Chairman's Statement

Rio Tinto PLC
10 May 2000


                     Rio Tinto plc Annual General Meeting                     
                                 10 May 2000                                  
 
At today's annual general meeting of Rio Tinto plc shareholders in London,
Sir Robert Wilson, chairman, said that the Group's performance in 1999
improved significantly despite some notably adverse market prices.
 
Sir Robert said 'Earnings were US$1.3 billion compared with US$1.1 billion in
1998, an increase of 16 per cent. The 1999 earnings include a US$89 million
tax benefit arising from the planned reduction in corporate tax rates in
Australia and South Africa. But even stripping this out, we still had an
eight per cent rise reflecting, once again, significant operational
improvements.
 
'In the first half of 1999, we saw some of the lowest real terms metals
prices in our corporate history. Although there was a recovery in the second
half, for 1999 as a whole, prices were generally lower than in 1998. Overall,
the reduction in prices cost us a net US$134 million. And exchange rate
movements added to this impact by a further US$29 million.
 
'Of the factors within our control, we continued to build on the average
seven per cent annual volume growth achieved through the 1990s. Most product
groups contributed, with record production at Comalco, near record shipments
by Hamersley, and higher output from the Energy group's coal mines. In all,
higher sales volumes contributed just over US$100 million to earnings.
 
'More importantly, further efficiency gains brought us over US$200 million
after tax in 1999. The cumulative effect of these for the past three years is
now over US$600 million per annum at the net earnings level and over US$1
billion per annum before tax and minorities. This is equivalent to about 15
per cent of our cost base. That is a substantial achievement and solid
evidence of the continuing effort made by our worldwide team. I know you will
want to join me in acknowledging their unstinting support. It is all the more
notable if you recall that this Group was generally regarded as being
efficient even at the start of the period. Not only does Rio Tinto have world
class assets but also the skill, experience and dedication in our people to
get the very best from them.
 
'Encouragingly, we have seen the safety improvement of 20 per cent in 1999
gaining momentum this year. We still have much to do, though. Our aim is not
only to make the Group the safest in our industry but also comparable with
the very best in any industry.
 
'Whilst 1999 was a good year for Rio Tinto, it was also a time of change in
the international mining business. We saw moves towards consolidation in our
highly fragmented industry. There was little on offer to encourage our
participation but, arguably, a more consolidated industry might be less prone
to the creation of surplus capacity. Imprudent growth for growth's sake has
been a persistent feature of our industry, with inevitable consequent
declines in prices. In theory, at least, the recent consolidations offer the
prospect of more rational behaviour. I hope, but it is only a hope, that this
is what happens.
 
'Among our own corporate developments last year, we increased our
shareholding in Comalco by two per cent to over 72 per cent, and we have now
made an offer for all the publicly held shares. Given our strong balance
sheet, at current share prices our preference is to purchase Comalco for cash
rather than Rio Tinto paper. To the extent that Comalco shareholders elect to
take Rio Tinto equity, we intend to buy back an equivalent number of Rio
Tinto shares to those issued, so that effectively, this will be an all cash
purchase.
 
'In Rio Tinto we use net present value calculations as a starting point in
our investment analysis and choice of strategies. We work on the assumption
that if we try to maximise shareholder value in this way, then it will
reflect over time in our share price. We measure how we are doing by
comparing our rolling four year total shareholder return - that's dividends
and capital appreciation - with that of a mix of companies in the industry,
which together more or less reflect our product mix.
 
'We are much more diversified than most of the companies in this comparator
group. Logic suggests that we should normally be in the second quartile if we
are doing well and the third quartile if we are doing poorly, with the top
and bottom quartiles reserved for whichever commodities have been having a
good or bad run during that period.
 
'However, our actual performance has been much better than that. In every
four year period over the 13 cycles we have recorded, we have never been
lower than the second quartile and, in recent times, in the first.
 
'More generally, this year we have seen a shift in market focus towards the
so called 'new economy' stocks. Swings in sentiment have caused considerable
volatility in the market even though the fundamentals have remained broadly
unchanged.
 
'Rio Tinto may not be a 'dot com' company but we still benefit from this
exciting technology. In particular, we are well advanced with plans for
applying this to more extensively purchasing and we propose to examine how it
can improve our ability to serve our customers better. We have also embarked
on a study to identify an appropriate shared services model to improve the
efficiency and cost of those services which support the core activities of
our businesses. Our aim is an organisation providing professional, best in
class service throughout the Group, complementary to our e-business
initiatives.
 
'On the world stage, new technology development is proving good for economic
growth. We benefit from the consequent increased demand for our products.
This is already clearly evident in the United States. In fact, the result,
after twenty years of stagnation in metal demand between 1970 and 1990, has
been a vigorous revival in US consumption of many of our products over the
past decade.
 
'Most metals are experiencing a resurgence in growth. This is at least partly
due to the new economy. Taking copper as an example, its use in new US family
homes alone has risen by about 60 per cent over the last ten years. The
impact on energy consumption of the new technology is also apparent. I have
seen one estimate that eight per cent of all the electricity generated in the
US is already used to drive the internet. Put another way, every two
megabytes sent through the internet in the US needs the energy from one pound
of coal.  I'm told that means anyone buying a book through Amazon.com
requires the electricity generated by about half a pound of coal! The
likelihood is that Europe and, in time, Asia and elsewhere will follow the US
in new technology usage and the investment growth which accompanies it.
 
'We see no reason, therefore, to change the key aspects of our overall
strategy: a focus on a diverse range of high quality mining assets, and on
running our operations as efficiently as possible, to achieve our aim of
creating shareholder wealth in a responsible and sustainable way.
 
'It is, however, time for all the major players in the industry to find a new
way of understanding the place of mining in society. We need to work to a
deeper, more rounded understanding of the economic, social and environmental
dimensions in a more interactive way than in the past.
 
'This thought has led us to play a leading role with a number of major
international mining companies to establish the Global Mining Initiative. Our
aim is to ensure that mining is responsive to global needs and expectations
at a time of unprecedented social change. We hope that it will help the
industry and a wider public to assess candidly, and to understand better, the
role that mining and minerals can play in making the transition to
sustainable patterns of economic development. Of course we want to dispel
some of the unfounded criticisms of the industry. But we also want a clear
focus on those priority areas where the industry could and should do better.
The initiative will lead to a global conference on mining and sustainable
development in 2002 as a contribution to the tenth anniversary of the Earth
Summit at Rio de Janeiro. We as an industry, with our industry associations
and a wide cross section of those interested in how we conduct the mining
business, have a lot of work to do before then.
 
'To meet the world's future needs for minerals and metals, Rio Tinto
continues to invest in projects that create long term shareholder value.
Hamersley's Yandicoogina iron ore mine in Western Australia is an example.
Not only was it completed ahead of schedule and under budget but it sold much
more iron ore in 1999 than we had originally expected. Reflecting the
improved outlook for demand, Hamersley has agreed an average five per cent
price increase for its products with Japanese steel mills for the current
delivery year.
 
'In Canada, QIT's new plant with its innovative technology has also achieved
full design capacity. The high grade titanium dioxide feedstock product from
this plant has been successfully used by a number of pigment manufacturers.
 
'Last year, the Canadian Government concluded that the Diavik Diamond project
would have no significant adverse environmental effects. Whilst there have
been delays, Diavik and the Canadian and Northwest Territories Governments
have been working constructively and steadily towards permitting the project
and most permits are now in place. The project has won considerable support
from many quarters, including aboriginal groups in the area with whom two
participation agreements have already been concluded.
 
'Elsewhere, the feasibility studies for a Phase 4 expansion of the Escondida
copper mine in Chile are well advanced. If approved, construction of the
US$1.2 billion project could begin late this year. This would lift annual
copper output from around 800,000 to 1 million tonnes in early years,
although declining ore grades mean that this will soon begin to reduce.
 
'But what of the shorter term prospects? So far this year, we have seen
nothing to change the near term improvement in global economic conditions
that I outlined in the annual report. Barring a major setback, economic
growth in 2000 seems sure to exceed 1999. There are some worries, of course.
The extraordinary volatility of US stock markets and the strongly divergent
performance of new and old economy stocks is a source of instability which
could threaten the real economy. The weakness of the euro may prompt interest
rate increases which are not needed on other criteria.
 
'I could go on - but there are always risks and uncertainties. Overall, the
outlook is considerably brighter than seemed likely just twelve months ago.
 
'Looking specifically at our own business, metal prices are firmer than they
were this time last year. Underlying demand fundamentals should generally
continue to improve. Internationally traded coal prices, though, have
weakened further in an over supplied market. But iron ore prices are a little
firmer. Even so, production volumes of our principal products have varied
first quarter on first quarter for many reasons, including unusually adverse
weather conditions in several parts of the world and, in the case of copper,
lower ore grades in some major operations.
 
'Across the Group, we expect to see further contributions from cost
reductions in the current year although perhaps not at the same level as in
recent years.
 
'All in all then, whatever the economic uncertainties, I can confidently
report that the outlook for Rio Tinto remains bright.'
 

For further information, please contact:
     
Media Relations                     Investor Relations 
 
Lisa Cullimore                      Peter Jarvis
+ 44 20 7753 2305                   + 44 20 7753 2401
 
Website: www.riotinto.com