12th Mar 2008 07:21
Rio Tinto PLC12 March 2008 Rio Tinto Alcan confirmed as third major pillar of Rio Tinto Group 12 March 2008 • Pro forma 2007 underlying EBITDA of $4,813 million for Primary Metaland Bauxite & Alumina, making Rio Tinto Alcan the third major pillar of GroupEBITDA along with iron ore and copper. • Pro forma 2007 underlying earnings for Primary Metal and Bauxite &Alumina of $2,092 million, representing 23 per cent of Rio Tinto's pro formaunderlying earnings before corporate items and interest. • Pro forma capital expenditure for Primary Metal and Bauxite & Aluminaof $2,296 million in 2007, reflecting continuing investment in value addinggrowth projects. • Pro forma share of production of 4.2 million tonnes of aluminium, 8.5million tonnes of alumina and 32.0 million tonnes of bauxite in 2007. • Significant earnings momentum anticipated in 2008 with each 10 c/lbmovement in the average annual aluminium price from the 2007 level of 120c/lbexpected to change Rio Tinto Alcan's underlying earnings by $620 million. 2008underlying earnings are also expected to be affected by exchange rate movementswith a 10 US cent movement in the Canadian dollar rate expected to impact fullyear underlying earnings by $150 million. Rising energy, pitch, coke, oil andfreight costs are also expected to partly offset any gain from higher LMEprices. • Bauxite reserves totalling 1,387 million tonnes of recoverable mineral(Rio Tinto share) at the end of 2007 compared with 1,193 million tonnes at theend of 2006. The 2007 numbers incorporate the Rio Tinto assets and Alcan assetscombined under the Rio Tinto Alcan name for the first time. Detailed bauxitereserves and resources data have been included within this release on pages 5and 6. Rio Tinto completed the acquisition of Alcan on 23 October 2007, and the newproduct group, comprising the combination of Alcan and the original Rio TintoAluminium businesses, was named Rio Tinto Alcan. In order to aid analysis of theRio Tinto Alcan product group going forward this pro forma information is beingprovided illustrating the enlarged product group, as though Alcan were part ofRio Tinto for the whole of 2007. The above financial summary numbers excludePackaging and Engineered Products. A sale process is underway for these assets.They have been excluded to present a view of the future Rio Tinto Alcanproduct group. Tom Albanese, Rio Tinto's chief executive said, "These pro forma numbersreinforce the significance of the Alcan acquisition, which has transformed ouraluminium group into an industry leader and the third major business within RioTinto. The strong fundamentals of the aluminium industry and the excellent longterm demand outlook augur well for Rio Tinto Alcan's future financialperformance. In addition to these earnings, we look forward to the synergiesfrom the acquisition. Our internal target is $1.1 billion, exceeding the $940million after tax synergies announced in November 2007." Dick Evans, Rio Tinto Alcan chief executive said, "The combination of the RioTinto and Alcan assets has created a world leader in bauxite and aluminiumproduction with a clear pathway to becoming the largest alumina producer. Ourmodern, low cost smelting assets benefit from a competitive hydro power positionwhich is becoming ever more valuable in today's energy constrained world. Thisis a business which we intend to grow and from which we are ideally positionedto deliver value in the future." Rio Tinto Alcan pro forma financial information by business unitYear ended 31 December 2007 US$ millions Gross sales Underlying Underlying(unaudited) revenue (a) EBITDA (b) earnings (c) AluminiumPrimary Metal 11,756 3,711 1,597Bauxite & Alumina 3,272 1,102 495Product group operations 15,028 4,813 2,092Other Product Group items 66 (19) 548Rio Tinto Alcan 15,094 4,794 2,640 Rio Tinto Group pro forma 7,859underlying earnings Reference above are to notes on page 3 Basis of preparation The Rio Tinto Alcan data presented above comprises the Primary Metal and Bauxite& Alumina business units before interest and does not include EngineeredProducts or Packaging. The pro forma underlying earnings for the Rio Tinto Groupinclude the full year underlying earnings of Primary Metal and Bauxite & Aluminaas well as Engineered Products, less the pro forma interest cost in respect ofthe acquisition facility for a full year and a number of other items. The RioTinto Group pro forma numbers exclude Packaging which is shown as an asset heldfor sale. Debt and interest In support of its acquisition of 100 per cent of Alcan's common shares, RioTinto arranged $40 billion of term loan and revolving credit facilities, fullyunderwritten and subsequently syndicated. The $40 billion term loan andrevolving credit facilities are divided into four tranches with maturitiesranging from 364 days (with an option to extend for an additional year at theborrower's option) out to five years and one business day. The total amountdrawn under the facility as at 31 December 2007 was $37.9 billion. The pro formainterest charge for the whole of 2007 has been based on the one month LIBOR rateas at 31 December 2007, plus the appropriate margins. Other Product Group items To give a more representative indication of the underlying earnings of thebusiness units, the positive impact of the reduction in the Canadian tax rateand certain other one-off items, together with Product Group project evaluationand other costs have been included within the line "Other Product Group items". Tax The approximate long-term effective tax rate on underlying earnings for RioTinto Alcan, before one-off items and excluding the impact of foreign exchangerate movements, is expected to be 31%. Rio Tinto Group pro forma underlying earnings 'Underlying earnings' is an alternative measure of earnings, which is reportedby Rio Tinto to provide greater understanding of the business performance of itsoperations. Items excluded from net earnings in arriving at underlying earningsinclude impairment charges less reversals, certain exchange differences andderivatives and non-recurring consequences of the Alcan acquisition. Rio Tinto Alcan pro forma financial information by business unitYear ended 31 December 2007US$ millions Capital Depreciation & expenditure amortisation (e)(unaudited) (d) AluminiumPrimary Metal 1,175 1,316Bauxite & Alumina 1,121 445Corporate 10 53Total Rio Tinto Alcan 2,306 1,814 Notes to financial information by business unit (a) Gross sales revenue includes 100 per cent of subsidiaries' sales revenueand Rio Tinto Alcan's share of the sales revenue of equity accounted units. (b) EBITDA of subsidiaries and Rio Tinto Alcan's share of EBITDA relating toequity accounted units represents profit before: tax, net finance items,depreciation and amortisation. (c) Underlying earnings represent profit after tax for the periodattributable to Rio Tinto Alcan. Earnings of subsidiaries are stated beforefinance items but after the amortisation of the discount related to provisions.Earnings attributable to equity accounted units include interest charges andamortisation of discount. Earnings attributed to business units do not includeamounts that are excluded in arriving at Underlying earnings. (d) Capital expenditure comprises the net cash outflow on purchases lessdisposals of property, plant and equipment, capitalised evaluation costs andpurchases less disposals of other intangible assets. The details providedinclude 100 per cent of subsidiaries' capital expenditure and Rio Tinto Alcan'sshare of the capital expenditure of equity accounted units, whether this isfunded by Rio Tinto Alcan or not. (e) Depreciation and amortisation includes 100% of subsidiaries and RioTinto Alcan's share of depreciation and amortisation relating to equityaccounted units. The provisional assessment of the incremental depreciation &amortisation on the fair value up-lift is included within these amounts. Bauxite reserves Ore reserves and mineral resources for Rio Tinto managed operations are reportedin accordance with the Australasian Code for Reporting of Exploration Results,Mineral Resources and Ore Reserves, December 2004 (the JORC Code) as required bythe Australian Stock Exchange (ASX). Codes or guidelines similar to JORC withonly minor regional variations have been adopted in South Africa, Canada, USA,Chile, UK, Ireland and Europe, Peru, and the Phillipines. Together these Codesrepresent current best practice for reporting ore reserves and mineralresources. The JORC Code envisages the use of reasonable investment assumptions, includingthe use of projected long term commodity prices, in calculating reserveestimates. However, for US reporting, the US Securities and Exchange Commissionrequire historical price data to be used. For this reason, some reservesreported to the SEC in the Form 20-F will differ from those reported below. Ore reserve and mineral resource information in the tables below is based oninformation compiled by Competent Persons (as defined by JORC), or 'recognisedoverseas mining professionals' as defined by the ASX, most of whom are full timeemployees of Rio Tinto or related companies. Each has had a minimum of fiveyears relevant estimation experience and is a member of a recognisedprofessional body whose members are bound by a professional code of ethics.Each Competent Person consents to the inclusion in this report of informationthey have provided in the form and context in which it appears. A register ofthe names of the Competent Persons who are responsible for the estimates ismaintained by the Company Secretaries in London and Melbourne and is availableon request. Where operations are not managed by Rio Tinto the reserves arepublished as received from the managing company. The ore reserve figures in the following tables are as of 31 December 2007.Summary data for year end 2006 are shown for comparison. Metric units are usedthroughout. The figures used to calculate Rio Tinto's share of reserves areoften more precise than the rounded numbers shown in the tables, hence smalldifferences might result if the calculations are repeated using the tabulatedfigures. (a) Type of mine: O/P = open pit (b) Reserves of bauxite (as alumina) are shown as recoverable reserves ofsaleable product after accounting for all mining and processing losses. Millrecoveries are therefore not shown. (c) Rio Tinto acquired the operating assets of Alcan with effect from 24 October2007. The Rio Tinto assets and the Alcan assets have been combined under theRio Tinto Alcan name. Reserves are presented here for the first time. The Weipadeposit includes the reserve for Ely.Bauxite resources As required by the Australian Stock Exchange, the following tables containdetails of other mineralisation that has a reasonable prospect of beingeconomically extracted in the future but which is not yet classified as Provedor Probable Reserves. This material is defined as Mineral Resources under theJORC Code. Estimates of such material are based largely on geologicalinformation with only preliminary consideration of mining, economic and otherfactors. While in the judgement of the Competent Person there are realisticexpectations that all or part of the Mineral Resources will eventually becomeProved or Probable Reserves, there is no guarantee that this will occur as theresult depends on further technical and economic studies and prevailing economicconditions in the future. Where operations are not managed by Rio Tinto theresources are published as received from the managing company. Resources are stated as additional to the reserves reported earlier. (a) Likely mining method: O/P = open pit (b) Rio Tinto acquired the operating assets of Alcan with effect from 24 October2007. The Rio Tinto assets and the Alcan assets have been combined under theRio Tinto Alcan name. Resources are presented here for the first time. The Weipadeposit includes the resource for Ely; Rio Tinto Alcan has an 80% interest inthe Awaso mine in Ghana but the resource estimate is still under review. Metal prices and exchange rates 2007 Metal prices - average for the period Aluminium US cents/lb 120c Average exchange rates in US$ Australian dollar 0.84Canadian dollar 0.93Euro 1.37 Period end exchange rates in US$ Australian dollar 0.88Canadian dollar 1.01Euro 1.47 Price, exchange and interest rate sensitivities The following sensitivities give the estimated effect on underlying earningsassuming that each individual price, exchange rate or interest rate moved inisolation. The relationship between currencies and commodity prices is a complexone and movements in exchange rates can cause movements in commodity prices andvice versa. The exchange rate sensitivities quoted below only include theeffect on operating costs of movements in exchange rates. They do not includethe effect of the revaluation of foreign currency financial assets andliabilities. They should therefore be used with care. 2007 average price/ Effect on exchange rate Rio Tinto Alcan full year underlying earnings ($m) Aluminium 120c/lb +/-10c/lb 620Canadian dollar 93USc +/-10c 150Australian dollar 84USc +/-10c 165Euro 137USc +/-10c 50 Availability of this report This report is available on the Rio Tinto website. Further information on modelling Rio Tinto Alcan can be found on the Rio Tintowebsite at www.riotinto.com/media/5157_7016.asp About Rio Tinto Rio Tinto is a leading international mining group headquartered in the UK,combining Rio Tinto plc, a London and NYSE listed company, and Rio TintoLimited, which is 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. Pro forma Financial Information Pro forma financial information included in this announcement has not beenaudited and has not been prepared in accordance with the rules and regulationsof the United States Securities and Exchange Commission. Such pro formainformation has been prepared on the basis of IFRS. Actual financial results mayhave differed from those reported herein. 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 ofactual production during any period, levels of demand and market prices, theability to produce and transport products profitably, the impact of foreigncurrency exchange rates on market prices and operating costs, operationalproblems, political uncertainty and economic conditions in relevant areas of theworld, the actions of competitors, activities by governmental authorities suchas changes in taxation or regulation and such other risk factors identified inRio Tinto's most recent Annual Report on Form 20-F filed with the United StatesSecurities and Exchange Commission (the "SEC") or Form 6-Ks furnished to theSEC. Forward-looking statements should, therefore, be construed in light of suchrisk factors and undue reliance should not be placed on forward-lookingstatements. These forward-looking statements speak only as of the date of thisannouncement. Rio Tinto expressly disclaims any obligation or undertaking(except as required by applicable law, the City Code on Takeovers and Mergers(the "Takeover Code"), the UK Listing Rules, the Disclosure and TransparencyRules of the Financial Services Authority and the Listing Rules of theAustralian Securities Exchange) to release publicly any updates or revisions toany forward-looking statement contained herein to reflect any change in RioTinto's expectations with regard thereto or any change in events, conditions orcircumstances 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, AustraliaChristina Mills Amanda BuckleyOffice: +44 (0) 20 7781 1154 Office: +61 (0) 3 9283 3627Mobile: +44 (0) 7825 275 605 Mobile: +61 (0) 419 801 349Nick Cobban Ian HeadOffice: +44 (0) 20 7781 1138 Office: +61 (0) 3 9283 3620Mobile: +44 (0) 7920 041 003 Mobile: +61 (0) 408 360 101 Media Relations, AmericasNancy IvesMobile: +1 619 540 3751 Investor Relations, London Investor Relations, AustraliaNigel Jones Dave SkinnerOffice: +44 (0) 20 7781 2049 Office: +61 (0) 3 9283 3628Mobile: +44 (0) 7917 227365 Mobile: +61 (0) 408 335 309 David Ovington Simon EllinorOffice: +44 (0) 20 7781 2051 Office: +61 (0) 7 3867 1068Mobile: +44 (0) 7920 010 978 Mobile: +61 (0) 439 102 811 Investor Relations, North AmericaJason CombesOffice: +1 (0) 801 685 4535Mobile: +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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