AGM Statement

Rio Tinto PLC
27 April 2001

                                                                              
                   Rio Tinto Limited Annual General Meeting                   

 
At today's annual general meeting of Rio Tinto Limited shareholders in
Sydney, chairman Sir Robert Wilson said Rio Tinto's spread and quality of
assets, together with significant acquisitions made in 2000, provide a strong
foundation for the Group's prospects.
 
'In 2000 our earnings were a very satisfactory $1.5 billion, up by 18 per
cent. Indeed, the Group's performance strengthened as the year progressed and
second half earnings were 23 per cent higher than the first half, mainly due
to increased volumes,' Sir Robert said.
 
'Our markets were generally in good shape. Global growth at around 4.7 per
cent was the highest in over a decade. There was, though, a marked
deterioration in the US towards the end of the year, especially in
metal-using sectors such as vehicle manufacture and capital equipment. Europe
grew slowly but steadily, growth accelerated in China and we saw a modest but
apparently short-lived recovery in Japan. As a result, benefits from higher
commodity prices and exchange rate changes generated much of our earnings
increase.
 
'Further sustainable cash cost savings across the Group reinforced the
benefits of these healthy market conditions. At the earnings level, these
savings amounted to over $80 million after tax, which more than offset the
$60 million cost of higher fuel prices.
 
'At the half-year, we increased our interim dividend by two and a half US
cents to 19 cents per share. We kept the final dividend unchanged, making
57.5 cents in total for the year.
 
'Our cash flow in 2000 was US$400 million higher at a record $3.4 billion.
That is a marked strengthening which reflects the growth of the Group.
Indeed, had we made all our acquisitions at the beginning of 2000, Rio
Tinto's operating cash flow would have been around $4 billion for the year.
 

Acquisitions

'In all, we committed some $4 billion to acquisitions and we also invested a
further $800 million in capital expenditure during the year. This provides a
platform for further growth across our diverse product range.
 
'We made five acquisitions, the final one completed in January this year.
These were almost entirely funded by debt and taking them all into account,
our gearing rose to a little over 40%. That is well within the capacity of
our strong balance sheet and we retain our double A credit rating.
 
'We made good progress on our existing developments and committed to both the
Diavik diamond mine and the major, Phase 4 expansion of the Escondida copper
mine. These and the projects which came with the acquisitions will raise our
capital expenditure in the next two years to about $1.25 billion annually.
 
'Our acquisitions last year covered four major product groups: aluminium,
iron ore, diamonds and coal. This reflects one of Rio Tinto's advantages as a
multi-commodity business; namely that we have access to a wide range of
opportunities.
 
'Virtually all of the assets are well known to us, being either partly owned
already or near to our existing operations. Most of them offer important
operational synergies with our current activities.
 
'By acquiring existing assets in preference to building new projects, we are
aiding the much-needed process of consolidation in what has been a highly
fragmented industry.
 
'The acquisitions add substantially to our existing portfolio of long life
mines with substantial reserves. They also extend the range of development
opportunities available to us in the future.
 
'And, of course, we expect them to generate shareholder value.
 
'One other common feature of these acquisitions is that they further
concentrate our assets in traditional areas of operation, especially
Australia. There may still be some who think that most of Rio Tinto's
business is in the developing world. That is simply not the case.
 
'Australia and North America are by far the most significant areas of
operation for us. These two regions account for about 80 per cent of the
company whether measured by assets or earnings.'
South Korea is more important than China - sales in 2000 Japan 1425, S Korea
629, China 414 and Taiwan 289 
 
Chief Executive Leigh Clifford said that the full effect of the acquisitions
would be felt this year and beyond.
 
'Acquisitions have a high profile, but we never lose sight of the key factors
for success in everything we do: a constant focus on shareholder value;
constructive interaction with people the world over; and an effective
management team and structure. These were all in play during the year,' Mr
Clifford said.
 
'Comalco's full integration into the Group was especially straightforward
since it has been a successful part of the Rio Tinto family from its outset.
 
'Comalco's team has been showing how to add value to their exceptional assets
in recent years. Now, in addition to accessing Comalco's considerable cash
flow, we will benefit fully from further operational and cost improvements
and several opportunities under consideration.
 
'I am especially pleased that Comalco is the latest Rio Tinto business to
demonstrate leadership by finding fresh ways to collaborate with Aboriginal
people. Comalco recently concluded an agreement with the traditional owners
of Cape York and the Queensland Government. I believe this agreement will
better foster reconciliation and co-operation.
 
'We acquired North Limited in the second half of the year. The initiative for
this acquisition came from our Iron Ore group based on a clear perspective of
their global marketplace. It results in a bigger and more diverse iron ore
business. Yet its successful completion did not distract from running the
existing business. The skills and strengths of our global organisation,
working as an 'around the clock' team, provided the necessary support. The
Iron Ore group now has responsibility for North's iron ore interests, Robe
River in Western Australia and the Iron Ore Company of Canada.
 
'Hamersley's close proximity to Robe's existing 30 million tonnes a year iron
ore operation at Mesa J and its $600 million West Angelas project was a main
driver behind this acquisition. You only have to visit Hamersley to discover
how employees, working purposefully together, can drive performance
improvement. Whether it is in redesigning shift rosters or cutting the turn
around time of trains to improve asset utilisation, you can sense the vast
potential for Hamersley and Robe to co-operate and transfer best practice,
not only in their existing operations but also in the development of the West
Angelas mine and plant.
 
'The Iron Ore Company of Canada brings a new iron ore pellet product and
exposure to the North American market. We have supported its Sept Iles pellet
plant refurbishment. On completion, this will lift total pellet production to
over 17 million tonnes per year and make IOC a more significant world scale
pellet producer. Last month, we went ahead with our bid for the Labrador Iron
Ore Royalty Income Fund to consolidate our position in IOC. Essentially, this
is just a tidying up exercise. Our offer, which will not be increased, has
been extended until 21 April.
 
'Reverting to last year's acquisitions, we took the unusual step of making a
counter bid for Ashton Mining, our joint venture partner in the Argyle
diamond mine in Western Australia. We did so to secure Argyle's highly
successful marketing arrangements, thereby ensuring its benefits accrue to
our shareholders
What the Ashton shareholders wanted was cash so had no concern about
marketing streams.
 
'At the same time, Diavik received all the necessary approvals and we began
the $900 million construction of this major Canadian diamond mine. The winter
ice road, over which all materials get to the site, has been well used this
year and the project should come on stream as intended in 2003.
 
'With Argyle and Diavik, as well as smaller diamond interests, we now have a
much greater presence in this international business. Recognising the
heightened significance of diamonds for the Group, management responsibility
is now with the re-named and restructured Diamonds & Gold product group.
 
'Two other acquisitions were in the Energy group, specifically in Australian
coal. Coal & Allied acquired Lemington in December and completed the
acquisition of Peabody's mines in January this year.
 
'Lemington and four of the five Peabody mines are in the Hunter Valley of New
South Wales, contiguous with other Coal & Allied properties. We are looking
at the integration of all these based on the sound foundations laid by Coal &
Allied during 2000.
 

Health and Safety

'Together with operational improvements, new collective agreements struck by
Coal & Allied last year provide much needed work practice changes. These
arrangements seek, nurture and reward good performance. The improvement is
already evident in both job satisfaction and productivity. These operations
can now deliver world class performance and everyone can look to their future
with confidence.
 
'Across the Group, health and safety performance is a key indicator of
managerial leadership and employee engagement. To my mind, it is no
coincidence that in a record year we also had almost 40 per cent fewer
injuries. We may not yet have met our challenging annual target to halve, and
eventually eliminate, injuries but I think you will agree, that such an
improvement takes effort and is a commendable result. We are also introducing
our rigorous social and environmental approach to the recently acquired
businesses.
 

New Projects

'In addition to the operations and opportunities I have outlined, our Copper
group also has three developments in hand. In South Africa, the Palabora
underground block cave project remains on schedule. We are going ahead with
the underground development of Northparkes in Australia. This will give that
mine a new lease of life and increase our knowledge of block caving. We have
also committed to the $1 billion expansion of Escondida in Chile to increase
production by 50 per cent over its first five years of full production. All
these projects will contribute to the Group's production in 2003.
 
'Since none of the recent acquisitions contributed for the full year, volumes
of our major commodities increased by around six per cent in 2000. This
continued the trend of the past decade.
 
'The main increases came in iron ore and aluminium. Half of the 40 per cent
growth in iron ore came from Hamersley while the rest was from the North
acquisition. In a full year, the Group's iron ore production will rise from
last year's 72 million tonnes to around 90 million tonnes.
 
'Most of the 24 per cent growth in aluminium was due to our increased stake
in Comalco but we also had record production at all the aluminium smelters.
 
'Overall, had all the acquisitions occurred at the start of 2000, production
growth would have been around 22 per cent last year. The full effect will, of
course, be felt in 2001 and beyond. Additional to that, we also have output
to come in future years from the other major projects to which I have
referred.
 
'In summary, Rio Tinto has great capacity for profitable growth across its
diverse product range. We shall maximise the benefits from consolidation and
the major projects under construction. For the longer term, the Group's
exploration effort remains formidable and focussed. We have the
technological, managerial and financial resources to bring discoveries to
fruition.
 
'2000 was a particularly eventful year. But year in, year out, our focus on
delivering outstanding value to our shareholders is constant and unchanged,'
Mr Clifford concluded.
 
 
Global Mining Initiative 

Sir Robert also highlighted the key role of the Global Mining Initiative.
'Making the most of our assets takes not only excellent operating and safety
performance but also a strong sense of social and environmental
responsibility. That is why Rio Tinto has taken a leading role in the Global
Mining Initiative,' he said.
 
'The Initiative's main focus is a sustainable development model that will
serve our industry's future business direction. This is based on a wide
ranging and independent consultative analysis of the issues that our industry
faces. Alongside the 30 mining industry participants, we have many
co-sponsors of this programme. They include national governments, major
environmental organisations and international bodies such as the United
Nations Environment Programme, the UN Conference on Trade and Development and
The World Bank.
 
'The concept of sustainable development involves the integration of economic
development, social development and environmental protection. It is
inevitable that there are sometimes there are inevitable trade-offs between -
and sometimes within - these three aspects of sustainable development. In the
most important of these trade-off decisions, governments should be the final
arbiters. But the debate should always be informed and not by companies
alone. There is need for a better quality dialogue between government,
industry and other parts of civil society, particularly the local communities
involved.
 
'We hope to find pathways and practices the industry should follow to improve
its performance. We also hope that the relationships forged will lead to a
wider understanding of the vital contribution this industry can make to
sustainable development.'
 
 
Outlook 

Looking ahead to near term prospects, Sir Robert said: 'I wish I could give
you a confident view of the economic outlook. I have to say though that, like
many others at present, we find it very difficult to predict. There is no
doubt that the international economy, especially the US, is slowing down.
What we don't know is how far, nor for how long, and we do not know the
extent to which the slow-down will drag other economies in its wake.
 
'Obviously this is not good news for any international company, but nor is it
cause for gloom at Rio Tinto. There are several reasons why I say that.
 
'First, the metal markets seem to have already discounted all but a deep US
recession. And the power shortages in the western parts of the United States
have hit domestic production of aluminium particularly hard and copper has
also been affected. So, supply is being hit as well as demand and we don't
know yet which will have the greater effect.
 
'Secondly, the outlook for our bulk commodities, iron ore and - particularly
- coal, remains strong despite the down turn in the steel industry. Last
month, we settled prices with our Japanese iron ore customers that are
approximately 4 per cent up on the previous year. Coal markets, both
internationally and domestically in the US, have continued to tighten and
prices have risen strongly in recent months. Internationally traded coal
prices are up by about 20 per cent.
 
'Thirdly, production of some metals and minerals was in deficit until the
slowdown began so, relative to consumption, most stocks remain at
historically low levels.
 
'And fourthly, whilst the prospects for Japan look poor, China is now a major
component of world commodity demand. We don't expect that its exceptional
rate of growth in raw materials imports will be sustained this year, but
China's growth potential remains considerable in the medium and longer term.
 
'Finally, the mining industry as a whole is carrying little spare capacity.
And not much new capacity is under construction. This suggests that prices
might respond quite quickly when global economic activity picks up again.
 
'For Rio Tinto, specifically, there are some additional considerations. Our
spread and quality of assets, as well as the people to get the best from
them, provide an element of protection when economic times get tough.
 
'In addition, over the past year we have made some significant acquisitions,
which together will raise our production volumes by about 20 per cent.
 
'And finally, we have achieved a step change in the Group's operating cash
flow, to about $4 billion annually at current prices and exchange rates.
 
'Rio Tinto has a strong and proven business model. At this stage, I would
have to say that the global economic outlook still seems to be worsening.
But, for the reasons I have mentioned, we do not expect 2001 to be a bad year
for us. And looking a little bit further ahead, I believe that when economic
activity recovers, Rio Tinto's prospects could be very promising indeed. '
 
(NB All $ are US$)
 
 
For further information, please contact:
 

                                                                  
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