Coal & Allied - AGM

Rio Tinto PLC
02 May 2006


Coal & Allied Industries (Rio Tinto 75.7 per cent) issued the following address
by the chairman, Chris Renwick, following the annual meeting of shareholders in
Australia today. Dollar amounts are in Australian currency.


Coal & Allied AGM - Chairman's address


2005 was a good year for Coal & Alllied, characterised by very strong demand for
coal and a continuation of the improved financial performance we reported in the
last half of 2004.


The high price achieved for export coal sales has dominated our business in
2005.


The gains were somewhat offset by the relatively high operating cost of Coal &
Allied's mines, a burden shared by most Hunter Valley operators.  Much of this
cost pressure is due to unprecedented competition for many of the necessary
business inputs.


In 2005 our production was aligned to available port and rail capacity. A
capacity balancing system remains in place to manage vessel queues at Port
Waratah.


Safety


Coal & Allied achieved new standards of safety performance during 2005.  All
mines recorded improvements. Our overall Lost Time Injury Frequency Rate was
1.75 per million hours compared with 3.81 in 2004.


I am proud to note that we have reduced not only the number but also the
severity of injuries at our sites.


Improvements in safety performance were assisted by the introduction of new
initiatives including the Taproot Incident Investigation methodology, a review
of health and safety leadership competencies, new approaches to safety
interactions and the introduction of a simple pre-task assessment tool.


A significant safety incident in 2004 prompted some employees to develop a
device to safely check grease system pressure.  This Mount Thorley Warkworth
initiative won the New South Wales Mineral Council's Occupational Health and
Safety Innovation Award.  More recently, this initiative has received the
Minerals Council of Australia's National Award for Safety and Health Innovation.


The Mount Thorley Warkworth team also won the 2005 Hunter Valley Mines Rescue
Competition.


While external recognition of our systems and improvements is encouraging, we
also know that we must be relentless in our efforts to improve safety.  To be
successful, we must continue building a belief in the workforce that a business
free of injuries is a realistic and achievable goal.


Financial performance


We continued our strategy to optimise mobile equipment and processing plant
efficiency during 2005.  It is particularly important to continue to focus on
this fundamental issue, despite the recent high coal prices.  Costs during 2005
were higher due to the extremely strong demand for inputs such as tyres,
explosives, maintenance materials and, importantly, skilled labour.  For
example, fuel costs increased by $19 million compared with 2004.


The key points of our financial results were:

-          Net profit after tax of $290.1 million in 2005 was $173.5 million
           greater than the 2004 profit of $116.6 million;

-          Net debt in Australian dollar terms reduced by 73 per cent to $69.2
           million; and

-          A $1.20 fully franked final dividend on ordinary shares was paid in
           March 2006.



Production



Looking now at the performance of the individual operations.



Hunter Valley Operations produced 12.4 million tonnes of saleable production,
which was just under a million tonnes fewer than the previous year. Mount
Thorley Warkworth continued to function as an integrated operation with saleable
production of four million tonnes from Mount Thorley and 6.3 million tonnes from
Warkworth.



The mining sequence led to a 0.7 million tonne increase in production at
Bengalla, with saleable production of six million tonnes.



The Port Waratah capacity balancing system continued to manage the vessel queues
with a total of 81 million tonnes loaded through the port, an increase of 4.1
per cent on 2004.  We again worked with stakeholders of the Hunter Valley coal
chain to maximise output from existing infrastructure.  This has translated into
decreased demurrage costs and an obvious reduction in queue length.



We believe the commitment to expand annual port capacity to 102 million tonnes
combined with continued de-bottlenecking of the rail system will provide
opportunities to access additional capacity.



Rio Tinto Coal Australia continued to provide first class management to Coal &
Allied's operations.





Future developments



With the issues of New South Wales rail and port capacity being addressed
through review and expansion, we resumed studies into the Mount Pleasant
deposit.  We appointed a General Manager to specifically oversee this process,
which will investigate the feasibility of either a stand alone operation or
integration with Bengalla.  We have also recently reached agreement with the
Native Title parties for the Mount Pleasant project. In addition, we continue to
work to meet our objective of contributing to a sustainable Aboriginal community
in the region through our broader Aboriginal engagement program in the Upper
Hunter.





Business improvement - IPT and employee engagement



Achieving greater operational efficiency is always a challenge and is the key to
our long-term financial success.   We continue to harness great benefit from the
engagement of our employees on a range of business improvement initiatives



One of the best examples of employee-initiated improvement can be found at Mount
Thorley Warkworth where the coal handling preparation plant team has designed,
tested and implemented a stacker/reclaimer operation.  This ensures that even
when stockpiles are low, raw coal can be consistently provided to the plant.



At Bengalla employees have reviewed the crushing and overland conveyor systems
and improved truck management. The maintenance improvement team at Hunter Valley
Operations has reviewed work practices and improved the washing process at the
front end of the maintenance activity.  This process has freed up 63 additional
equipment operational hours per month.



In addition to locally initiated projects, Coal & Allied employees have
participated in Rio Tinto's global business improvement programme. The
programme, known as Improving Performance Together (IPT), identifies best
practice and introduces common systems, standards and procedures across all Rio
Tinto businesses.   This means Coal & Allied can aspire to achieve best practice
within the Rio Tinto Group and maximise its membership of one of the world's
leading mining companies.



The programme targets value creation through a combination of capital
efficiency, higher volumes, enhanced revenues and lower costs.  During 2005,
Hunter Valley Operations employees participated in a programme aimed at
increasing the alignment of mining, processing, asset management and logistics
teams within the operation.





Human resources



The availability of skilled labour continued to present challenges for Coal &
Allied during 2005.  Management recognises that providing permanent employment
helps to reduce the risk of labour and skill shortages, facilitates better
training and skill development and increases employee commitment to improvement
work.  Consequently, we converted 150 contractor positions at Hunter Valley
Operations and Mount Thorley Warkworth to permanent roles during 2005.
Contractors will continue to play an important role in providing operational
flexibility, but as a smaller percentage of the workforce.





Within the community



Consultation between neighbouring landholders and Coal & Allied continued
throughout 2005 under the Near Neighbour strategy.  This strategy also
facilitated communication between the company and community members who may
potentially be impacted by the Mount Pleasant development.



Coal and Allied's Community Trust was extended in 2005 with a new commitment of
$3 million until 2008.  The Trust has proven a successful vehicle to engage the
community and for the company to support a range of community-initiated
projects.



Coal and Allied has long been a significant enterprise in Newcastle and the
Hunter Valley region.  During 2005 we signed an agreement to sponsor the iconic
Newcastle Knights National Rugby League team.  The team, which was facing
economic uncertainty at the time, has leveraged our commitment to attract
additional financial support from other supporters and secure its future.





Environment



Employees continued to work to improve environmental management at all sites
and, as is expected, no penalty notices or infringements were issued to any
operations during the year.



All sites maintained accreditation of their Environmental Management Systems
under ISO14001.  We were particularly pleased with the recognition achieved by
Bengalla through the presentation of the prestigious Banksia Environmental
Foundation Award for Sustainable Development Leadership in the Minerals
Industry.





Sustainability



Coal & Allied continued to develop its approach to sustainable development
though both internal and external engagement programmes.  For example, the Mount
Pleasant study team trialled a sustainable development decision-making
methodology for possible use across the business.



We also support the research and development of new technologies through
targeted spending directly and within the Australian Coal Association Research
Programme and the ACA's Coal21 programme.



We are also participating in other technology initiatives including:

-          The Australian Government's Low Emission Technology Fund

-          The announcement of a capture and storage programme on the Otway
           Basin by the CRC for Greenhouse Gas Technologies; and

-          The formation of the Asia Pacific Partnership





Outlook



During 2005, strong supply growth for thermal coal in the Pacific region came
from Indonesia; however, this was largely offset by China's export position
diminishing.  Semi-soft coking coal demand was strong in the first half of the
year but eased towards year-end.



Looking forward, we expect demand for Australian coal to remain firm in 2006.
For thermal coal, we anticipate the supply and demand balance will be largely
determined by supply growth in Indonesia and China's evolving net export
position.  Recent trends in the spot and forward markets in the Pacific and
Atlantic regions support this positive outlook for thermal coal.



We expect to see continued demand growth from South East Asia, particularly
Malaysia and Thailand; Latin and Central America and from the more traditional
markets for Australian producers, Korea and Taiwan.  These regions are
experiencing significantly increased economic growth and resultant increased
forecast energy demand.



Coal & Allied will need to maintain sufficient stock levels to ensure we are
positioned to take advantage of any additional available capacity in the port
and rail infrastructure.  This will allow Coal & Allied to capitalise on pockets
of demand growth.





Conclusion



While coal prices are high and demand is strong, the operational challenges
presented by shortages of key inputs remind us of the need to stay focused on
the basics of our business.  In the face of increased costs and shortages in
labour and other inputs we know that we must continue to work hard and remain
committed to continued improvement.



As our mines are relatively high on the global cost curve, we must also work
that much harder to ensure we stay competitive.  Harnessing the knowledge and
ingenuity of our employees to focus on business improvement initiatives will be,
I believe, the key to our ongoing financial success.  This focus will ensure we
maintain a strong competitive position for the time when coal supply and demand
balance and prices inevitably subside.



Chris Renwick

Chairman



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