MOLYBDENUM        
Bingham Canyon (US) pound   13.0  
         
SILVER        
Bingham Canyon (US) ounce   5.79  
Grasberg (Indonesia)* ounce   5.00  
Greens Creek (US) ounce   5.79  
         
ZINC        
Greens Creek (US) pound   0.44  
         
* = non managed operations        
         
IRON ORE        
Australian benchmark (fines) dmtu**   0.34  
Atlantic benchmark (fines) dmtu**   0.36  




 
** = dry metric tonne unit
 
Prices for all other commodities are determined by individual contract negotiation. The reported reserves for these commodities have been tested to confirm that they could be economically extracted using a combination of existing contract prices until expiry and thereafter three year historical prices.
(b) Type of mine: O/P = open pit, O/C = open cut, U/G = underground, D/O = dredging operation, S/P = stockpile.
(c) Drill hole spacings are either average distances, a specified grid distance (a regular pattern of drill holes - the distance between the drill holes along the two axes of the grid will be aligned to test the size, shape and continuity of the mineral deposit; as such there may be different distances between the drill holes along the two axes of a grid) or the maximum drill hole spacing that is sufficient to determine the reserve category for a particular deposit. As the continuity of mineralisation varies from deposit to deposit, the drill hole spacing required to categorise a reserve varies between and within deposit types.
(d) Reserves of iron ore, bauxite and diamonds are shown as recoverable reserves of saleable product after accounting for all mining and processing losses. Mill recoveries are therefore not shown.
(e) Reserves of industrial minerals are expressed in terms of marketable product, i.e. after all mining and processing losses. In the case of borates, the saleable product is B2O3.
(f) Coal reserves are shown as both recoverable and marketable. The yield factors shown reflect the impact of further processing, where necessary, to provide marketable coal. All reserves at operating mines are assigned, all undeveloped reserves are unassigned. By “assigned” and “unassigned,” we mean the following: assigned reserves means coal which has been committed by the coal company to operating mine shafts, mining equipment, and plant facilities, and all coal which has been leased by the company to others; unassigned reserves represent coal which has not been committed, and which would require new mineshafts, mining equipment, or plant facilities before operations could begin in the property.
(g) Coal type: SC = steam/thermal coal; MC = metallurgical/coking coal.
(h) Analyses of coal from the US were undertaken according to "American Standard Testing Methods" (ASTM) on an "As Received" moisture basis whereas the coals from Australia have been analysed on an "Air Dried" moisture basis according to Australian Standards (AS).
  MJ/kg = megajoules per kilogramme. 1 MJ/kg = 430.2 Btu/lb.
(i) Stockpile components of reserves are shown for all operations, where relevant.
(j) The addition of the West Antelope lease to the project has substantially increased the available ore reserve tonnage.
(k) Rio Tinto Energy America was formerly known as Kennecott Energy. In view of Rio Tinto Energy America’s responsibilities under a management agreement for the operation of the mine, all of Colowyo's reserves are included in Rio Tinto's share shown above.
(l) The term 'undeveloped reserves' is used here to describe material that is economically viable on the basis of technical and economic studies but for which construction and commissioning have yet to commence.

 

Rio Tinto 2005 Form 20-F 28

Back to Contents

ORE RESERVES continued
Under Industry Guide 7

(m) Under the terms of a joint venture agreement between Rio Tinto and Freeport-McMoRan Copper & Gold (FCX), Rio Tinto is entitled to a direct 40 per cent share in reserves discovered after 31 December 1994 and it is this entitlement that is shown.
(n) Open pit mining at Northparkes was completed in 2005, whilst underground reserves increased following updated technical and economic studies.
(o) Reserves at Palabora have decreased following a reassessment of grade and of dilution effects from the open pit. During the second half of 2005, the conversion of debentures into ordinary shares resulted in a dilution of Rio Tinto’s shareholding in Palabora from 49.2 per cent to 47.2 per cent.
(p) Portions of the Cortez Hills and Pipeline deposit reserves were reclassified as mineralised material following technical and economic reviews of the mine plans. The Crossroads extension to the Pipeline mine was added to reserves in 2005.
(q) Brockman reserves have increased following the development of new geological models and approved mine design extensions.
(r) Yandicoogina reserves have increased following the development of updated geological models and the approval of mine design and project expansions.
(s) Pannawonica reserves have increased following revision and updating of geological models and mine designs, leading to the inclusion of reserves for the Mesa A deposit.
(t) During 2005, Rio Tinto entered into an agreement to purchase a 50 per cent interest in the Hope Downs iron ore project. As at 31 December 2005 the purchase of Hope Downs was proceeding and was subject to various regulatory approvals, and so no reserves have been reported.
(u) Reserves for the titanium dioxide operations are presented separately for the first time including those for QMM following successful completion of technical and economic studies.
(v) The increased reserves at Rössing reflect the transfer of mineralised material to reserves on the basis of updated technical and economic studies.
(w) Reserves for the following deposits are no longer shown: Lihir (Papua New Guinea) in which Rio Tinto's interest was sold during 2005 and Jabiluka (Australia) where additional work on the technical aspects and review of permitting and legal requirements led to a re-assessment of the deposit under Industry Guide 7.

 

Rio Tinto 2005 Form 20-F 29

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GROUP OPERATIONS (wholly owned unless stated otherwise)
 
 
 
    ALUMINIUM
    Operating sites
1   Anglesey Aluminium (51%)
2   Bell Bay
3   Boyne Island (59%)
3   Comalco Alumina Refinery
3   Gladstone Power Station (42%)
3   Queensland Alumina (39%)
4   Eurallumina (56%)
5   Tiwai Point (79%)
6   Weipa
     
    BORATES
    Operating sites
7   Boron
8   Coudekerque Plant
9   Tincalayu
10   Wilmington Plant
     
    COAL
    Operating sites
11   Antelope
12   Bengalla (30%)
13   Blair Athol (71%)
14   Colowyo (20%)
11   Cordero Rojo
15   Decker (50%)
13   Hail Creek (82%)
16   Hunter Valley Operations (76%)
11   Jacobs Ranch
17   Kestrel (80%)
16   Mt Thorley Operations (61%)
15   Spring Creek
18   Tarong
16   Warkworth (42%)
     
    Projects
13   Clermont (50%)
12   Mt Pleasant (76%)
    COPPER AND GOLD
    Operating sites
20   Bougainville (not operating) (54%)
21   Cortez/Pipeline (40%)
22   Escondida (30%)
23   Grasberg joint venture (40%)
24   Kelian (90%)
19   Kennecott Utah Copper
25   Northparkes (80%)
26   Palabora (47%)
27   Rawhide (51%)
     
    Projects
28   Resolution (55%)
     
    DIAMONDS
    Operating sites
29   Argyle
30   Diavik (60%)
31   Murowa (78%)
    IRON ORE
    Operating sites
32   Corumbá
33   Hamersley Iron mines:
    Brockman
    Marandoo
    Mt Tom Price
    Paraburdoo
    Yandicoogina
    Channar (60%)
    Eastern Range (54%)
33   Robe River mines: (53%)
    West Angelas
    Pannawonica
34   HIsmelt® (60%)
35   Iron Ore Company of
    Canada (59%)
     
    Projects
33   Hope Downs (50%)
36   IOC Pellet Plant (59%)
37   Simandou
38   Orissa (51%)
     
    NICKEL
    Projects
39   Eagle
     
    POTASH
    Projects
40   Rio Colorado Potash
     
    SALT
    Operating sites
41   Dampier (65%)
42   Lake MacLeod (65%)
41   Port Hedland (65%)
    TALC
    Operating sites
    (only major sites are shown)
43   Ludlow
44   Talc de Luzenac
45   Yellowstone
46   Three Springs
     
    TITANIUM DIOXIDE
    FEEDSTOCK
    Operating sites
47   QIT-Fer et Titane Lac Allard
48   QIT-Fer et Titane Sorel Plant
49   Richards Bay Minerals (50%)
     
    Projects
50   QIT Madagascar Minerals (80%)
     
    URANIUM
    Operating sites
51   ERA (68%)
52   Rössing (69%)
     
    ZINC, LEAD, SILVER
    Operating sites
53   Greens Creek (70%)

 

Rio Tinto 2005 Form 20-F 30

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INFORMATION ON GROUP MINES (Rio Tinto interest 100 per cent unless otherwise shown)

Mine   Location   Access   Title/lease







ALUMINIUM            







Comalco   Weipa, Queensland, Australia   Road, air, and port   Queensland Government lease expires in 2041 with 21 year extension, then two years’ notice of termination







COPPER            







Escondida (30%)   Atacama Desert, Chile   Pipeline and road to deep sea port at Coloso   Rights conferred by Government under Chilean Mining Code







Grasberg joint venture (40%)
  Papua, Indonesia   Pipeline, road and port   Indonesian Government Contracts of Work expire in 2021 with option of two ten year extensions







Kennecott Minerals
Cortez/Pipeline (40%)
  Nevada, US   Road   Patented and unpatented mining claims







Kennecott Minerals
Greens Creek (70%)
  Alaska, US   Port   Patented and unpatented mining claims







Kennecott Utah Copper
Bingham Canyon
  Near Salt Lake City, Utah, US   Pipeline, road and rail   Owned







Northparkes (80%)   Goonumbla, New South Wales, Australia   Road and rail   State Government mining lease issued in 1991 for 21 years







Palabora (47%)   Phalaborwa, Northern Province, South Africa   Rail and road   Lease from South African Government valid until deposits exhausted. Base metal claims owned by Palabora
 







DIAMONDS            







Argyle Diamonds   Kimberley Ranges, Western Australia   Road and air   Mining tenement held under Diamond (Argyle Diamond Mines Joint Venture) Agreement Act 1981-83; lease extended for 21 years from 2004







Diavik (60%)   Northwest Territories, Canada   Air, ice road in winter   Mining leases from Canadian federal government







Murowa (78%)   Zvishavane, Zimbabwe   Road and air   Claims and mining leases







ENERGY            







Energy Resources of Australia
(68%) Ranger
  Northern Territory, Australia   Road   Leases granted by State







 

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INFORMATION ON GROUP MINES (Rio Tinto interest 100 per cent unless otherwise shown)

Mine   History   Type of mine   Power source







ALUMINIUM            







Comalco   Bauxite mining commenced in 1961; Major upgrade completed in 1998 to incorporate Alcan’s adjacent Ely reserve in overall mining plan; Rio Tinto interest increased from 72.4% to 100% in 2000; In 2004 a mine expansion was completed that will lift annual capacity to 16.5 million tonnes in coming years   Open cut   On site generation; new power station under construction







COPPER            







Escondida (30%)   Production started in 1990 and expanded in phases to 2002 when new concentrator was completed; sulphide leach project approved 2004 and Norte project started production 2005   Open pit   Supplied from SING grid under two contracts with Norgener to 2008 and Nopel (Gas Atacama) to 2009







Grasberg joint venture (40%)   Joint venture interest acquired 1995; capacity expanded to over 200,000 tonnes of ore per day in 1998 with addition of underground production of more than 35,000 tonnes per day in 2003   Open pit and underground   Long term contract with US-Indonesian consortium operated, purpose built, coal fired generating station







Kennecott Minerals
Cortez/Pipeline (40%)
  Gold production started at Cortez in 1969, Pipeline in 1997 and Cortez Hills was approved in 2005.   Open pit   Public utility







Kennecott Minerals
Greens Creek (70%)
  Redeveloped in 1997   Underground/drift and fill   On site diesel generators







Kennecott Utah Copper
Bingham Canyon
  Interest acquired in 1989; modernisation includes smelter complex and expanded tailings dam   Open pit   On site generation supplemented by long term contracts with Utah Power and Light







Northparkes (80%)   Interest acquired in 2000; production started in 1995   Open pit and underground   Supplied from State grid







Palabora (47%)   Development of 20 year underground mine commenced 1996 with open pit closure in 2003   Underground   Supplied by ESCOM via grid network







DIAMONDS            







Argyle Diamonds   Interest increased from 59.7% following purchase of Ashton Mining in 2000. Underground mine project approved in 2005 to extend mine life to 2018   Open pit   Long term contract with Ord Hydro Consortium and on site generation back up







Diavik (60%)   Deposits discovered 1994-1995; construction approved 2000; diamond production started 2003. Second dike closed off in 2005 for mining of additional orebody   Open pit to underground in future   On site diesel generators; installed capacity 27MW







Murowa (78%)   Discovered 1997; small scale production started 2004   Open pit   Supplied by ZESA







ENERGY            







Energy Resources of Australia
(68%) Ranger
  Mining commenced 1981; interest acquired through North in 2000; life of mine extension to 2014 announced in 2005   Open pit   On site diesel/steam power generation







 

Rio Tinto 2005 Form 20-F 32

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INFORMATION ON GROUP MINES (Rio Tinto interest 100 per cent unless otherwise shown)

Mine   Location   Access   Title/lease







ENERGY (continued)            







Rio Tinto Energy America
Antelope
Colowyo (20%)
Cordero Rojo
Decker (50%)
Jacobs Ranch
Spring Creek
  Wyoming, Montana and Colorado, US   Rail and road   Leases from US and State Governments and private parties, with minimum coal production levels, and adherence to permit requirements and statutes







Rio Tinto Coal Australia
Bengalla (30%)
Blair Athol (71%)
Hail Creek (82%)
Hunter Valley Ops. (76%)
Kestrel (80%)
Mount Thorley Ops. (61%)
Tarong Coal Warkworth (42%)
  New South Wales and Queensland, Australia   Road, rail conveyor and port   Leases granted by State







Rössing Uranium (69%)   Namib Desert, Namibia   Rail, road and port   Federal lease







INDUSTRIAL MINERALS            







Boron   California, US   Road, rail and port   Owned







Dampier Salt (65%)   Dampier, Lake MacLeod and Port Hedland, Western Australia   Road and port   Mining leases expiring in 2013 at Dampier, 2018 at Port Hedland and 2021 at Lake MacLeod with options to renew in each case







Luzenac   Trimouns, France (other smaller operations in Australia, Europe and North America)   Road and rail   Owner of ground (orebody) and long term lease agreement to 2012







QIT-Fer et Titane   Saguenay County, Quebec, Canada   Rail and port (St Lawrence River)   Mining covered by two Concessions granted by State in 1949 and 1951 which, subject to certain Mining Act restrictions, confer rights and obligations of an owner







Richards Bay Minerals (50%)  

Richards Bay, KwaZulu-
Natal,
South Africa

  Rail, road and port   Long term renewable leases; State lease for Reserve 4 initially runs to end 2022; Ingonyama Trust lease for Reserve 10 runs to 2010







IRON ORE            







Hamersley Iron
Brockman
Marandoo
Mount Tom Price
Paraburdoo
Yandicoogina
Channar (60%)
Eastern Range (54%)
  Hamersley Ranges, Western Australia   Railway and port (owned by Hamersley Iron and operated by Pilbara Iron)   Agreements for life of mine with Government of Western Australia







Iron Ore Company of Canada (59%)   Labrador City, Province of Labrador and Newfoundland   Railway and port facilities in Sept-Iles, Quebec (owned and operated by IOC)   Sublease with the Labrador Iron Ore Royalty Income Fund which has lease agreements with the Government of Newfoundland and Labrador that are due to be renewed in 2020 and 2022







Rio Tinto Brasil
Corumbá
  Matto Grosso do Sul, Brazil   Road, air and river   Government licence for undetermined period







Robe River Iron Associates (53%)
Mesa J
West Angelas
  Pilbara region, Western Australia   Railway and port (owned by Robe River and operated by Pilbara Iron)   Agreements for life of mine with Government of Western Australia







 

Rio Tinto 2005 Form 20-F 33

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INFORMATION ON GROUP MINES (Rio Tinto interest 100 per cent unless otherwise shown)

Mine   History   Type of mine   Power source







ENERGY (continued)            







Rio Tinto Energy America
Antelope
Colowyo (20%)
Cordero Rojo
Decker (50%)
Jacobs Ranch
Spring Creek
  Antelope, Spring Creek, Decker and Cordero acquired in 1993, Colowyo in 1995, Caballo Rojo in 1997, Jacobs Ranch in 1998 and West Antelope in 2004   Open cut   Supplied by IPPs and Cooperatives through national grid service







Rio Tinto Coal Australia
Bengalla (30%)
Blair Athol (71%)
Hail Creek (82%)
Hunter Valley Ops. (76%)
Kestrel (80%)
Mount Thorley Ops. (61%)
Tarong Coal
Warkworth (42%)
  Lemington acquired late 2000 and integrated with Hunter Valley Operations. Peabody Australian interests acquired in 2001. Production started for export at Blair Athol and adjacent power station at Tarong in 1984. Kestrel acquired and recommissioned 1999. Hail Creek started 2003.   Open cut and underground (Kestrel)   State owned grid







Rössing Uranium (69%)   Production began in 1978. Life of mine extension to 2016 approved in 2005   Open pit   Namibian National Power







INDUSTRIAL MINERALS            







Boron   Deposit discovered in 1925, acquired by Rio Tinto in 1967   Open pit   On site co-generation units







Dampier Salt (65%)   Construction of the Dampier field started in 1969; first shipment in 1972. Lake MacLeod was acquired in 1978 as an operating field   Solar evaporation of seawater (Dampier and Port Hedland) and underground brine (Lake MacLeod); dredging of gypsum from surface of Lake MacLeod   Dampier supply from Hamersley Iron Power; Lake MacLeod from Western Power and on site generation units; Port Hedland from Western Power







Luzenac   Production started in 1885; acquired in 1988. (Australian mine acquired in 2001)   Open pit   Supplied by EdF and on site generation units







QIT-Fer et Titane   Production started 1950; interest acquired in 1989   Open pit   Long term contract with Quebec Hydro







Richards Bay Minerals (50%)   Production started 1977; interest acquired 1989; fifth dredge commissioned 2000   Beach sand dredging   Contract with ESCOM







IRON ORE            







Hamersley Iron
Brockman
Marandoo

Mount Tom Price
Paraburdoo
Yandicoogina
Channar (60%)
Eastern Range (54%)
  Annual capacity increased to 68 million tonnes during 1990s; Yandicoogina first ore shipped in 1999 and port capacity increased; Eastern Range mine started 2004   Open pits   Supplied through the integrated Hamersley and Robe power network operated by Pilbara Iron







Iron Ore Company of Canada (59%)   Current operation began in 1962 and has processed over one billion tonnes of crude ore since; annual capacity now 17.5 million tonnes of concentrate of which 13.5 million tonnes can be pelletised. Interest acquired in 2000 through North   Open pit   Supplied by Newfoundland Hydro under long term contract







Rio Tinto Brasil
Corumbá
  Iron ore production started 1978; interest acquired in 1991   Open pit   Supplied by ENERSUL







Robe River Iron Associates (53%)
Mesa J
West Angelas
  First shipment in 1972; annual sales reached 30 million tonnes in late 1990s; interest acquired in 2000 through North; West Angelas first ore shipped in 2002 and mine expanded in 2005   Open pit   Supplied through the integrated Hamersley and Robe power network operated by Pilbara Iron







 

Rio Tinto 2005 Form 20-F 34

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INFORMATION ON GROUP SMELTERS, REFINERIES AND PROCESSING PLANTS
(Rio Tinto interest 100 per cent unless otherwise shown)


Smelter, refinery or plant   Location    Title/lease    Plant type/product    Capacity 

ALUMINIUM GROUP

Anglesey Aluminium (51%)   Holyhead, Anglesey, Wales   100% Freehold   Aluminium smelter producing aluminium billet, block, sow   145,000 tonnes per year aluminium

Bell Bay   Bell Bay, Northern Tasmania, Australia   100% Freehold   Aluminium smelter producing aluminium ingot, block, t-bar   174,000 tonnes per year aluminium

Boyne Smelters (59%)   Boyne Island, Queensland, Australia   100% Freehold   Aluminium smelter producing aluminium ingot, billet, t-bar   545,000 tonnes per year aluminium

Comalco Alumina Refinery   Gladstone, Queensland, Australia   97% Freehold 3% Leasehold (expiring in 2101 and after)   Refinery producing alumina   1,400,000 tonnes per year alumina

Eurallumina (56%)   Portoscuso, Sardinia, Italy   39% Freehold 61% Leasehold   Refinery producing alumina   1,070,000 tonnes per year alumina

Gladstone Power Station (42%)   Gladstone, Queensland, Australia   100% Freehold   Thermal power station   1,680 megawatts

New Zealand Aluminium Smelters (NZAS) (79%)   Tiwai Point, Southland, New Zealand   19.6% Freehold 80.4% Leasehold (expiring in 2029 and use of certain Crown land)   Aluminium smelter producing aluminium ingot, billet, t-bar   352,000 tonnes per year aluminium

Queensland Alumina (39%)   Gladstone, Queensland, Australia   73.3% Freehold 26.7% Leasehold (of which more than 80% expires in 2026 and after)   Refinery producing alumina   3,953,000 tonnes per year alumina

COPPER GROUP

Kennecott Utah Copper   Magna, Salt Lake City, Utah, US   100% Freehold   Flash smelting furnace / Flash convertor furnace copper refinery   335,000 tonnes per year refined copper

Palabora (47%)   Phalaborwa, South Africa   100% Freehold   Reverberatory Pierce Smith copper refinery   130,000 tonnes per year refined copper

INDUSTRIAL MINERALS

Boron   California, US   100% Freehold   Borates refinery   584,000 tonnes per year boric oxide

QIT-Fer et Titane Sorel Plant   Sorel-Tracy, Quebec, Canada   100% Freehold   Ilmenite smelter   1,100,000 tonnes per year titanium dioxide slag 900,000 tonnes per year iron

Richards Bay Minerals (50%)   Richards Bay, South Africa   100% Freehold   Ilmenite smelter   1,060,000 tonnes per year titanium dioxide slag

IRON ORE GROUP

Hlsmelt® (60%)   Kwinana, Western Australia   100% Leasehold (expiring in 2010 with rights of renewal for two further 25 year terms)   Hlsmelt® ironmaking plant producing pig iron   800,000 tonnes per year pig iron

IOC Pellet Plant (59%)   Labrador City, Newfoundland, Canada   100% Leaseholds (expiring in 2020, 2022 and 2025 with rights of renewal for further terms of 30 years)   Pellet induration furnaces producing multiple iron ore pellet types   13,500,000 tonnes per year pellet

 

Rio Tinto 2005 Form 20-F 35

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Item 4A. Unresolved Staff Comments

As far as Rio Tinto is aware there are no unresolved written comments from the SEC staff regarding its periodic reports under the Exchange Act received more than 180 days before 31 December 2005.

Item 5. Operating and Financial Review and Prospects
 
This Item includes a discussion of the main factors affecting the Group’s “Profit for the year”, as measured in accordance with International Financial Reporting Standards as adopted by the European Union (EU IFRS). In monitoring its financial performance, the Group also focuses on that part of the Profit for the year attributable to equity shareholders of Rio Tinto, which is referred to as “Net earnings”, and on an additional measure called “Underlying earnings”. The latter measure, which is also based on the amounts attributable to Rio Tinto shareholders, is reported to provide greater understanding of the underlying business performance of Rio Tinto operations. This is defined and reconciled with Net earnings in Note 2 to the 2005 Financial statements.
     
Significant movements in the items excluded from Underlying earnings are discussed on pages 40 to 41.
     
In this report, the turnover of the parent companies and their subsidiaries is referred to as “Consolidated turnover”. Rio Tinto also reports a turnover measure that includes its share of jointly controlled entities and associates, which is referred to as "Gross turnover". This latter measure is considered informative because a significant part of the Group's business is conducted through operations that are subject to equity accounting.
  This Item is comprised of the following:
Chairman’s letter providing a high level review of the Group
Chief executive’s report providing a high level review of the Group’s operations
Financial review of the Group
Operating reviews for each of the principal product groups and global support groups
As a result of adopting IAS 32, IAS 39 and IFRS 5 on 1 January 2005, the Group changed its method of accounting for financial instruments and non-current assets held for sale. In line with the relevant transitional provisions, the prior period comparatives have not been re-stated. See Note 1 to the 2005 Financial statements for further discussion.

CHAIRMAN’S LETTER

Dear shareholder
Demand was strong throughout 2005 for most of the metals and minerals we produce, and supply was generally tight. As a result prices of most products were well above the historical average trend. The buoyant conditions in our sector, together with Rio Tinto’s strategic positioning and strong operating performance, resulted in a second successive year of record profits.
     However, these favourable conditions are no basis for complacency. Our view of the world has not changed fundamentally. The reality is that we are in an inherently cyclical business – even if successive cycles have different characteristics. Our long term strategy for portfolio development, investment, capital management and operational excellence is designed to create shareholder value whatever the prevailing business conditions.

Results
Higher prices and increased production volumes in 2005 contributed to underlying earnings of US$4,955 million, US$2,683 million or 118 per cent above 2004. Net earnings were US$5,215 million compared with US$3,297 million in 2004.
     
Cash flow from operations at US$8,257 million, including dividends from jointly controlled entities and associates, was also a record, and 85 per cent higher than 2004. Timely disposal of non core assets further strengthened our balance sheet which, in turn, helps to underpin our extensive capital investment programme and gives us the flexibility to pursue investment opportunities when and where they arise. In 2005 we saw significant investments and developments in a number of new areas.
     In the current environment of strong economic returns, we are aware of the potential for our balance sheet to become overly strong.
     Reflecting our large cash flows, we announced a substantial return of capital to shareholders totalling US$4 billion as part of our capital management programme. This comprises a US$1.5 billion special dividend (equivalent to US$1.10 per share), and a share buy back programme totalling US$2.5 billion by the end of 2007. This replaces the US$500 million remaining from the 2005 programme.
     The final dividend declared for 2005 under the progressive ordinary dividend policy brings total dividends for the year to 80 US cents per share, an increase of four per cent from 2004.

 

Rio Tinto 2005 Form 20-F 36

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Sustainable development
Mining operates on long time horizons, and most of Rio Tinto’s mines and processing plants have operational lives spanning decades. A key part of our strategy therefore is to make social and environmental responsibility integral to our planning and decision making. We always seek to align our interests with those of the communities and environments where our operations are based. Rio Tinto regards corporate social responsibility as a vital determinant of commercial success. Investors relate positively to companies who have values they can identify with and we remain committed to the principles of sustainable development.
     
We see a clear responsibility to help to address the challenges posed by climate change, to manage issues related to biodiversity, and to maintain effective product stewardship across the value chain of our products. I believe Rio Tinto has become a leader in our industry in these areas but we still have some way to go.

Board developments1,2
In September we welcomed Sir Rod Eddington to the boards on his retirement as chief executive of British Airways plc. Rod is an Australian and was educated at the University of Western Australia and Oxford University where, as a Rhodes Scholar, he completed a doctorate in engineering science. He brings valuable new skills and experience to the board. Sir Richard Giordano, Leon Davis and John Morschel all retired from the boards after the 2005 annual meetings and Ashton Calvert and Vivienne Cox joined from 1 February 2005. I believe we have a very strong, well qualified and cohesive board which provides the right level of support and challenge to our executive team.

Forward outlook
Despite several challenges – including high oil prices, structural imbalances, and the potential for currency fluctuations – we believe the global economy will continue its recent positive trend, even if rates of growth slow somewhat.
     
We are continuing to experience strong short term demand for our metal and mineral products. Demand from China remains particularly strong but risks remain of occasional “speed bumps” as the country’s social and economic structures adjust to the high rates of growth. Overall, we expect supply/demand balances to remain tight in 2006 with prices continuing to track above the long term trend.
     At some point the supply position will become more balanced and we will see a downturn in the cycle. While we are continuing to invest in increased production to provide long term supply assurance to our customers, and to maintain our market position, we focus on economically robust projects which we believe can deliver sustained profitability in varying market conditions.
     We are increasingly seeking to leverage our global reach and scale by delivering operational excellence, sharing of best practice between our businesses, and adopting common business systems and processes across the Group. I am confident that the continuing efforts of the Group’s talented and committed people all over the world will ensure we maintain a strong and competitive company, responsive to all opportunities which we believe can add value for our shareholders. The board is, once again, very appreciative of our employees’ major contribution in 2005.

Paul Skinner Chairman
24 February 2006

Note
1. Tom Albanese was appointed as an executive director on 7 March 2006. He will remain chief executive of the Copper group and Exploration until 1 July 2006 when he will be appointed director, Group Resources.
2. Michael Fitzpatrick was appointed as a non executive director on 6 June 2006.

CHIEF EXECUTIVE’S REPORT

The 2005 results were excellent. The mining industry is experiencing strong prices across most of its products. We were able to capitalise on the upswing with a strong operating performance that maximised production, while at the same time improving our safety record. We approved a number of major projects and concluded a number of well executed transactions. We are also introducing structural business improvements in the Group that are expected to yield long term benefits and position us for continuing strong performance when markets are not as buoyant.

Performance
As China’s industrial output soars and more than a billion people participate in a transformation of their living standards, the demand for the metals and minerals we produce has increased rapidly. Besides China’s large share of world growth, economic conditions were also stronger in Japan and the US.
     
The level of demand sent the prices for copper, molybdenum, iron ore, coking and thermal coal, and alumina to historic peaks in nominal terms. Only time will tell whether the 2005 prices for these commodities represent cyclical highs. For its part, Rio Tinto concentrated on operational delivery, and we achieved record output in many areas.
     As a result, all product groups except Industrial Minerals increased their underlying earnings. Higher costs reduced earnings by US$598 million.

 

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     In the current environment some cost increases are inevitable. Other costs are, in fact, desirable and make good business sense, such as increased exploration and project evaluation spending.
     Our business is cyclical. The increase in demand and consumption with the resultant rise in prices, provides an incentive for the industry to invest. This can lead to oversupply and some product substitution, which ultimately depresses prices. This effect produces “spikes” in the chart, above and below the average long term price trend. Rio Tinto aims to operate successfully and create value in all environments.
     How long the current strong price environment remains depends on how rapidly the industry is able to respond to the strong demand for most products. The response will differ from product to product.
     So far this response has been varied. In iron ore, major producers including Rio Tinto are responding to demand through increased investment. In copper, the response has been impacted by significant interruptions in supply. In aluminium, in spite of strong demand growth, a period of strong investment in China has meant demand has been satisfied for the metal itself, although alumina is in short supply and prices have risen significantly. Finally, in both coking and thermal coal, there has been some response but infrastructure has been a constraining factor.
     Current market conditions may result in a longer period of above average prices than we have seen before. In fact Rio Tinto has modestly increased its long term price forecasts for some products for planning and investment purposes.
     While the cycle may be longer, there has been a significant impact on costs. Most mining inputs such as energy, supplies, equipment and labour have become more costly and in short supply. In energy, we paid 40 per cent more for fuel and 50 per cent more for natural gas in the US. Lead times to procure heavy mining equipment have risen from six to 12 months. Heavy mobile equipment tyres are in very short supply. Thanks to our established purchasing networks we have been able to secure supplies better than most.
     Some specialist skills are also short and labour costs in a number of regions have risen significantly. The cost of oil and gas is unlikely to return to the prices prevailing previously. These factors may represent a structural increase in costs for our industry, but we constantly look for ways to use energy more efficiently and improve productivity across all our operations.
     Rio Tinto has a long track record of creating value through business improvement. A global approach to procurement has resulted in savings from purchases under Group wide contracts, while the establishment of Rio Tinto Shipping to leverage the scale of our bulk shipments has successfully reduced costs. On the operating side, the concept of combining business units in common geographic areas such as Rio Tinto Coal Australia and Pilbara Iron has led to cost effective rationalisation.
     We are currently entering the next phase in the evolution of business improvement. Our model of decentralised businesses with strong local management accountability has been a source of success. By making the most of our global scale and reach, we now want to ensure we maximise the sum of our parts.
     This means leveraging synergies across all our businesses through greater collaboration and the standardisation of successful operating practices. The use of improved information technology is part of the process. We are still in the early stages of this journey, but we are confident it will deliver considerable value. Improving performance together, as we call our programme, will create value through a combination of capital efficiency, higher volumes, higher revenues and improved productivity leading to lower costs. This goes to the core of our business, which is about first class operational delivery. We are developing a real sense of excitement about the scale, ambition and potential of the changes we have set in motion (see page 73).

Strategy
We focus on long life, low cost assets. These assets are expected to generate very strong cash flows when markets are buoyant. Just as importantly, they are also expected to deliver good returns when markets are weaker. Large world class orebodies give us options to expand capacity in line with demand, as we are doing today. Options can also be created by acquisition, especially where synergies exist.
     
This was demonstrated in our Iron Ore group by the development of West Angelas following the acquisition of North Ltd in 2000, and the 2005 agreement to form a joint venture involving Hope Downs. The Hope Downs iron ore property in Western Australia is also a good illustration of our ability to evaluate and execute a value creating transaction quickly.
     Although the bulk of our operations are in Australia, the US and Canada, we have invested in many new frontier regions and will continue to do so. Our exploration programme is very broad, but wherever we conduct development, our projects will be subject to the same rigorous evaluation. Our approach is focused and measured – we are risk aware, but not risk averse.
     We are investing in Madagascar, we are evaluating exciting projects in West Africa (iron ore) and Argentina (potash by solution mining) and we have entered into a significant joint venture in Russia with Norilsk Nickel. There are advanced exploration projects in progress in Australia (iron ore), India (diamonds), Indonesia (nickel), Brazil (bauxite), South Africa (coal) and Turkey (copper).

     Our exploration portfolio is currently the best we have seen. We have a suite of projects and prospects with the potential to ensure we can maintain our growth profile. They provide a variety of new development options in all of our main product sectors over the next five years, many of which could become long life, quality assets – the hallmark of Rio Tinto.
     In 2005 we invested US$2.5 billion in the growth of the business and expect to spend an additional US$3 billion in both 2006 and 2007. We are demonstrating that in these times of buoyant demand Rio Tinto has the best

 

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opportunities for organic growth in its history, based on the number and scale of current and potential projects in our pipeline.
     Reflecting strong demand and our excellent resource position, we are making significant investments in iron ore. At the beginning of 2005 we had investment of US$1.3 billion already under way for the expansion of production and transportation capacity in the Pilbara. In April we committed another US$290 million to expanding three mines, followed in October by a further US$1.35 billion for additional port capacity and further mine expansions.
     In Industrial Minerals, in the first half of the year we completed an expansion of the upgraded titanium slag plant at QIT in Canada. Due to strong demand, we announced a further expansion to 375,000 tonnes per year which will be completed in 2006.
     The resource relating to our investment in Madagascar will support a 40 year mine life. Titanium dioxide feedstock reserves are more than 12 millon tonnes. At an ilmenite grade of 60 per cent, this represents the best undeveloped resource of this scale and quality. We are investing US$775 million of which US$585 million will be for the mine and port in Madagascar and US$190 million for upgrading related processing facilities in Canada. Production is due to commence in late 2008.
     Elsewhere, the development of a new mine at Cortez Hills in Nevada, US was announced, and the Diavik diamond mine in Canada closed off a second dike to permit mining of additional orebodies. At year end we commenced development of an underground mine at Argyle Diamonds at a cost of US$910 million and further expenditure to extend the life of mine at Rössing Uranium in Namibia to 2016.
     After taking a leading position in the financing and development of the Lihir gold mine in Papua New Guinea in the 1990s, we agreed with Lihir Gold in September to relinquish our management agreement and subsequently sold our 14.5 per cent interest in November for US$295 million.
Summing up
The Group is performing well operationally, maximising the volumes of product we deliver into strong markets. These markets continue to look strong well into 2006.
     Whilst alert to merger and acquisition opportunities we are delivering our current projects and have an excellent array of organic growth options.
     Notwithstanding our record levels of investment and return of capital to shareholders, we are generating cash that is surplus to our needs, enabling us to manage and maintain a strong balance sheet and retain our capacity to take advantage of opportunities as they arise.
     In this buoyant climate we remain focused on business improvement as a priority by implementing a major new programme of renewal that will create value for shareholders in the future no matter what market conditions we face.
     Rio Tinto’s success is a tribute to the dedication and commitment of our employees. I thank my management team and employees throughout the world for the hard work they have put in and for their continued support.

Leigh Clifford Chief executive
24 February 2006

FINANCIAL REVIEW

Financial risk management
The Group’s policies with regard to risk management are clearly defined and consistently applied. They are a fundamental tenet of the Group’s long term strategy.
     The Group’s business is mining and not trading. The Group only sells commodities it has produced. In the long term, natural hedges operate in a number of ways to help protect and stabilise earnings and cash flow, obviating the need to use derivatives or other forms of synthetic hedging for this purpose. Such hedging is therefore undertaken to a strictly limited degree, as described below.
     
The Group has a diverse portfolio of commodities and markets, which have varying responses to the economic cycle.
     The relationship between commodity prices and the currencies of most of the countries in which the Group operates provides further natural protection in the long term. In addition, the Group’s policy of borrowing at floating US dollar interest rates helps to counteract the effect of economic and commodity price cycles.
     The Group’s 2005 Financial statements and disclosures show the full extent of its financial commitments including debt. The Group’s share of the net debt of jointly controlled entities and associates is also disclosed.
     The risk factors to which the Group is subject that are thought to be of particular importance are summarised on pages 7 to 8.
     The effectiveness of internal control procedures continues to be a high priority in the Rio Tinto Group. The Boards’ statement on internal control is included under Corporate governance on page 117.
     The Group’s policies with regard to currencies, commodities, interest rates and treasury management are discussed below.

 

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Underlying earnings

Rio Tinto presents “Underlying earnings” as an additional measure of earnings to provide greater understanding of the underlying business performance of its operations. Underlying earnings and net earnings both represent amounts attributable to Rio Tinto shareholders. Items (a) to (f) below are excluded from net earnings in arriving at underlying earnings.
(a) Gains and losses relating to the disposal of interests in businesses (including investments) and undeveloped properties.
(b) Charges and credits relating to impairment of non-current assets, excluding those related to current year exploration expenditure.
(c) Exchange gains and losses on US dollar net debt and intragroup balances.
(d) Valuation changes on currency and interest rate derivatives which are ineligible for hedge accounting, other than those embedded in commercial contracts.
(e) The currency revaluation of embedded US dollar derivatives contained in contracts held by entities whose functional currency is not the US dollar.
(f) Other credits and charges that individually, or in aggregate if of a similar type, are of a nature or size to require exclusion in order to provide additional insight into underlying business performance.
Earnings contributions from Group businesses and business segments reflect underlying earnings. Underlying earnings is reconciled with net earnings in Note 2 to the 2005 Financial statements.

Group operating results 2005 compared with 2004
EU IFRS requires that the profit for the period reported in the income statement should also include earnings attributable to outside shareholders in subsidiaries. Both net earnings and underlying earnings, which are also discussed in this report, deal with amounts attributable to equity shareholders of Rio Tinto as shown below.

  2005    2004  
  US$m    US$m  




 
Profit for the year 5,498   3,244
– attributable to outside equity shareholders 283   (53 )
– attributable to equity shareholders of Rio Tinto (net earnings) 5,215   3,297  




 

Amounts attributable to outside equity shareholders increased because of improved results at Robe, Iron Ore Company of Canada, Coal & Allied, Rio Tinto Iron & Titanium and Palabora. In addition, in 2004 outside equity shareholders’ interests reflected a US$129 million charge for impairments.
     
Net earnings of US$5,215 million in 2005 were US$1,918 million above 2004. Underlying earnings of US$4,955 million were US$2,683 million above 2004. The principal factors explaining the changes in net earnings are shown in the table below.

  US$ m  


 
2004 Net earnings 3,297  
Exclusions in arriving at Underlying earnings (1,025 )


 
2004 Underlying earnings 2,272  
Effect of changes in:  
               Prices 2,374  
               Exchange rates (123 )
               Inflation (