Annual report 2008 Rio Tinto 2008 Annual report Annual report 2008 Focusing on our strengths 2008 Rio Tinto is a leading international business involved in each stage of metal and mineral production. The Group combines Rio Tinto plc, which is listed on the London StockExchange, and Rio Tinto Limited, which is listed on the Australian Securities Exchange. We aim to operate as a seamless organisation that maximises the benefits of standard and shared approaches for every activity. We find, mine and process the Earth’s mineral resources that fulfil vital consumer needs and improve world living standards. We produce aluminium, copper, diamonds, coal, iron ore, uranium, gold and industrial minerals (borates, titanium dioxide, salt, talc). With production mainly in Australia and North America, we operate in more than 50 countries and employ about 106,000 people. We promote health, safety, and sustainable development wherever Rio Tinto operates. The health and safety of our employees, and a contribution to sustainable development, are key priorities. We work as closely as possible with host countries and communities, respecting their laws and customs and ensuring a fair share of benefits and opportunities. The Group’s objective is to maximise its value and the long term return delivered to shareholders by finding, mining and processing natural resources across the globe. Our proven strategy to achieve this goal is to invest in large, long term, cost competitive mines and businesses. Rio Tinto’s shareholder documents are They can also be obtained free of charge from available on the website, www.riotinto.com the Companies’ registrars whose contact details can be found on page 180. Some The Annual report, the Full financial statements shareholders prefer to receive the Summary Designed by Tor Pettersen & Partners Printed in England by Park Communications on FSC certified paper. and Auditor’s report comply with the financial statements which do not allow as full Park is a CarbonNeutral® company and its Environmental Management System is certified to ISO14001:2004. Australian and UK reporting requirements. an understanding of the Group. 100 per cent ofthe electricity used is generated from renewable sources. 100 per cent ofthe inks used are vegetable oil based, 95 per cent ofpress chemicals are recycled forfurther use and on average 99 per cent ofany waste associated with this production will be recycled. This document is printed on ERA Silk, a paper made using 50 per cent recycled fibre and 50 per cent virgin fibre sourced from FSC certified forests. Front cover image: Rio Tinto’s Gove bauxite Printed in Australia by Blue Star Print. operations in Australia. © Rio Tinto plc and Rio Tinto Limited. Highlights Contents Overview Record underlying EBITDA* of US$22,317 million, 60 per cent A description of the business Group overview 4 activities of the Group and Product overview 6 above 2007 messages from the chairman Where we operate 8 and the chief executive Chairman’s statement 10 EBITDA* of US$23,870 million was Chief executive’s message 12 75 per cent higher than 2007 Recent developments 14 Selected financial data 17 Earnings before interest, taxes, depreciation & amortisation restated US$m Markets and strategy 04 6,111 05 9,743 An overview of our markets, Market review 20 06 12,566 the Group’s strategy, Core objective and strategy 21 07 13,611 measures of performance and Key performance indicators 23 08 23,870 the outlook for 2009 Risk factors 24 Capital projects 29 Record underlying earnings* Outlook for 2009 31 of US$10,303 million, 38 per cent Performance above 2007 Key performance data and Group financial performance 34 Net earnings* were US$3,676 million, operational highlights by Aluminium 38 product group and function Copper & Diamonds 46 50 per cent below 2007 together with a review of the Energy & Minerals 58 Group’s contribution to Iron Ore 66 Cash flow from operations up sustainable development Exploration 73 64 per cent to a record of Technology & Innovation 76 US$20,668 million Other operations 78 Sustainable development 80 Financial review Annual production records set for iron ore, bauxite, alumina, on a Financial results and in depth Financial review 92 like for like basis discussion Production Record net capital expenditure of and reserves US$8.5 billion, a 71 per cent rise over 2007 Information tables and details Metals and minerals production 108 of our assets Ore reserves 112 Ordinary dividend for the 2008 Mineral resources 117 Group mines 122 year maintained at 136 US cents Group power stations 126 Group smelters and refineries 128 Governance Introducing the board of Chairman and executive directors 132 directors and senior Non executive directors 133 management with their Executive committee members 135 remuneration and our Directors’ report 136 approach to corporate Remuneration report 141 governance Corporate governance 158 Shareholder information Key shareholder information Shareholder information 168 * Net earnings and underlying earnings relate to profit and data Rio Tinto share ownership 175 attributable to equity shareholders of Rio Tinto. Underlying Definitions and exchange rates 176 earnings is defined on page 23 and is reconciled to net Financial calendar 179 earnings on page 34. EBITDA is earnings before interest, Useful addresses 180 taxes, depreciation and amortisation. Underlying EBITDA excludes the same items that are excluded from underlying earnings. EBITDA and underlying EBITDA are reconciled to the income statement in the “Financial information by business unit” section of the 2008 Pages 4 to 105 form the Business review required Full financial statements. by Section 417 of the UK Companies Act 2006. Rio Tinto 2008 Annual report 1 World leading assets Cautionary statement about forward costs, outputs and productive lives of assets or changes in taxation or regulation, and political looking statements similar factors. Forward looking statements involve uncertainty. This document contains certain forward looking known and unknown risks, uncertainties, In light of these risks, uncertainties and statements with respect to the financial condition, assumptions and other factors set forth in this assumptions, actual results could be materially results of operations and business of the Rio Tinto document that are beyond the Group’s control. For different from projected future results expressed Group. The words “intend”, “aim”, “project”, example, future ore reserves will be based in part or implied by these forward looking statements “anticipate”, “estimate”, “plan”, “believes”, on market prices that may vary significantly from which speak only as at the date of this report. “expects”, “may”, “should”, “will”, or similar current levels. These may materially affect the Except as required by applicable regulations or by expressions, commonly identify such forward timing and feasibility of particular developments. law, the Group does not undertake any obligation looking statements. Other factors include the ability to produce and to publicly update or revise any forward looking Examples of forward looking statements in transport products profitably, demand for our statements, whether as a result of new this Annual report and financial statements products, the effect of foreign currency exchange information or future events. The Group cannot include those regarding estimated ore reserves, rates on market prices and operating costs, and guarantee that its forward looking statements will anticipated production or construction dates, activities by governmental authorities, such as not differ materially from actual results. Overview Iron ore for shipment: This section contains Group overview 4 Overview a description of the business Product overview 6 Rio Tinto is the second activities of the Group and Where we operate 8 messages from the chairman Chairman’s statement 10 largest supplier to the and the chief executive Chief executive’s message 12 Recent developments 14 world’s seaborne iron Selected financial data 17 ore trade Group overview Rio Tinto’s organisational structure is designed to facilitate a clear focus on the Group’s objective. The structure comprises, primarily, four product groups and two business support groups. Product groups The Aluminium product group, Rio Tinto Alcan, is one of the world’s largest Underlying earnings Number of employees Aluminium producers of bauxite, alumina and aluminium, benefiting from a sustainable, low contribution % * 39,326 Products: Bauxite, cost energy supply. It operates mainly in Canada and Australia, with interests in alumina, aluminium Europe, New Zealand, Africa, South America and the US. The group is organised Operating assets metal into four business units, Bauxite & Alumina, Primary Metal, Engineered Products US$35,730 million and Packaging, the latter two of which are to be divested. * Gross sales revenue 12%12% US$23,839 million Underlying earnings US$1,184 million The Copper group is a world leader in copper production, comprising Kennecott Underlying earnings Number of employees Copper & Utah Copper in the US, and interests in some of the world’s largest copper mines contributionpp % * 8,976 Diamonds and development projects, including Escondida in Chile, Grasberg in Indonesia, the Resolution and Pebble projects in the US, the Oyu Tolgoi project in Mongolia Operating assets Products: Copper in and the La Granja project in Peru. US$5,536 million concentrate, refined The Diamonds group is a leading supplier of rough diamonds, comprising * Gross