Palabora Annual Results 2003

Rio Tinto PLC
30 January 2004

Rio Tinto's 49.2 per cent owned subsidiary, Palabora Mining Company, issued the
following news release in Johannesburg. All dollars are US$ unless otherwise
stated.


Palabora Mining Company Ltd - annual results 2003

Overview

The ramp up to full production of the underground block-cave mining operation
continued during 2003. In-pit ramp scavenging activities were discontinued in
November 2003. Palabora's underground mine achieved a number of significant
milestones during 2003. The safety record was the best on record with only seven
lost time injuries recorded. This is consistent with improvements around the
rest of the business where a total of 17 lost time injuries were recorded
compared to 26 in 2002. The Industrial Minerals Division continued with its
excellent safety performance, finishing the year without any lost time injuries.
The first quarter production in 2003 averaged 10,288 tonnes per day, this
increased to 21,983 tonnes per day in the final quarter as a result of the
improvements initiated during 2003. A production rate of 30,000 tonnes of ore
per day was achieved on several occasions during the fourth quarter and the
Company is confident of achieving that rate more regularly in the forth coming
months.  Current work to achieve this is focused on further improvements to
equipment effectiveness, particularly secondary breaking equipment.  Production
of refined copper was supplemented by purchased copper concentrate and the
ongoing ramp scavenging operation in the open pit. On 15 September 2003 Palabora
issued convertible debentures via a rights offer which raised R849 million.
During the last quarter Palabora implemented the first stage of the organisation
restructuring process, the aim of which is to process lower throughput
efficiently.



Group financial results

Group loss after taxation for the year was R35 million, which compares with the
R257 million profit achieved in 2002, after a R66 million deferred taxation
credit.



The Rand strengthened by 28 per cent on average in 2003 compared with 2002,
which led to reduced revenues of R577 million.  Partially offsetting this was an
improvement in the price of copper and other minerals which increased revenues
by R169 million.   Sales volumes of copper during 2003 were 8.5 per cent below
the 2002 level.  Copper sales were limited by reduced production.    Overall,
lower sales volumes reduced profit by R65 million.



Group operating expenditure reduced by R184 million mainly due to reduced sales
and production volumes. Achievements obtained through business improvement
initiatives continued from prior years reduced the cost base further. Included
are increased open pit contract mining costs of R72 million and a provision
raised of R37 million for the cost of voluntary early retirement for former
employees.

Finance charges increased due to the increased debt levels of the Group as well
as more expensive loans. This was partially offset by currency gains on
repayment of existing debt.



Earnings were adversely impacted in the final quarter of 2003 as a result of the
commencement of depreciation of the underground asset as well as the cessation
of capitalisation of interest.  These changes were made to recognize that the
underground mine had reached commercial levels of production.



Higher inventory values are primarily due to increased unit cost of production,
premium paid on imported concentrates and inclusion of depreciation.



The feasibility study indicated the total expenditure requirement to build the
underground mine would be $437 million.  Subsequently the latest estimate
indicates that a total of $460 million is required, an overspend of $23 million.
The following are the main reasons for this increase in cost:

-  additional mobile equipment (three additional secondary breaking units have 
   been ordered for delivery in April 2004);
-  enhanced water management;
-  slowdown of the development of the production footprint because of
   seismic activity; and
-  additional support for drawpoints because of excessive wear.


The project to develop an underground mine had been in progress for 92 months at
the end of 2003.  A total of 117,556 square metres have been undercut, to date
99 per cent complete.  The outstanding 1,783 square metres are anticipated to be
completed in February 2004.  A total of 148 drawbells have been commissioned, 89
per cent of the total complete. Completion of the outstanding 18 drawbells is
anticipated by end April 2004. 16 out of the targeted 19 crosscuts were
completed. The development of a 20th crosscut is being reviewed.



The net debt increased by 27 per cent to R1,820 million during the year mainly
due to on-going capital expenditure on the underground project.  The Company has
negotiated with its major shareholder to provide an unsecured loan of US$65
million to meet short term financial obligations.  The intent is that this will
be repaid out of the proceeds of a full recapitalisation of the business at a
later stage. No dividends were declared and it is unlikely that dividends will
recommence within the next year.



ZBS (zirconium basic sulphate) production was 1,129 metric tons for the year.
Whilst the plant has been proven technically, the difficult market conditions
have meant that the Board are in the process of considering other options for
the ZBS facility, including, sale to a third-party as a going concern or
alternatively a toll-manufacturing arrangement with the major customer.
Shareholders will be advised in due course regarding the Board's decision.

Demand for vermiculite was constrained in the United States and efforts were
made to develop new markets. Production during the third quarter of 2003 was
reduced in order to lower supply chain inventory levels.



The sudden death of our previous Chairman, Mr. Wells Ntuli, who retired at the
end of 2002, is announced with sadness.




Abridged income statement                                                            2003             2002
                                                                                    R'000            R'000

Revenue                                                                         1 554 727        2 121 307
Operating costs                                                                 1 402 401        1 586 598
Depreciation                                                                      126 402          133 187
Operating profit                                                                   25 924          401 522
Interest received                                                                     215            5 495
Interest paid                                                                    (93 003)         (31 283)
Foreign exchange gains                                                             14 366           27 306
Provisions                                                                       (30 675)         (40 976)
(Loss)/profit before taxation                                                    (83 173)          362 064
Taxation                                                                           48 522        (105 211)
Current                                                                          (17 871)         (25 010)
Deferred tax                                                                       66 393         (80 201)
(Loss)/profit after taxation                                                     (34 651)          256 853

(Loss)/earnings per share                                                          (122)c             907c
Write back of profit on disposal of fixed assets - net of tax                       (30)c            (68)c
Reversal of provision for Palabora Foundation donation                              (69)c              -
Headline (loss)/earnings per share (7)                                             (221)c             839c

Weighted average shares in issue                                                   28 316           28 316



Abridged balance sheet                                                                  2003            2002
                                                                                       R'000           R'000

Employment of capital
Current assets
Stores                                                                                59 322          47 737
Product inventories                                                                  374 940         254 607
Accounts receivable                                                                  220 677         282 456
Taxation                                                                               1 400           3 030
Cash and cash equivalents                                                             16 602          39 019
                                                                                     672 941         626 849
Non-current assets
Mining assets                                                                      4 575 672       4 284 701
Investment - unlisted                                                                118 043          54 971
Total assets                                                                       5 366 656       4 966 521


Liabilities and shareholders' equity
Current liabilities
Accounts payable                                                                     298 031         217 900
Provisions                                                                            26 799          39 227
Current portion of long term loans                                                   294 212         355 450
Taxation                                                                               6 237           7 403
Group companies - related parties                                                     13 237           8 214
Bank overdraft                                                                       388 660         391 816
                                                                                   1 027 176       1 020 010
Non-current liabilities
Provision for close down costs and restoration costs                                 196 817         185 147
Provision for post retirement medical benefits                                       172 209         159 760
Deferred taxation                                                                    799 436         865 535
Long-term loans                                                                    1 153 937         726 881
Total liabilities                                                                  3 349 575       2 957 333
Total shareholders' equity                                                         2 017 081       2 009 188
Total equity and liabilities                                                       5 366 656       4 966 521






Notes

1.       Accounting policies

The preliminary consolidated financial statements are prepared on the historical
cost basis. During the year, Palabora adopted the provisions of AC133, '
Financial Instruments: Recognition and Measurement'.  As a consequence,
investments are now stated in the balance sheet at fair market value.  The
impact of adoption of AC133 resulted in an increase in investments amounting to
R61 million. Unrealised gains and losses on the revaluation are recognised
through the statement of changes in equity. All other accounting policies used
are consistent with those used in the audited financial statements for the year
ended 31 December 2002. The preliminary results have been prepared in accordance
with South African Statements of Generally Accepted Accounting Practice,
including accounting standard AC127, 'Interim Reports'.





2.       Audit Review

The year-end financial results have been reviewed in terms of paragraph 3.18 (c)
of the Listings Requirements of the JSE Securities Exchange SA by the Company's
auditors, PricewaterhouseCoopers Inc.  This review opinion is available on
request from the Company Secretary.





3.       Net Debt
                                                                                     2003            2002
                                                                                    R'000           R'000
Current portion of long term loans                                                294 212         355 450
Non current portio of long term loans                                           1 153 937         726 881
Total long term loans                                                           1 448 149       1 082 331
Bank overdrafts                                                                   388 660         391 816
Cash and cash equivalents                                                        (16 602)        (39 019)
Net debt                                                                        1 820 207       1 435 128



In 2001 the Company arranged an unsecured long-term loan with a group of
domestic and international banks.  The facility consisted of a US$90 million
tranche and a Rand tranche of R283 million.



The loan is repayable in six equal half yearly instalments of US$15 million and
R47 million.  The first repayment was made in June 2003 and the second repayment
in December 2003.  The interest rate is Libor / Jibor plus 1,5 per cent.  During
the first half of 2003, Rio Tinto, the Company's major shareholder, agreed to
provide a short-term facility of up to US$60 million at an interest rate of
Libor plus 5 per cent.





US$55 million had been drawn and this loan was repaid from the proceeds of a
rights offer of debentures completed in September 2003. R849 million was raised
by way of a renounceable rights offer to shareholders at an issue price of
R1,000 per convertible debenture at an interest rate of Jibar plus 5 per cent.



4.       Contingencies and Commitments



In the 2002 Annual Financial Statements a contingent liability was disclosed
relating to payments made to former employees for early voluntary retirement. In
the current financial year Palabora provided R37 million to recognise this
liability.



5.  Holding Company



The immediate holding Company is Palabora Holdings Limited and the ultimate
holding Company is Rio Tinto plc, which is incorporated in the United Kingdom.



6.  Share Capital



The directors are authorised to issue unissued shares until the next annual
general meeting.  On 16th July 2003 shareholders approved a special resolution
to increase the authorised      share capital of the Company to 100,000,000
ordinary shares of R1 each and an ordinary     resolution placing the newly
issued shares under the control of the directors.



7.       Headline Loss



The calculation of headline (losses)/earnings per share is derived from
consolidated net loss after taxation of R34.7 million (2002: net profit of
R256.9 million) adjusted for any non-operational losses or gains, divided by the
number of shares in issue.  2003 year losses (2002: earnings) have been adjusted
for the post taxation impact of profit on disposal of fixed assets of R8.5
million (2002: R19.4 million) and the release of provisions for donations to the
Palabora Foundation of R19.4 million.  Headline losses for the year ended 31
December 2003 are R62.5 million (2002: headline earnings of R237.5 million).


Summarised cash flow                                                                2003             2002
                                                                                   R'000            R'000

Cash (utilised in)/generated from operating activities                           (4 576)          588 917
Cash utilised in investing activities                                          (555 629)        (741 996)
Replacement of mining assets                                                   (117 964)        (195 323)
Development expenditure                                                        (450 601)        (570 075)
Other investing activities                                                        12 936           23 402
Cash flow from financing activities                                              540 944               18
Long and short term loans raised                                               1 268 840               18
Long and short term loans re-paid                                              (727 896)                -
Net decrease in cash and cash equivalents                                       (19 261)        (153 061)
Cash and cash equivalents at beginning of year                                 (352 797)        (199 736)
Cash and cash equivalents at end of year                                       (372 058)        (352 797)




                                                Share         Other        Distributable         Total
                                            Capital &        Reserves      Reserves
                                              Premium

                                                R'000           R'000              R'000         R'000
Statement of changes in equity for the year ended 31 December 2003
Balance 1 January 2003                         28 891         134 244          1 846 053     2 009 188
Revaluation of investments                          -          60 795                  -        60 795
Currency translation difference                     -        (18 436)                  -      (18 436)
Other movements                                     -             185                  -           185
Net loss for the year                               -               -           (34 651)      (34 651)
Balance 31 December 2003                       28 891         176 788          1 811 402     2 017 081


Statement of changes in equity for the year ended 31 December 2002
Balance 1 January 2002                         28 891         174 642          1 589 200     1 792 733
Currency translation difference                     -        (40 398)                  -      (40 398)
Net profit for the year                             -               -            256 853       256 853
Balance 31 December 2002                       28 891         134 244          1 846 053     2 009 188



Segmental Reporting             Copper           Industrial Minerals         Other                Total
                                 R'000                  R'000                R'000                R'000
                           31.12.03    31.12.02   31.12.03   31.12.02  31.12.03  31.12.02    31.12.03   31.12.02
Profit and Loss
Revenues                 1 082  735   1 459 146    356 802    535 249   115 190   126 912   1 554 727  2 121 307
Cost and expenses         1 140 774   1 156 909    333 338    457 495    54 691   105 381   1 528 803  1 719 785

Operating (loss)/profit    (58 039)     302 237     23 464     77 754    60 499    21 531      25 924    401 522

Net interest paid                                                                            (92 788)   (25 788)
Other costs and                                                                              (16 309)   (13 670)
provisions
(Loss)/profit before                                                                         (83 173)    362 064
tax
Taxation                                                                                      48 522   (105 211)
Net (loss)/profit for                                                                        (34 651)    256 853
the year






The segmental split on a geographical basis is based on the country in which the
order is received.

                          South Africa              America           United Kingdom             Total
                              R'000                  R'000                R'000                  R'000
                        31.12.03    31.12.02   31.12.03   31.12.02   31.12.03  31.12.02     31.12.03    31.12.02
Profit and Loss

Revenues               1 227 439   1 632 754    163 241    280 917    164 047   207 636    1 554 727 2 121 307
Cost and expenses      1 367 622   1 344 112    154 743    255 506    115 535   159 625    1 637 900 1 759 243
Operating (loss)/      (140 183)     288 642      8 498     25 411     48 512    48 011     (83 173)   362 064
profit before tax
Taxation                  65 869    (80 945)    (2 907)    (9 206)   (14 440)  (15 060)      48 522   (105 211)
Net (loss)/profit       (74 314)     207 697      5 591     16 205     34 072    32 951     (34 651)   256 853
for the year



For further information, please contact:
LONDON                                               AUSTRALIA

Media Relations                                      Media Relations
Lisa Cullimore                                       Ian Head
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Investor Relations                                   Investor Relations
Peter Cunningham                                     Dave Skinner
Office:  [phone]                        Office:  [phone]
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Richard Brimelow                                     Daphne Morros
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Website: www.riotinto.com




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