Rio Tinto: Fourth quarter 2008 operations review
Chief executive Tom Albanese said: “Production for the quarter was in line with expectations. We are taking firm action in response to the global economic downturn and, given the resilience of Rio Tinto’s low cost assets, expect to remain well positioned when recovery comes.”
. Quarterly global production of iron ore down 18 per cent on the fourth quarter of 2007 following a ten per cent reduction in the Pilbara annualised production in line with guidance provided on 10 November 2008.
. Annual iron ore production (100 per cent basis) from the Pilbara operations of 175 million tonnes (142 million tonnes on an attributable basis) up seven per cent on 2007. Pilbara iron ore shipments for 2008 of 171 million tonnes (100 per cent basis), up seven per cent on 2007, in line with previous guidance.
. Bauxite production up 19 per cent, alumina up 26 per cent and aluminium up 21 per cent, compared with the fourth quarter of 2007, reflecting the completion of the Alcan acquisition with effect from 24 October 2007. On a proforma basis the respective increases for bauxite and alumina were six per cent and three per cent while aluminium declined by two per cent, primarily due to production cutbacks in France, New Zealand and the UK.
. Continued recovery in copper grades at Kennecott Utah Copper offset by a further grade decline and operational difficulties at Escondida, leading to an overall decrease in mined copper of 18 per cent compared with the fourth quarter of 2007 and an associated increase in unit costs.
. Australian hard coking and thermal coal production up 40 per cent and 21 per cent respectively on the fourth quarter of 2007.
. Uranium production up 20 per cent on the same quarter of 2007 due to higher grades.
. The QMM mineral sands operation in Madagascar commenced ilmenite production on schedule at the end of December 2008.
. Fourth quarter earnings at Rio Tinto Alcan will be negatively impacted by the sharp decline in the aluminium price. In addition, inventories are expected to be written down to reflect realisable values at the year end.
. Copper provisional pricing expected to lower underlying earnings by approximately $360 million in the second half of 2008.
. Estimated total exploration and evaluation expenditure of $1,135 million (pre-tax) for the year, including the write off of $176 million of project costs and undeveloped exploration properties.
All currency figures in this report are US dollars, and comments refer to Rio Tinto’s share, unless otherwise stated
COMMITMENT TO REDUCE NET DEBT BY $10 BILLION BY END OF 2009
On 10 December 2008, Rio Tinto announced the following key initiatives and commitments to reduce net debt by $10 billion in 2009:
. Reduction of net capital expenditure guidance for 2009 from over $9 billion to $4 billion, while retaining future growth options
. Capital expenditure to be reduced to sustaining levels in 2010, absent an improvement in expected commodity market conditions
. Commitment to reduce controllable operating costs by at least $2.5 billion per annum in 2010
. Reduction in global headcount of 14,000 roles (8,500 contractor and 5,500 employee roles)
. 2008 dividend to be held at 2007 level of US 136 cents with no 20 per cent uplift in 2008 and 2009
. Expanded scope of assets targeted for divestment including significant assets not previously highlighted for sale
During the remainder of January and early February there will be a series of local announcements about the impact of capital expenditure reductions on the Group’s projects. These will be aggregated in the preliminary annual results release on 12 February.
About Rio Tinto
Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and NYSE listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.
Rio Tinto’s business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, energy (coal and uranium), gold, industrial minerals (borax, titanium dioxide, salt, talc) and iron ore. Activities span the world but are strongly represented in Australia and North America with significant businesses in South America, Asia, Europe and southern Africa.
Contacts:
Media Relations London
Christina Mills
Office: +44 (0) 20 7781 1154
Mobile: +44 (0) 7825 275 605
Nick Cobban
Office: +44 (0) 20 7781 1138
Mobile: +44 (0) 7920 041 003
Media Relations, US
Tony Shaffer
Office: +1 202 393 0266
Mobile: +1 202 256 3667
Media Relations, Australia
Ian Head
Office: +61 (0) 3 9283 3620
Mobile: +61 (0) 408 360 101
Amanda Buckley
Office: +61 (0) 3 9283 3627
Mobile: +61 (0) 419 801 349
Investor Relations, London
Nigel Jones
Office: +44 (0) 20 7781 2049
Mobile: +44 (0) 7917 227 365
David Ovington
Office: +44 (0) 20 7781 2051
Mobile: +44 (0) 7920 010 978
Investor Relations, North America
Jason Combes
Office: +1 (0) 801 204 2919
Mobile: +1 (0) 801 558 2645
Investor Relations, Australia
Dave Skinner
Office: +61 (0) 3 9283 3628
Mobile: +61 (0) 408 335 309
Simon Ellinor
Office: +61 (0) 7 3867 1607
Mobile: +61 (0) 439 102 811
Further information:
Email: questions@riotinto.com
Website: www.riotinto.com
High resolution photographs available at: www.newscast.co.uk
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