18th Dec 2007 09:12
Rio Tinto PLC18 December 2007 Rio Tinto to place up to 15 million tonnes of iron ore into the spot market in2008 18 December 2007 Rio Tinto has announced plans to place up to 15 million tonnes of iron ore intothe spot market in 2008. Rio Tinto announced at its Investor Seminar on 26 November 2007 that it isplanning substantial expansions of capacity over the next decade in its WesternAustralia Pilbara operations. This will allow the Group to place substantiallymore tonnage on to the higher-priced spot market while continuing to meetlonger-term contractual commitments. Rio Tinto has been active in the spot market during 2007 and in December soldone million tonnes at US$190 per tonne. A similar volume has been sold forJanuary shipment at an average price of US$187 per tonne. This compares withthe current equivalent benchmark price of US$85 per tonne (FY2007 FOB benchmarkplus spot freight). "The iron ore market is changing", said Tom Albanese, chief executive of RioTinto. "Customers are demanding more transparency in pricing and more tonnes,faster than ever before. Our industry-leading growth pipeline in iron ore putsus in a strong position to benefit from stronger prices, now and in the future." Sam Walsh, Rio Tinto's chief executive Iron Ore, said, "The bulk of Rio Tinto'sPilbara capacity is committed under long term contracts and Rio Tinto willcontinue to honour these contracts. At the same time the gap between thebenchmark and spot prices is huge and we intend to continue to take advantage ofthose higher prices". Mr Walsh said the iron ore market was extremely tight. "We produce more tonnesat lower cost, from locations closest to the growth iron ore markets. We believein competitive and transparent pricing, and our production expansion plans giveus the capacity to supply all of our markets and allow us to agree prices forall durations." This announcement follows the 26 November 2007 Investor Seminar outlining RioTinto's conceptual pathway to iron ore production of more than 600 milliontonnes per year, including 420 million tonnes a year from the Pilbara. At that time Rio Tinto also announced a US$2.4 billion commitment to develop theMesa A and Brockman 4 iron ore deposits in the Pilbara, as well as outliningplans to increase the potential capacity of its Simandou iron ore project inGuinea (West Africa) to 170 million tonnes per year. The existing Pilbara rail and port infrastructure secures Rio Tinto's positionas the premier Australian iron ore supplier, allowing it to reap maximum benefitfrom a strong pricing outlook, Mr Walsh said. "We own and operate three ports intwo locations, and we have the capability to expand these facilities well beyondthe existing levels." Notes to editors: Rio Tinto believes that efficient short, medium and long term contracts need toexist in the iron ore industry. At its Investor Seminar on 26 November 2007,Rio Tinto outlined its intention to operate a mix of three pricing approaches: • Short-term spot sales; • Hybrid contracts - which are based around a frequent pricing adjustment to reflect fair market value. As at November 2007, Rio Tinto had signed some 6.5 million tonnes per annum of hybrid contracts; and • Long-term contracts with regular re-pricing. By way of sensitivity, the current difference between the spot iron ore priceand the price of iron ore delivered pursuant to 2007 term contracts is aboutUS$100 per tonne. On 15 million tonnes this would equate to US$1.5 billion ofrevenue before tax This announcement is one component of this approach. About Rio Tinto Rio Tinto is a leading international mining group headquartered in the UK,combining Rio Tinto plc, a London listed company, and Rio Tinto Limited, whichis listed on the Australian Securities Exchange. Rio Tinto's business is finding, mining, and processing mineral resources. Majorproducts are aluminium, copper, diamonds, energy (coal and uranium), gold,industrial minerals (borax, titanium dioxide, salt, talc) and iron ore.Activities span the world but are strongly represented in Australia and NorthAmerica with significant businesses in South America, Asia, Europe and southernAfrica. Forward-Looking Statements This announcement includes "forward-looking statements" within the meaning ofSection 27A of the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended. All statements other thanstatements of historical facts included in this announcement, including, withoutlimitation, those regarding Rio Tinto's financial position, business strategy,plans and objectives of management for future operations (including developmentplans and objectives relating to Rio Tinto's products, production forecasts andreserve and resource positions), are forward-looking statements. Suchforward-looking statements involve known and unknown risks, uncertainties andother factors which may cause the actual results, performance or achievements ofRio Tinto, or industry results, to be materially different from any futureresults, performance or achievements expressed or implied by suchforward-looking statements. Such forward-looking statements are based on numerous assumptions regarding RioTinto's present and future business strategies and the environment in which RioTinto will operate in the future. Among the important factors that could causeRio Tinto's actual results, performance or achievements to differ materiallyfrom those in the forward-looking statements include, among others, levels ofdemand and market prices, the ability to produce and transport productsprofitably, the impact of foreign currency exchange rates on market prices andoperating costs, operational problems, political uncertainty and economicconditions in relevant areas of the world, the actions of competitors,activities by governmental authorities such as changes in taxation or regulationand such other risk factors identified in Rio Tinto's most recent Annual Reporton Form 20-F filed with the United States Securities and Exchange Commission(the "SEC") or Form 6-Ks furnished to the SEC. Forward-looking statementsshould, therefore, be construed in light of such risk factors and undue relianceshould not be placed on forward-looking statements. These forward-lookingstatements speak only as of the date of this announcement. Rio Tinto expresslydisclaims any obligation or undertaking (except as required by applicable law,the City Code on Takeovers and Mergers (the "Takeover Code"), the UK ListingRules, the Disclosure and Transparency Rules of the Financial Services Authorityand the Listing Rules of the Australian Securities Exchange) to release publiclyany updates or revisions to any forward-looking statement contained herein toreflect any change in Rio Tinto's expectations with regard thereto or any changein events, conditions or circumstances on which any such statement is based. Nothing in this announcement should be interpreted to mean that future earningsper share of Rio Tinto plc or Rio Tinto Limited will necessarily match or exceedits historical published earnings per share. Subject to the requirements of the Takeover Code, none of Rio Tinto, any of itsofficers or any person named in this announcement with their consent or anyperson involved in the preparation of this announcement makes any representationor warranty (either express or implied) or gives any assurance that the impliedvalues, anticipated results, performance or achievements expressed or implied inforward-looking statements contained in this announcement will be achieved. For further information, please contact:Media Relations, London Media Relations, Australia Christina Mills Amanda Buckley Office: +44 (0) 20 7781 1154 Office: +61 (0) 3 9283 3627Mobile: +44 (0) 7825 275 605 Mobile: +61 (0) 419 801 349 Nick Cobban Alison Smith Office: +44 (0) 20 7781 1138 Office: +61 (0) 7 3361 4223 Mobile: +44 (0) 7920 041 003 Mobile: +61 (0) 438 787 038 Media Relations, US Nancy Ives Mobile: +1 619 540 3751Investor Relations, London Investor Relations, Australia Nigel Jones Dave Skinner Office: +44 (0) 20 7781 2049 Office: +61 (0) 3 9283 3628 Mobile: +44 (0) 7917 227 365 Mobile: +61 (0) 408 335 309 Investor Relations, North America David Ovington Jason Combes Office: +44 (0) 20 7781 2051 Office: +1 (0) 801 685 4535 Mobile: +44 (0) 7920 010 978 Mobile: +1 (0) 801 558 2645 Email: [email protected] Website: www.riotinto.com High resolution photographs available at: www.newscast.co.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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