Palabora Mining Interim Rslts

Rio Tinto PLC
20 July 2001

 
                   Palabora Mining Unaudited Group Results                    
 
                                                                              
                                           Six Months   Six Months        Year
  Abridged Income Statement                  30.6.01      30.6.00         2000
                                          R000         R000               R000
  Revenue                                   1 118 741      719 039   1 747 685
  Operating Costs                             758 754      496 574   1 305 600
  Depreciation                                 83 802       66 294     124 302
  Operating Profit                            276 185      156 171     317 783
  Interest Received                               351        5 636      12 723
  Interest Payable                           (15 560)     (11 516)    (11 545)
  Foreign Exchange Gains / (Losses)           (6 172)      (1 306)      28 081
  Amortisation Of Discount Related To         (9 812)        (918)    (19 642)
  Provisions                                                                  
  Profit Before Taxation                      244 992      148 067     327 400
  Taxation                                     88 253       56 521      90 658
  Current                                      13 169       24 717       7 738
  Deferred Tax                                 75 084       31 804      82 920
  Profit After Taxation                       156 739       91 546     236 742
 
Notes:
1.   Accounting principles 
     The accounting policies used in the preparation of the interim report
     are consistent with those used in the audited financial statements for   
     the year ended 31 December 2000. The interim report has been prepared in
     accordance with accounting standard AC127, 'Interim Reports'.
 
                            Six Months            Year 
                              30.06.01            2000 
     Long-term loan

     Long term loan           1 002 230            595 100
     Current portion                 -           (405 850)
                             1 002 230            189 250  

                                                                              
                                           Six Months   Six Months        Year
                                             30.6.01       30.6.00        2000
                                                R000          R000        R000
                                                                          
  Summarised Cash Flow                                                        
  Cash Flow From Operating Activities         366 827      174 207    317 239
  Cash Flow From Investing Activities       (250 648)    (288 395)   (599 423)
  Replacement Of Mining Assets               (36 314)     (48 911)   (132 447)
  Development Expenditure                   (214 455)    (248 089)   (476 673)
  Other Investing Activities                      121        8 605       9 697
  Cash Flow From Financing Activities         396 868       65 684   (225 192)
  Long-Term Loans Raised - Net                407 130       82 673   (191 213)
  Other Financing Activities                 (10 262)     (16 989)    (33 979)
  Net Increase In Cash And Cash               513 047     (48 504)   (507 376)
  Equivalents                                                                 
  Cash And Cash Equivalents At              (587 168)     (79 792)    (79 792)
  Beginning Of Period                                                         
  Cash And Cash Equivalent At End Of         (74 121)    (128 296)   (587 168)
  Period                                                                      
 
                                                                              
                           Share          Other      Distributable      Total 
                       Capital &       Reserves           Reserves     
                         Premium                                              
                            R000           R000               R000       R000 
  Statement of changes in equity for the six months ended 30 June 2001   
     
  Balance 1               28 891        109 419          1 386 356   1 524 666
  January 2001 Net Gains 
  And Losses Not 
  Recognised In Income                                                        
  Statement:                                                                  
  
  Currency Translation                    1 087                          1 087
  Difference                                                                  
  
  Net Profit For The 
  Period                                                   156 739     156 739
                                                                    
  Dividends                                               (16 990)    (16 990)
  
  Balance 30 June 2001    28 891        110 506          1 526 105   1 665 502
                                                                          
  Comparative statement of changes in equity for the six months ended 30 June 
  2000                                                                        
  Balance 1               28 891         79 648          1 183 593   1 292 132
  January 2000 Net Gains                                                      
  And Losses Not                                                              
  Recognised In                                                               
  Income Statement:                                                          
                                                                    
  Currency Translation                   (1 269)                       (1 269)
  Difference                                                                  
  
  Net Profit For                                            91 546      91 546
  The Period                                                                  
  
  Dividends                                               (16 990)    (16 990)
  
  Balance 30 June         28 891         78 379          1 258 149   1 365 419
  2000                                                                        
 
                                                                            
                                                      Six Months        Year
    Abridged Balance Sheet                              30.6.01         2000
                                                           R000         R000
                                                                        
    Employment Of Capital                                                   
    Current Assets                                       740 991     945 748
    Mining Assets                                      3 189 841   2 935 660
    Deferred Expenditure                                  14 813      26 126
    Investments - (Unlisted)                              41 967      41 967
    Total Assets                                       3 987 612   3 949 501
    Liabilities And Shareholders' Equity                                    
    Current Liabilities                                  246 029   1 250 497
    Provision For Close-Down And Restoration Costs       151 913     142 092
    Provision For Post-Retirement Medical Benefits       147 994     141 490
    Deferred Taxation                                    773 944     701 506
    Long-Term Loans                                    1 002 230     189 250
    Total Liabilities                                  2 322 110   2 424 835
    Total Shareholders' Equity                         1 665 502   1 524 666
    Total Equity And Liabilities                       3 987 612   3 949 501


The company has arranged a long-term loan with a group of national and
international banks for an unsecured facility agreement of US$125 million.
This facility, which is being used for the underground mine development and
the repayment of other short term loans, is repayable in six equal half
yearly instalments starting on 11 June 2003 and the interest rate is based on
Libor/Jibor + 1,5%. The balance owing on the Chase Manhattan loan, being
US$50 million was repaid on 29 June 2001.

SELECTED STATISTICS 
                                                                              
                                              Six Months   Six Months     Year
                                                30.6.01      30.6.00      2000
  Production And Sales                                                        
  Materials Mined (Millions Of Tons)                 7,7         10,1     21,8
  Copper In Concentrate (Thousands Of Tons)         29,3         57,9    117,0
  Cathode Produced (Thousands Of Tons)              44,5         32,2     87,7
  Cathode Sold (Thousands Of Tons)                  53,5         36,7     84,2
  Contained Copper Sold (Thousands Of Tons)         54,3         37,6     89,7
  Average Rand/Dollar Exchange Rate                 7,93         6,58     6,93
  Average Copper Price Realised Per Ton           14 446       11 983   12 949
  (ZAR)                                                                       
  Cash Cost - Delivered (ZAR)                     10 426        8 830    7 682
  Average Copper Price Realised (Usc/Lb)            82,6         82,6     84,8
       All Tons Are Metric Tons                                               
  
  Capital Expenditure (R Million)                    251          262      505
  
  Capital Commitments (R Million)                                             
  
  Approved Expenditure At End Of Each                828          958      999
  Period                                                                      
  Contracts Placed At End Of Each Period             391          607      621
  
  Share Capital (R 000)                                                       
  Ordinary Shares Of R1 Each (Thousands) -        28 500       28 500   28 500
  Authorised                                                                  
  Ordinary Shares Of R1 Each (Thousands) -        28 316       28 316   28 316
  Issued                                                                      
  The Directors Are Authorised To Issue                                       
  Unissued Shares Until The Next Annual                                       
  General Meeting                                                             
  
  Investments - (Unlisted)                                                    
  Fair Value Of Unlisted Investments              75 728       60 947   70 078
  
  Dividends Paid (R000)                                                       
  2000 Final Dividend 30 Cents Per Share           8 495                      
  (1999 : 30 Cents Per Share)                                   8 495         
  2000 Total Dividend 120 Cents Per Share                               33 980
  2001 First Interim Dividend : 30 Cents           8 495                      
  Per Share                                                                   
  (2000 : 30 Cents Per Share)                                   8 495         
  
  Earnings Per Share, Based On The Net             R5,54        R3,23    R8,36
  Profit After Tax                                                            
  Fully Diluted Earnings Per Share, Based          R5,54        R3,23    R8,36
  On The Net Profit After Tax                                                 
  Headline Earnings Per Share, Based On            R5,54        R3,23    R7,91
  The Net Profit After Tax Adjusted For                                       
  Non-Operational Gains/Losses                                                
  Net Asset Value Per Share                       R58,82       R48,22   R53,85
 

                                                                              
  Segment     Copper          Industrial         Other             Total      
  report      R000           Minerals            R000             R000       
  ng                            R000                                          
         30.6.01  30.6.00  30.6.01  30.6.00 30.6.01  30.6.00  30.6.01  30.6.00
                                   
  Profit And Loss                                                             
          
Revenues 
         784,728  450,345  228,797  171,745 105,216   96,949 1,118,741 719,039
Cost And        
Expenses 633,693  392,617  164,727  106,901  75,329    71,455  873,749 570,972

Operating 
Profit Before        
Tax

        151, 035  57,728   64,070   64,844  29,887    25,494  244,992 148,067 
Taxation                                                       88,253  56,521
                                                                             
Net Income for the six months
                                                              156,739  91,546
                                                                        
                                                                              
  The segmental split on a geographical basis is based on the country in      
  which the order is received.                                                
  Total assets are presented by geographical area according to where the      
  assets are located.   
                   
                                   
                  South Africa            America           United Kingdom    
                      R000                 R000                  R000         
               30.6.01    30.6.00    30.6.01    30.6.00    30.6.01    30.6.00 
  Profit And                                                                  
  Loss                                                                        
  Revenues     892 358    486 463     82 742     79 190    109 464    124 880 
  Cost And     698 487    398 593     72 261     68 605     82 480     88 345 
  Expenses                                                                    
  Operating    193 871     87 870     10 481     10 585     26 984     36 535 
  Profit                                                                      
  Before Tax                                                                  
  Taxation      72 495     37 988      4 055      4 041      8 523     11 271 
  Net Income   121 376     49 882      6 426      6 544     18 461     25 264 
  For The                                                                     
  Six Months                                                                  
  Balance                                                                     
  Sheet                                                                       
  Total      3 780 137  3 157 137     76 274     77 604    110 027    166 537 
  Assets                                                                
  Total      2 283 487  1 633 165      7 868     12 665     27 382     32 315 
  Liabilities                                                           
 

                                      Singapore                  Total  
                                        R000                     R000  
                                                                              
                                 30.6.01    30.6.00      30.6.01      30.6.00 
  Profit & Loss                                                               
  Revenues                        34 177     28 506    1 118 741      719 039 
  Cost And Expenses               20 521     15 429      873 749      570 972 
  Operating Profit Before Tax     13 656     13 077      244 992      148 067 
  Taxation                         3 180      3 221       88 253       56 521 
  Net Income For The Six          10 476      9 856      156 739       91 546 
  Months                                                                      
  Balance Sheet                                                               
  Total Assets                    21 174     34 288    3 987 612    3 435 566 
  Total Liabilities                3 373      6 018    2 322 110    2 070 147 
 
 
COMMENTARY 
 
Consolidated Group Profit for the first half of 2001 was R157 million,
compared with R92 million achieved for the equivalent period last year. The
increase in profit was attributable to an increase in revenue on account of
the benefit derived from a weakening of the Rand/US$ exchange rate and an
increase in the contained copper sold. Operating costs were R759 million
compared to R497 million for the first six months in 2000. The increase was
attributable to the increase in sales volumes and increased operating costs
due to industrial action.
 
The Company and the National Union of Mine workers failed to reach agreement
on wages and conditions of employment negotiations in May 2001. This resulted
in a protracted strike by the union and a simultaneous lockout by the
company, which lasted 24 days from 22 May to 14 June 2001. Sales and
production volumes of all products were impacted by the industrial action.
 
The Rand copper price achieved for the first half of 2001 was R14 446/ton
against R11 983/ton for the equivalent period in 2000. Revenue of R1 119
million was R400 million more than the R719 million achieved for the
equivalent period in 2000. Contained copper sold increased from 37 583 tons
in 2000 to 54 323 tons over the comparable period. There is a concern that
the current low copper price of approximately US$0.70 per lb and the
inventory effects of the strike will have an impact on second half earnings.
 
Copper in concentrate produced was 29 307 tons, a decrease of 49% compared
with the same period in 2000. This decrease was mainly the result of low
concentrate grades associated with the processing of reverberatory slag and
low matte grades linked to high pyrrhotite levels in the ex-pit ores and the
flooding of the open pit in the first quarter of the year. The last two
months of the period under review were dominated by the strike and previously
stockpiled concentrate was used to maintain smelter production at a reduced
level. Production of copper cathode increased from 32 170 to 44 503 tons over
the comparable period due to improved smelter performance compared to the
first six months of 2000 when production was down due to smelter operational
problems coupled with a planned extensive smelter overhaul.
 
The company announced in April 2001 that mining in its present form in the
open pit would come to an end on 31 January 2002. By this date, the pit will
be virtually exhausted and will have reached its final planned depth although
some 'scavenging' of the ramps will subsequently take place. It was also
announced at the same time that the Zirconium Sulphate Tetrahydrate (ZST)
plant would cease operations in its current form on 31 May 2001 as the
expected reduction in zirconia available to the baddeleyite plants is
occurring earlier than anticipated and has rendered the ZST plant uneconomic.
 
In anticipation of reduced copper output it was also determined that across
the property there would be a number of positions which will no longer be
required over the next two years. As a consequence of the above it was
decided to offer voluntary early retirement to all employees who had reached
the age of 53 years by 30 April 2001, and had 10 years service with the
company. A total of 261 employees took up this offer.
 
The company was successful in arranging a new four-and-a-half year unsecured
syndicated loan of US$125 million with a consortium of nine local and
international banks. The loan has been used to repay the Chase Manhattan loan
outstanding of US$50 million and other short term loans incurred to finance
the underground mine development. The first of six half-yearly instalments is
due on 11 June 2003.
 
On 25 April 2001 the Company announced on the declaration of Dividend No. 136
that the payment of future dividends may be deferred in the light of the
continuing need to finance the development of the underground mining project.
One of the conditions pertaining to the granting of the aforementioned loan
was that of dividend control. The company undertook that it would not, in
respect of either of the calendar years 2001 and 2002, distribute any of its
Distributable Profits for each such calendar year except for the dividends
already declared on 25 January 2001 and 25 April 2001. The directors ratified
this agreement at the Board meeting held on 19 July 2001.
 
It is with regret that we have to report that a fatality occurred in the
underground mine on 14 June 2001. A total of 11 lost time injuries (including
the fatality) were reported during the first half of 2001. This is a small
improvement over the 12 lost time injuries reported in the first half of 2000.
 
The overall underground mine project schedule for the achievement of a
sustainable production rate of 30 000 tons per day by November 2002 is on
target. A total of 39 262 square meters have been undercut to date. Hand over
of draw points has been consistent at a rate of one per week, since the end of
April. This will enable the target of 100 draw points/draw bells to be
achieved
by November 2002. A total of ten draw bells are now available for production.
Civil work to the first crusher is almost complete. The civil contractor has
taken over the second crusher chamber and has commenced concrete placement.
 
 
For further information, please contact:
 
 

                                                                  
              LONDON                     AUSTRALIA                
              Media Relations            Media Relations          
              Lisa Cullimore             Ian Head                 
              + 44 (0) 20 7753 2305      [phone]      
              Investor Relations         Investor Relations       
              Peter Cunningham           Dave Skinner             
              + 44 (0) 20 7753 2401      [phone]      
              Jonathan Murrin            Daphne Morros            
              + 44 (0) 20 7753 2326      [phone] 
     
Website: www.riotinto.com