rio annoucement, page-3

rio announcement for coal & allied Company Rio Tinto PLC
TIDM RIO
Headline Coal & Allied - FY2005
Released 10:10 31-Jan-06
Number 6768X

Rio Tinto’s 75.7 per cent owned subsidiary, Coal & Allied Industries Limited, issued the following news release in Australia.

All dollars are Australian currency.

Coal & Allied record earnings and cashflow - 2005 full year results


SUMMARY

· Net profit after tax was $290.1 million compared with $116.6 million profit after tax in 2004

· Net debt in Australian dollar terms reduced by 73 per cent in 2005 to $69.2 million

· A fully franked dividend of $1.20 per share will be paid on ordinary shares.


Commenting on the result, Coal & Allied’s Managing Director, Dr Grant Thorne said, “This financial result reflects a continuation of strong demand for coal in 2005.


“Although a capacity balancing system remained in place at Port Waratah to manage vessel queues liable to arise through constrained infrastructure, Coal & Allied managed to increase total sales by 1.3 per cent over 2004.”


“Overall shipments, and hence production, were aligned with port and rail capacity. New investments in rail and port infrastructure, announced in 2005, are expected to provide increasing capacity from mid-2006.”


With buoyant market conditions applying to all mineral and metal sectors, there was unprecedented competition for business inputs - notably heavy mobile equipment, off road tyres, explosives, skilled labour, and maintenance materials. Like all industry participants, Coal & Allied faced unremitting cost pressures. Higher fuel prices alone increased
Coal & Allied’s costs by $19 million over 2004.


Coal & Allied’s net profit was positively affected by higher export prices and business improvement initiatives, offset by higher input costs (including fuel, tyres and explosives) and engagement of mining contractors. The net profit after tax was $290.1 million.


Sales revenue

Sales revenue of $1,442.0 million was 36 per cent higher than in 2004, reflecting higher prices for export thermal coal and semi-soft coal in 2005, which were partially offset by the stronger Australian dollar.


Production

Managed production of saleable coal was down by two per cent (0.5 million tonnes) to 28.6 million tonnes, consistent with allocation through Port Waratah Coal Services and domestic contracts. Coal & Allied’s share of saleable coal production was 21.4 million tonnes.


Dividends

A fully franked final dividend of $1.20 per ordinary share will be paid. An interim dividend of $1.10 was paid during 2005. A dividend of 1.75 cents per preference share, fully franked, will be paid, making the total preference dividend for the year 3.5 cents per share, fully franked.


Cash flow

Net operating cash was $449.8 million compared with $224.7 million in 2004. The significant change in operating cash flow reflected the effect of higher earnings resulting from improved coal prices, partially offset by higher operating costs.


Debt

Net debt was lower in Australian dollar terms at the end of 2005 at $69.2 million. Gearing (net debt to net debt + equity) was 7.8 per cent at 31 December 2005, compared with 27.1 per cent at 31 December 2004.


Capital expenditure

Total capital expenditure for the year was $65.1 million compared with $29.5 million in 2004. Expenditure was predominantly for sustaining purposes and the purchase of land surrounding the Mount Pleasant deposit.

Capacity Balancing System

The capacity balancing system at Port Waratah Coal Services continued to manage the vessel queues, with a total of 80.9 million tonnes loaded through the port in 2005, an increase of 4.1 per cent on 2004.

Stakeholders in the Hunter Valley coal chain collaborated throughout the year with the aim of maximising output from existing infrastructure. In addition, a commitment to expand annual port capacity to 102 million tonnes by late 2007 combined with continued de-bottlenecking of the rail system, should create the opportunity to access additional capacity.


Market conditions

Commodity markets continued to surge throughout 2005, on the back of strong economic growth and increased energy demands. Despite spot prices for thermal coal declining in late 2005, the volume of transactions was small and some recovery is expected.

The year was very positive for thermal coal producers and demand fundamentals remain sound. Record prices for semi-soft coals were achieved in the first half of 2005. Strong supply growth of thermal coal from Indonesia was largely offset by a reduction in Chinese exports.


Safety performance

Significant progress was made in reducing the frequency of injury (1.75 LTIFR compared with 3.80 in 2004) with all operations contributing to this improvement. A number of initiatives were identified and implemented at the operations.

Coal & Allied was again represented at the NSW Minerals Council Occupational Health and Safety Innovation Awards with Mount Thorley/Warkworth winning the State Award for the development of a grease system pressure checking and reducing device. Mount Thorley/ Warkworth’s mines rescue team also won first place in the 2005 Hunter Valley Mines Rescue Competition.