Full Year Results - Part 2

Rio Tinto PLC 5 February 2001 Part 2 PROFIT AND LOSS ACCOUNT Years ended 31 December 2000 1999 2000 1999 2000 1999 A$m A$m £m £m US$m US$m Gross turnover (including share of joint ventures and associates) 16,440 14,421 6,287 5,747 Continuing operations 9,525 9,310 772 - 295 - Acquisitions 447 - 17,212 14,421 6,582 5,747 9,972 9,310 Share of joint ventures' (2,570)(2,336) (983) (931) turnover (1,489)(1,508) Share of associates' (1,049) (937) (401) (373) turnover (608) (605) Consolidated 13,593 11,148 5,198 4,443 turnover 7,875 7,197 (9,816)(8,622)(3,753)(3,436) Net operating costs (5,687)(5,566) Group operating profit 3,691 2,526 1,412 1,007 Continuing operations 2,138 1,631 86 - 33 - Acquisitions 50 - 3,777 2,526 1,445 1,007 2,188 1,631 Share of operating profit of joint 885 787 339 314 ventures 513 508 Share of operating 364 294 139 117 profit of associates 211 190 Profit on ordinary activities before 5,026 3,607 1,923 1,438 interest 2,912 2,329 Net interest (587) (376) (224) (150) payable (340) (243) Amortisation of discount (109) (85) (42) (34) related to provisions (63) (55) Profit on ordinary activities before 4,330 3,146 1,657 1,254 taxation 2,509 2,031 (1,414) (849) (541) (338) Taxation (819) (548) Profit on ordinary activities after 2,916 2,297 1,116 916 taxation 1,690 1,483 Attributable to outside (316) (311) (121) (124) shareholders (equity) (183) (201) Profit for the financial year 2,600 1,986 995 792 (net earnings) 1,507 1,282 Dividends to (1,364)(1,168) (521) (465) shareholders (790) (754) Retained profit for the financial 1,236 818 474 327 year 717 528 Earnings per ordinary 189.4c 145.0c 72.5p 57.8p share 109.8c 93.6c Adjusted earnings 189.4c 145.0c 72.5p 57.8p per ordinary share(c) 109.8c 93.6c Dividends per share 38.87p 34.23p - Rio Tinto plc 57.5c 55.0c 102.44c 87.11c - Rio Tinto Limited 57.5c 55.0c (a) Diluted earnings per share figures are US 0.12 cents (1999: US 0.07 cents) lower than the earnings per share figures above. (b) For the purpose of calculating earnings and adjusted earnings per share, the weighted average number of Rio Tinto plc and Rio Tinto Limited shares outstanding during the period was 1372.7 million, being the average number of Rio Tinto plc shares outstanding (1062.6 million) plus the average number of Rio Tinto Limited shares outstanding not held by Rio Tinto plc (310.1 million). (c) Adjusted earnings and adjusted earnings per share exclude exceptional items of such magnitude that their exclusion is necessary in order that adjusted earnings reflect the underlying performance of the Group. There were no such items in 1999 or 2000. (d) Associates acquired in 2000 contributed US$30 million to gross turnover and US$8 million to operating profit. CASH FLOW STATEMENT Years ended 31 December 2000 1999 2000 1999 2000 1999 A$m A$m £m £m US$m US$m Cash flow from operating 5,133 3,750 1,962 1,494 activities(see below) 2,973 2,421 Dividends from joint ventures 806 920 308 367 and associates 467 594 5,939 4,670 2,270 1,861 3,440 3,015 124 178 48 71 Interest received 72 115 (521) (455) (199) (181) Interest paid (302) (294) Dividends paid to (264) (173) (101) (69) outside shareholders (153) (112) Returns on investment (661) (450) (252) (179) and servicing of finance (383) (291) (797) (601) (305) (240) Taxation (462) (388) Purchase of property, plant (1,412)(1,202) (540) (479) and equipment (818) (776) Funding of Group share of joint ventures' and associates' (38) (82) (15) (33) capital expenditure (22) (53) Other funding of joint ventures and associates 69 618 26 246 repaid 40 399 Exploration and evaluation (257) (231) (98) (92) expenditure (149) (149) Sale of property, plant and equipment and other 74 93 28 37 investments 43 60 Capital expenditure and financial (1,564) (804) (599) (321) investment (906) (519) Purchase of subsidiaries, joint ventures (5,751) (505)(2,199) (201) and associates (3,332) (326) Sale of subsidiaries, joint ventures and 243 73 93 29 associates 141 47 Acquisitions and (5,508) (432)(2,106) (172) disposals (3,191) (279) Equity dividends paid - (1,362)(1,104) (521) (440) Rio Tinto shareholders (789) (713) Cash flow before management of liquid resources and (3,953) 1,279 (1,513) 509 financing (2,291) 825 Net cash flow from management of 173 632 66 252 liquid resources 100 408 Ordinary shares 5 12 2 5 issued 3 8 (57) (28) (22) (11) Shares repurchased (33) (18) Loans received 3,758 (2,152) 1,437 (857) less repaid 2,177 (1,389) Management of liquid resources and 3,879 (1,536) 1,483 (611) financing 2,247 (991) (74) (257) (30) (102) (Decrease) in cash (44) (166) Cash flow from operating activities Group operating profit from continuing 3,777 2,526 1,445 1,007 activities 2,188 1,631 Depreciation and 1,465 1,250 560 498 amortisation 849 807 Exploration and evaluation charged 234 211 90 84 against profit 136 136 159 135 61 54 Provisions 92 87 Utilisation of (205) (160) (79) (64) provisions (119) (103) Change in 54 64 20 25 inventories 31 41 Change in accounts receivable and (418) (53) (160) (21) prepayments (242) (34) Change in accounts payable and 283 (74) 108 (30) accruals 164 (48) (216) (149) (83) (59) Other items (126) (96) Cash flow from 5,133 3,750 1,962 1,494 operating activities 2,973 2,421 (a) Acquisitions impacted on the cash flow statement as follows: cash inflow from operating activities US$164 million, tax paid US$52 million, capital expenditure US$109 million. (b) Net debt at 31 December 2000 of US$5,050 million compares with US$2,429 million at 31 December 1999. The increase of US$2,621 million comprises the cash outflow before management of liquid resources and financing of US$2,291 million, net debt of acquired companies of US$321 million and other items of US$9 million. BALANCE SHEET At 31 December 2000 1999 2000 1999 2000 1999 A$m A$m £m £m US$m US$m Intangible fixed assets 1,802 335 670 137 Goodwill 1,001 221 Tangible fixed assets Property, plant 21,886 14,526 8,134 5,955 and equipment 12,159 9,588 Exploration and evaluation 302 209 112 86 properties 168 138 Investments Share of gross assets 4,189 3,589 1,557 1,471 of joint ventures 2,327 2,369 Share of gross liabilities (1,895)(1,630) (704) (668) of joint ventures (1,053) (1,076) 2,294 1,959 853 803 1,274 1,293 Investments in associates/ 932 814 347 334 other investments 518 537 3,226 2,773 1,200 1,137 Total investments 1,792 1,830 27,216 17,843 10,116 7,315 Total fixed assets 15,120 11,777 Current assets 2,581 1,933 959 793 Inventories 1,434 1,276 Accounts receivable and prepayments Falling due within 2,801 1,778 1,041 729 one year 1,556 1,174 Falling due after 1,055 899 392 369 more than one year 586 593 3,856 2,677 1,433 1,098 2,142 1,767 27 233 10 96 Investments 15 154 Cash at bank 1,318 962 490 394 and in hand 732 635 7,782 5,805 2,892 2,381 4,323 3,832 Creditors due within one year Short term (7,670)(2,665)(2,851)(1,093) borrowings (4,261) (1,759) Accounts payable (3,953)(2,651)(1,469)(1,087) and accruals (2,196) (1,750) (11,623)(5,316)(4,320)(2,180) (6,457) (3,509) Net current(liabilities) (3,841) 489 (1,428) 201 /assets (2,134) 323 Total assets less current 23,375 18,332 8,688 7,516 liabilities 12,986 12,100 Creditors due after one year Medium and long term (2,765)(2,210)(1,028) (906) borrowings (1,536) (1,459) Provisions for liabilities and (5,836)(4,287)(2,169)(1,758) charges (3,242) (2,830) Outside shareholders' (1,555)(1,085) (578) (445) interests (equity) (864) (715) 13,219 10,750 4,913 4,407 7,344 7,096 Capital and reserves Share capital 277 259 103 106 - Rio Tinto plc 154 171 - Rio Tinto Limited (excluding Rio Tinto 1,429 1,367 531 560 plc interest) 794 902 Share premium 2,857 2,592 1,062 1,061 account 1,587 1,711 536 195 199 80 Other reserves 298 129 Profit and loss 8,120 6,337 3,018 2,600 account 4,511 4,183 Equity shareholders' 13,219 10,750 4,913 4,407 funds 7,344 7,096 (a) At 31 December 2000, Rio Tinto plc had 1,063.5 million ordinary shares in issue and Rio Tinto Limited had 310.9 million shares in issue, excluding those held by Rio Tinto plc. RECONCILIATION WITH AUSTRALIAN GAAP At 31 December 2000 1999 2000 1999 2000 1999 A$m A$m £m £m US$m US$m Net earnings 2,600 1,986 995 792 under UK GAAP 1,507 1,282 Increase/(decrease) net of tax in respect of: Abnormal increase - (454) - (181) in provisions - (293) Goodwill (250) (235) (96) (94) amortisation (145) (152) 3 (5) 1 (2) Taxation 2 (3) Higher cost of sales resulting from (43) - (17) - acquisition accounting (25) - 17 17 7 7 Other 9 11 Net earnings under 2,327 1,309 890 522 Australian GAAP 1,348 845 Earnings per ordinary share under 169.5c 95.5c 64.8p 38.1p Australian GAAP 98.2c 61.7c Australian GAAP earnings before abnormal items 2,327 1,625 890 648 Net earnings 1,348 1,049 Earnings per 169.5c 118.6c 64.8p 47.3p ordinary share 98.2c 76.6c Shareholders' funds 13,219 10,750 4,913 4,407 under UK GAAP 7,344 7,096 Increase/(decrease) net of tax in respect of: 2,520 2,407 937 987 Goodwill 1,400 1,589 (88) (77) (33) (32) Taxation (49) (51) (34) 3 (13) 1 Other (19) 2 Shareholders' funds under 15,617 13,083 5,804 5,363 Australian GAAP 8,676 8,636 Diluted earnings per share under Australian GAAP are US 0.11 cents (1999: US 0.04 cents) less than the above earnings per share figures. The Group's financial statements have been prepared in accordance with generally accepted accounting principles in the United Kingdom (UK GAAP), which differ in certain respects from generally accepted accounting principles in Australia (Australian GAAP). These differences relate principally to the following items, and the approximate effect of each of the adjustments to net earnings and shareholders' funds which would be required under Australian GAAP is set out above. Abnormal items Abnormal items of US$204 million arose in 1999 under Australian GAAP reporting, comprising a charge of US$293 million relating to Financial Reporting Standard 12 (FRS 12) and a credit of US$89 million resulting from changes in Australian and South African tax rates. The US$89 million benefit to earnings arose from the restatement of deferred tax balances as a result of reductions in tax rates. The introduction of FRS 12 in 1999 led to changes in the Group's accounting policy for closedown and restoration costs under UK GAAP. To minimise differences between accounting policies under UK and Australian GAAPs, the Group applied the new accounting policy under Australian GAAP also. Under UK GAAP, the effect of the change was recorded as a prior year adjustment, which reduced shareholders' funds by US$293 million. Under Australian GAAP, the impact of this change in policy was charged against earnings as an abnormal item. Goodwill For 1997 and prior years, UK GAAP permitted the write off of purchased goodwill on acquisition directly against reserves. Under Australian GAAP, goodwill is capitalised and amortised by charges against income over the period during which it is expected to be of benefit, subject to a maximum of 20 years. Goodwill previously written off directly to reserves in the UK GAAP accounts has been reinstated and amortised for the purpose of the reconciliation statements. For acquisitions in 1998 and subsequent years, goodwill is capitalised under UK GAAP, in accordance with FRS 10. Taxation Under UK GAAP, provision is made for deferred tax under the liability method to the extent that, in the opinion of the directors, it is probable that a tax liability will become payable within the foreseeable future. Under Australian GAAP deferred tax is provided for in full. Higher cost of sales resulting from acquisition accounting Under UK GAAP, the inventories of acquired companies are valued at the lower of replacement cost and net realisable value. Under Australian GAAP, such inventories are recognised at the time of acquisition on the basis of expected net sales proceeds. Earnings for the year are lower under Australian GAAP as a result of the higher cost of sales relating to inventories that were held at the date of acquisition. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 2000 1999 2000 1999 2000 1999 A$m A$m £m £m US$m US$m Profit for the 2,600 1,986 995 792 financial year 1,507 1,282 (1,364)(1,168) (521) (465) Dividends (790) (754) 1,236 818 474 327 717 528 Adjustment on 1,074 (515) (29) 228 currency translation (561) 159 Share capital issued 102 (16) 39 (6) less repurchased 59 (10) Goodwill relating to 57 - 22 - disposals written back 33 - 2,469 287 506 549 248 677 Opening shareholders' 10,750 10,463 4,407 3,858 funds 7,096 6,419 Closing shareholders' 13,219 10,750 4,913 4,407 funds 7,344 7,096 PRIMA FACIE TAX RECONCILIATION 2000 1999 2000 1999 2000 1999 A$m A$m £m £m US$m US$m Profit on ordinary activities before 4,330 3,146 1,657 1,254 taxation 2,509 2,031 Actual taxation charge (1,414) (849) (541) (338) for the year (819) (548) Prima facie tax payable at UK rate of 30% 1,300 951 497 379 (1999-30.25%) 753 614 Higher rate of taxation 102 88 39 35 on Australian earnings 59 57 (Adverse)/favourable (12) 190 (5) 76 variation (7) 123 The above variation is explained as follows: Other tax rates applicable outside the (123) (124) (47) (49) UK and Australia (71) (80) Research, development and other investment 14 12 5 5 allowances 8 8 Resource depletion and other depreciation 91 73 35 29 allowances 53 47 Advance Corporation Tax - 11 - 4 - net recovery - 7 Impact of tax rate changes on deferred - 166 - 66 tax balances - 107 6 52 2 21 Other 3 34 Total (adverse)/favourable variation in taxation (12) 190 (5) 76 charge (7) 123 EXPLORATION AND EVALUATION PROPERTIES 2000 1999 2000 1999 2000 1999 A$m A$m £m £m US$m US$m At cost less amounts written off 1,197 1,270 491 468 At 1 January 790 779 Adjustment on 100 (15) (10) 46 currency translation (72) 49 81 - 31 - Subsidiaries acquired 47 - 257 231 98 92 Expenditure in year 149 149 Charged against (86) (60) (33) (24) profit for the year (50) (39) Disposals, transfers (136) (229) (52) (91) and other movements (79) (148) 1,413 1,197 525 491 At 31 December 785 790 Provision (988)(1,084) (405) (399) At 1 January (652) (665) Adjustment on (111) 18 (3) (37) currency translation 42 (38) Charged against profit (148) (151) (57) (60) for the year (86) (97) Disposals, transfers and 136 229 52 91 other movements 79 148 (1,111) (988) (413) (405) At 31 December (617) (652) Net balance sheet 302 209 112 86 amount 168 138 RIO TINTO FINANCIAL INFORMATION BY BUSINESS UNIT Net Gross Operating Capital Rio Tinto earnings turnover assets expenditure Interest 2000 1999 2000 1999 2000 1999 2000 1999 % US$m US$m US$m US$m US$m US$m US$m US$m Iron Ore Hamersley (incl HISmelt)100 344 259 1,100 969 1,220 1,454 76 105 Industrial Minerals 392 411 2,130 2,233 3,210 2,641 299 315 Copper Kennecott Utah Copper 100 100 74 804 720 3,121 3,180 84 112 Escondida 30 97 84 388 357 489 460 68 56 Freeport 16.6 2 9 307 267 95 156 42 43 Freeport Joint Venture 40 71 82 273 272 429 385 18 21 Palabora 48.6 15 27 252 259 380 358 76 79 Somincor 49 5 (7) 50 52 76 78 5 5 290 269 2,074 1,927 4,590 4,617 293 316 Aluminium - Comalco (f) 338 157 1,589 1,412 2,188 1,686 52 77 Energy Kennecott Energy 100 81 76 817 831 640 681 33 29 Pacific Coal 100 93 80 341 309 358 479 11 9 Kaltim Prima Coal 50 18 26 150 175 39 21 6 13 Coal & Allied 71 49 28 340 346 373 246 14 14 Rossing 69 19 19 124 134 112 129 7 12 Other energy - (9) 1 12 - 27 - - 260 220 1,773 1,807 1,522 1,583 71 77 Gold and other minerals Kennecott Minerals 100 43 60 185 249 196 220 22 19 Kelian 90 (9) (3) 90 126 157 183 2 5 Peak Gold 100 6 3 38 38 27 34 12 6 Rio Tinto Zimbabwe 56 2 4 38 36 11 7 3 4 Brazil 45 37 148 123 156 156 16 16 Rio Tinto Aluminium 20 13 227 231 64 49 3 2 Other gold and minerals 14 9 131 156 137 138 15 16 121 123 857 959 748 787 73 68 North 19 446 2,737 109 Other items (11) (33) 3 3 (60) 15 1 (18) Exploration and evaluation (108) (107) Net interest (138) (83) Less joint ventures and associates (176) (169) Total 1,507 1,282 9,972 9,310 16,155 12,783 798 771 Add back outside interests 864 715 Unallocated net current financial items (4,033)(1,398) Total assets less current liabilities 12,986 12,100 (a) Net earnings represent after tax earnings attributable to the Rio Tinto Group. Earnings of subsidiaries are stated before interest charges but after the amortisation of the discount applied in establishing the book value of provisions. Earnings attributable to joint ventures and associates include interest charges. (b) Gross turnover includes 100 per cent of subsidiaries' turnover and the Group's share of the turnover of joint ventures and associates. (c) Operating assets of subsidiaries comprise total assets less cash and current asset investments less current non-financial liabilities and are net of outside interests but include goodwill. For joint ventures and associates, Rio Tinto's net investment is shown. For joint ventures and associates shown above, Rio Tinto's shares of operating assets, defined as for subsidiaries are as follows: Escondida US$810 million (1999 - US$776 million), Freeport joint venture US$515 million (1999 - US$453 million), Freeport associate US$638 million (1999 - US$555 million), Somincor US$131 million (1999 - US$157 million), Kaltim Prima US$238 million (1999 - US$271 million). (d) Capital expenditure comprises purchases less disposals of property, plant and equipment. The details provided include 100 per cent of subsidiaries' capital expenditure and now include Rio Tinto's share of the capital expenditure of joint ventures and associates. 1999 amounts have been presented on a consistent basis. Amounts relating to joint ventures and associates are deducted before arriving at the total of the capital expenditure column, except for amounts specifically funded by Rio Tinto. (e) Business units have been classified above according to the Group's management structure. Generally, this structure has regard to the primary product of each business unit but there are exceptions. For example, the Copper group includes the gold revenues of Kennecott Utah Copper and Freeport (Rio Tinto share); the earnings of Rio Tinto Aluminium are included in Gold & Other Minerals. This summary differs, therefore, from the Product Analysis in which the contributions of individual business units are attributed to several products as appropriate. (f) Rio Tinto's weighted average interest in Comalco for the period was 89 per cent compared with 72 per cent in 1999. Rio Tinto now owns 100 per cent of the share capital of Comalco Limited. PRODUCT ANALYSIS 2000 1999 2000 1999 2000 1999 2000 1999 A$m A$m £m £m % % US$m US$m Gross Turnover 2,637 2,051 1,008 817 15.3 14.2 Copper 1,528 1,324 1,348 1,312 515 523 7.8 9.1 Gold 781 847 (all sources) 2,391 1,526 914 608 13.9 10.6 Iron ore 1,385 985 2,844 2,590 1,088 1,032 16.5 18.0 Coal 1,648 1,672 3,136 2,547 1,199 1,015 18.2 17.7 Aluminium 1,817 1,644 Industrial Minerals (incl. 3,804 3,563 1,455 1,420 22.1 24.7 diamonds) 2,204 2,300 1,052 832 403 332 6.2 5.7 Other products 609 538 17,212 14,421 6,582 5,747 100.0 100.0 Total 9,972 9,310 Net earnings Copper, gold and 576 499 220 199 18.9 22.4 by-products 334 322 633 404 242 161 20.8 18.1 Iron ore 367 261 418 311 160 124 13.7 14.0 Coal 242 201 620 266 237 106 20.4 12.0 Aluminium 359 172 Industrial Minerals (incl. 696 655 266 261 22.8 29.4 diamonds) 403 423 100 94 39 38 3.4 4.1 Other products 59 60 3,043 2,229 1,164 889 100.0 100.0 1,764 1,439 Exploration and (186) (166) (71) (66) evaluation (108) (107) (257) (77) (98) (31) Other items(b) (149) (50) 2,600 1,986 995 792 Total 1,507 1,282 GEOGRAPHICAL ANALYSIS 2000 1999 2000 1999 2000 1999 2000 1999 A$m A$m £m £m % % US$m US$m Turnover by country of origin 5,351 4,549 2,046 1,813 31.1 31.5 North America 3,100 2,937 Australia and 6,731 5,302 2,574 2,113 39.1 36.8 New Zealand 3,900 3,423 1,025 860 392 343 6.0 6.0 South America 594 555 1,562 1,461 597 582 9.1 10.1 Africa 905 943 1,415 1,301 541 519 8.2 9.0 Indonesia 820 840 Europe and 1,128 948 432 377 6.5 6.6 other countries 653 612 17,212 14,421 6,582 5,747 100.0 100.0 Total 9,972 9,310 Net earnings by origin 685 587 262 234 24.1 27.8 North America 397 379 Australia and 1,412 942 540 375 49.7 44.5 New Zealand 818 608 300 108 115 43 10.6 5.1 South America 174 70 198 215 76 86 7.0 10.2 Africa 115 139 126 160 48 64 4.4 7.5 Indonesia 73 103 Europe and other 117 103 45 41 4.2 4.9 countries 68 66 2,838 2,115 1,086 843 100.0 100.0 1,645 1,365 (238) (129) (91) (51) Net interest (b)(138) (83) 2,600 1,986 995 792 Total 1,507 1,282 Turnover by destination 5,028 4,559 1,923 1,817 29.2 31.6 North America 2,913 2,943 4,065 3,464 1,554 1,380 23.6 24.0 Europe 2,355 2,236 3,184 2,207 1,218 880 18.5 15.3 Japan 1,845 1,425 3,400 2,635 1,300 1,050 19.8 18.3 Other Asia 1,970 1,701 Australia and 832 940 318 375 4.8 6.5 New Zealand 482 607 703 616 269 245 4.1 4.3 Other 407 398 17,212 14,421 6,582 5,747 100.0 100.0 Total 9,972 9,310 (a) The above analyses include the Rio Tinto share of the results of joint ventures and associates including interest. (b) The amortisation of discount related to provisions is included in the applicable product category and geographical area. All other financing costs of subsidiaries are included in 'other items' within the product analysis and in 'net interest' within the geographical analysis. RECONCILIATION WITH US GAAP At 31 December 2000 1999 2000 1999 2000 1999 A$m A$m £m £m US$m US$m Net earnings under 2,600 1,986 995 792 UK GAAP 1,507 1,282 Increase/(decrease) net of tax in respect of: Goodwill (180) (173) (69) (69) amortisation (104) (112) (5) (90) (2) (36) Asset write-downs (3) (58) Provision against - (76) - (30) receivable - (49) 3 (5) 1 (2) Taxation 2 (3) (159) (69) (61) (28) Other (92) (45) Income before exchange differences taken to 2,259 1,573 864 627 US GAAP earnings 1,310 1,015 Exchange differences taken to earnings under (212) - (81) - US GAAP (123) - Income before cumulative effect of change in 2,047 1,573 783 627 accounting principle 1,187 1,015 Cumulative effect of change in accounting principle for start-up - (88) - (35) costs - (57) Net income under 2,047 1,485 783 592 US GAAP 1,187 958 Basic earnings per ordinary share under US GAAP Before exchange differences taken to earnings under 164.6c 114.8c 62.9p 45.8p US GAAP 95.4c 74.1c Before cumulative effect of change in 149.1c 114.8c 57.0p 45.8p accounting principle 86.5c 74.1c After cumulative effect of change in accounting 149.1c 108.4c 57.0p 43.2p principle 86.5c 69.9c Shareholders' funds 13,219 10,750 4,913 4,407 under UK GAAP 7,344 7,096 Increase/(decrease) net of tax in respect of: 3,469 3,186 1,289 1,306 Goodwill 1,927 2,103 (88) (77) (33) (32) Taxation (49) (51) 952 800 354 328 Proposed dividends 529 528 171 148 64 61 Asset write-downs 95 98 Reversal of additional provisions under 423 376 157 154 FRS 12 235 248 (115) (98) (43) (40) Start-up costs (64) (65) Mark to market of certain derivative (121) - (45) - contracts (67) - (225) (44) (84) (18) Other (125) (29) Shareholders' funds 17,685 15,041 6,572 6,166 under US GAAP 9,825 9,928 Diluted earnings per share under US GAAP are US 0.09 cents (1999: US 0.05 cents) less than the above earnings per share figures. The Group's financial statements have been prepared in accordance with generally accepted accounting principles in the United Kingdom (UK GAAP), which differ in certain respects from those in the United States (US GAAP). The approximate effect of adjusting net earnings and shareholders' funds for the following differences in treatment under US GAAP is set out above. Financial Reporting Standard 12 (FRS 12): In 1999, changes in accounting policy on introduction of FRS 12 led to a prior year adjustment under UK GAAP. This reduced shareholders' funds by US$293 million. There was no corresponding change in US accounting standards. The prior year adjustment is therefore reversed in the calculation of shareholders' funds under US GAAP. Under US GAAP, receivables whose recovery is considered probable are recognised in the balance sheet. Under UK accounting standard FRS 12, certain receivables may only be recognised when their recovery is virtually certain. This can result in timing differences in the recognition of de-recognition of such receivables. Goodwill: For 1997 and prior years, UK GAAP permitted the write off of purchased goodwill on acquisition, directly against reserves. Under US GAAP, goodwill is capitalised and amortised by charges against income over the period during which it is expected to be of benefit, subject to maximum of 40 years. Goodwill previously written off directly to reserves in the UK GAAP accounts has been reinstated and amortised for the purpose of the reconciliation statements. For acquisitions in 1998 and subsequent years, goodwill is capitalised under UK GAAP in accordance with FRS 10. Start-up costs: The US pronouncement Statement of Position 98-5, Reporting on the Costs of Start-up Activities (SOP 98-5), requires that the costs of start-up activities are expensed as incurred. The cumulative effect of the change in accounting principle on adopting SOP 98-5 was recorded in 1999. Under UK GAAP, some of these start- up costs qualify for capitalisation and are amortised over the economic lives of the relevant assets. Asset write-downs: Following the implementation of FRS 11 in 1998, impairment of fixed assets under UK GAAP is recognised and measured by reference to the discounted cash flows expected to be generated by the asset. Under US GAAP, impairment is recognised only when the anticipated undiscounted cash flows are insufficient to recover the carrying value of the asset. Where an asset is found to be impaired under US GAAP, the amount of such impairment is generally similar under US GAAP to that computed under UK GAAP. Exchange differences under US GAAP: Derivatives: The Group is party to derivative contracts in respect of some of its future transactions in order to hedge its exposure to fluctuations between the US dollar and other currencies. Under UK GAAP, these contracts are accounted for as hedges: gains and losses are deferred and subsequently recognised when the hedged transaction occurs. Under US GAAP, some of these transactions do not qualify for hedge accounting under FAS 52, principally because they are not yet contractual commitments. Unrealised gains and losses on derivatives relating to such transactions have therefore been recognised in US GAAP earnings. Debt: The Group finances its operations primarily in US dollars and a significant proportion of the Group's US dollar debt is located in its Australian operations. Under UK GAAP, this debt is dealt with in the context of the currency status of the Group as a whole and exchange differences reported by the Australian operations are adjusted through reserves. US GAAP permits such exchange gains and losses to be taken to reserves only to the extent that the US dollar debt hedges US dollar assets in the Australian Group. Exchange gains and losses on US dollar debt that does not qualify for hedge accounting under US GAAP have therefore been recorded in earnings. METAL PRICES AND EXCHANGE RATES Years ended 31 December Year Year Metal prices 2000 1999 Change Average market prices for the year were: Copper - US cents/lb 82c 72c +14% Aluminium - US cents/lb 70c 62c +13% Gold - US$/troy oz US$279 US$279 - Exchange Rates in US$ Annual Average Year end 2000 1999 Change 2000 1999 Change Sterling 1.52 1.62 (6%) 1.49 1.61 (7%) Australia 0.58 0.65 (11%) 0.56 0.66 (15%) Canada 0.67 0.67 - 0.67 0.69 (3%) South Africa 0.14 0.16 (13%) 0.13 0.16 (19%) ACCOUNTING PRINCIPLES The financial information included in this report has been prepared in accordance with United Kingdom Accounting Standards and an Order under section 340 of the Australian Corporations Law issued by the Australian Securities and Investments Commission on 12 January 1998. Except as noted below, the financial information is drawn up on the basis of accounting policies consistent with those applied in the accounts for the year to 31 December 1999. FRS 15 - Tangible Fixed Assets and FRS 16 - Current Tax have been implemented in the period, but did not have a material effect on the financial position, results of operations or cash flows of the Group for either 1999 or 2000. Accordingly, comparative figures have not been restated. FINANCIAL INFORMATION This preliminary announcement contains financial information which has been extracted from the latest financial statements. This announcement does not constitute the full financial statements, which will be approved by the Board and reported on by the auditors on 23 February 2001 and subsequently filed with the Registrar of Companies and the Australian Securities and Investments Commission. The accounts of Rio Tinto plc and Rio Tinto Limited for 1999 were the subject of an unqualified audit report and have been delivered to the Registrar of Companies in the UK and the Australian Securities and Investments Commission respectively.

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