RIO TINTO LTD (Form Type: 20-F, Filing Date: 06/27/2005)

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 20-F

(Mark One)

	Registration statement pursuant to Section 12 (b) or 12(g) of the Securities Exchange Act of 1934
	or
	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the financial year ended: 31 December 2004
	or
	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from: __________ to __________


Commission file number: 1-10533	Commission file number: 0-20122

Rio Tinto plc	Rio Tinto Limited
	ABN 96 004 458 404
(Exact name of Registrant as specified in its charter)	(Exact name of Registrant as specified in its charter)

England and Wales	Victoria, Australia
(Jurisdiction of incorporation or organisation)	(Jurisdiction of incorporation or organisation)

6 St James’s Square	Level 33, 55 Collins Street
London, SW1Y 4LD, England	Melbourne, Victoria 3001, Australia
(Address of principal executive offices)	(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange	Name of each exchange	Title of each class
	on which registered	on which registered
American Depositary	New York		None
Shares*	Stock Exchange
Ordinary Shares of 10p	New York
each**	Stock Exchange


*	Evidenced by American Depository Receipts. Each American Depository Share Represents four Rio Tinto plc Ordinary Shares of 10p each.
**	Not for trading, but only in connection with the listing of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Title of each class	Title of each class
None	American Depositary Shares***
	Ordinary Shares


***	Evidenced by American Depository Receipts. Each American Depository Share represents four Rio Tinto Limited Ordinary Shares.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of
the period covered by the annual report:

Title of each class	Number	Number	Title of each class
Ordinary Shares of 10p each	1,066,674,301	499,058,420	Shares
DLC Dividend Share of 10p	1	1	DLC Dividend Share
Special Voting Share of 10p	1	1	Special Voting Share

Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and
(2) have been subject to such filing requirements for the past 90 days:
Yes No
Indicate by check mark which financial statement item the Registrants have elected to follow:

Item 17 Item 18

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EXPLANATORY NOTE

The Rio Tinto Group is a leading international mining group, combining Rio Tinto plc and Rio Tinto Limited in a dual listed companies (‘DLC’) merger that has created a single economic enterprise, nevertheless both companies remain separate legal entities with separate share listings and registrars, and with separate ADR programmes.
Rio Tinto plc and Rio Tinto Limited prepare annual reports and financial statements for the combined group that are presented to their shareholders as their consolidated accounts in accordance with both United Kingdom and Australian legislation and regulations. The current such document is the 2004 Annual report and financial statements. They also prepare their annual reports on Form 20-F,that are filed with the SEC in accordance with United States legislation and regulations, as a combined document.

Rio Tinto 2004 Form 20-F 2

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CONTENTS

		Page
	PART I

Item 1.	Identity of Directors, Senior Management and Advisers	4
Item 2.	Offer Statistics and Expected Timetable	4
Item 3.	Key Information	5
Item 4.	Information on the Company	10
Item 5.	Operating and Financial Review and Prospects	27
Item 6.	Directors, Senior Management and Employees	67
Item 7.	Major Shareholders and Related Party Transactions	90
Item 8.	Financial Information	91
Item 9.	The Offer and Listing	93
Item 10.	Additional Information	95
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	104
Item 12.	Description of Securities other than Equity Securities	104

	PART II

Item 13.	Defaults, Dividend Arrearages and Delinquencies	104
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	104
Item 15.	Controls and Procedures	104
Item 16A.	Audit Committee Financial Expert	105
Item 16B.	Code of Ethics	105
Item 16C.	Principal Accountant Fees and Services	105
Item 16D.	Exemptions from the Listing Standards for Audit Committees	105
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	105

	PART III

Item 17.	Financial Statements	105
Item 18.	Financial Statements	105
Item 19.	Exhibits	106

Rio Tinto 2004 Form 20-F 3

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RIO TINTO

PART I

Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.

Item 2. Offer Statistics and Expected Timetable
Not applicable.

Rio Tinto 2004 Form 20-F 4

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Item 3. Key Information

SELECTED FINANCIAL DATA FOR THE RIO TINTO GROUP for the period 2000 to 2004

Rio Tinto 2004 Form 20-F 5

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The following selected consolidated financial data has been derived from the consolidated financial statements of the Rio Tinto Group and of the Rio Tinto plc and Rio Tinto Limited parts of the Group presented elsewhere herein, restated where appropriate to accord with the current accounting policies and presentations. The selected consolidated financial data should be read in conjunction with, and qualified in their entirety by reference to, the consolidated financial statements and notes thereto included elsewhere in this annual report on Form 20-F.
The consolidated financial statements are prepared in accordance with UK GAAP, which differs in certain respects from US GAAP. Details of the principal differences between UK GAAP and US GAAP are set out in note 42 on pages A-65 to A-84.

RIO TINTO GROUP

Income Statement Data
For the years ending 31 December	2000	2001	2002	2003	2004
Amounts in accordance with UK GAAP
(US$ millions)

Consolidated turnover (f)	8,081	8,343	8,715	9,568	11,799
Group operating profit (a)	2,188	1,562	831	1,496	1,722
Net earnings (a)	1,507	1,079	651	1,508	2,813

Group operating profit per share (US cents)	159.4	113.6	60.3	108.6	124.9
Earnings per share (US cents)	109.8	78.5	47.3	109.5	204.0
Diluted earnings per share (US cents)	109.7	78.3	47.2	109.3	203.6
Dividends per share (US cents) (b)	57.5	59.0	60.0	64.0	77.0
Dividends per share (pence) (b)	38.87	41.68	37.47	37.13	41.48
Dividends per share (Australian cents) (b)	102.44	115.27	105.93	89.70	103.82
Weighted average number of shares (millions) (b)	1,373	1,375	1,377	1,378	1,379

Amounts in accordance with US GAAP
(US$ millions)

Consolidated turnover (c) (f)	8,065	8,348	8,719	9,545	11,814
Group operating profit	1,948	1,821	746	1,041	1,442
Net earnings	1,174	1,038	581	1,977	2,823

Group operating profit per share (US cents)	141.9	132.4	54.2	75.5	104.6
Earnings per share (US cents)	85.5	75.5	42.2	143.5	204.7
Diluted earnings per share (US cents)	85.4	75.4	42.1	143.3	204.4

Balance Sheet Data
at 31 December	2000	2001	2002	2003	2004
Amounts in accordance with UK GAAP
(US$ millions)

Total assets	19,367	19,540	20,204	24,081	25,711
Share capital / premium	2,535	2,486	2,580	2,869	2,938
Shareholders' funds (net assets)	7,211	7,043	7,462	10,037	12,584

Amounts in accordance with US GAAP
(US$ millions)

Total assets	21,530	22,102	22,600	26,959	28,938
Share capital / premium	2,535	2,486	2,580	2,869	2,938
Shareholders' funds (net assets)	9,812	9,571	9,517	12,044	14,462

Rio Tinto 2004 Form 20-F 6

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RIO TINTO PLC - PART OF RIO TINTO GROUP

Income Statement Data
for the years ending 31 December	2000	2001	2002		2003		2004
Amounts in accordance with UK GAAP
(US$ millions)

Consolidated turnover (f)	4,045	3,769	3,993		4,092		5,275
Group operating profit (a)	915	137	(19	)	368		289
Net earnings (a)	1,064	491	195		956		2,073

Group operating profit per share (US cents)	86.0	12.9	(1.8	)	34.5		27.1
Earnings per share (US cents)	100.1	46.1	18.3		89.7		194.2
Diluted earnings per share (US cents)	100.0	46.0	18.3		89.5		193.9
Dividends per share (US cents) (b)	57.5	59.0	60.0		64.0		77.0
Dividends per share (pence) (b)	38.87	41.68	37.47		37.13		41.48
Weighted average number of shares (millions) (b)	1,063	1,064	1,065		1,066		1,067

Amounts in accordance with US GAAP
(US$ millions)

Consolidated turnover (c) (f)	4,034	3,783	3,993		4,072		5,298
Group operating profit	747	548	(481	)	(7	)	162
Net earnings	820	618	(206	)	949		2,010

Group operating profit per share (US cents)	70.2	51.5	(45.2	)	(0.7	)	15.2
Earnings per share (US cents)	77.1	58.1	(19.3	)	89.0		188.3
Diluted earnings per share (US cents)	77.1	58.0	(19.3	)	88.9		188.0

BALANCE SHEET DATA
AT 31 DECEMBER	2000	2001	2002		2003		2004
Amounts in accordance with UK GAAP
(US$ millions)

Total assets	11,948	11,921	12,606		13,708		15,516
Share capital / premium	1,741	1,754	1,764		1,784		1,805
Shareholders’ funds (net assets)	6,325	5,902	5,899		7,343		9,139

Amounts in accordance with US GAAP
(US$ millions)

Total assets	13,557	13,735	13,941		15,180		17,375
Share capital / premium	1,741	1,754	1,764		1,784		1,805
Shareholders’ funds (net assets)	8,693	8,371	7,697		8,931		10,560

Rio Tinto 2004 Form 20-F 7

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RIO TINTO LIMITED - PART OF RIO TINTO GROUP

Income Statement Data
for the years ending 31 December	2000	2001	2002	2003	2004
Amounts in accordance with UK GAAP
(US$ millions)

Consolidated turnover (f)	4,036	4,574	4,722	5,476	6,524
Group operating profit (a)	1,273	1,425	855	1,128	1,433
Net earnings (a)	771	942	736	884	1,185

Group operating profit per share (US cents)	235.7	286.1	171.3	226.1	287.2
Earnings per share (US cents)	142.8	189.0	147.6	177.2	237.4
Diluted earnings per share (US cents)	142.7	188.9	147.4	176.9	236.9
Dividends per share (US cents) (b)	57.5	59.0	60.0	64.0	77.0
Dividends per share (Australian cents) (b)	102.44	115.27	105.93	89.70	103.82
Weighted average number of shares (millions) (b)	540	498	499	499	499

Amounts in accordance with US GAAP
(US$ millions)

Consolidated turnover (c) (f)	4,027	4,575	4,726	5,473	6,516
Group operating profit	1,201	1,273	1,231	1,048	1,280
Net earnings	614	671	1,267	1,647	1,301

Group operating profit per share (US cents)	222.4	255.6	246.7	210.0	256.5
Earnings per share (US cents)	113.9	134.6	254.0	330.1	260.6
Diluted earnings per share (US cents)	113.9	134.5	253.7	330.0	260.1


BALANCE SHEET DATA
AT 31 DECEMBER	2000	2001	2002	2003	2004
Amounts in accordance with UK GAAP
(US$ millions)

Total assets	9,542	9,977	10,382	13,542	15,316
Share capital / premium	939	865	964	1,280	1,336
Shareholders' funds (net assets)	1,420	1,828	2,510	4,324	5,515

Amounts in accordance with US GAAP
(US$ millions)

Total assets	10,236	10,770	11,609	15,234	16,964
Share capital / premium	939	865	964	1,280	1,336
Shareholders' funds (net assets)	1,795	1,920	2,922	4,996	6,247


(a)	In 2004 Rio Tinto Group operating profit under UK GAAP is stated after charging US$558 million for certain asset write downs and provisions for contract obligations which relate to Rio Tinto plc. In 2004, net earnings for the Rio Tinto Group include net write downs and provisions for contract obligations of US$321 million relating to Rio Tinto plc. In addition the Group’s net earnings for 2004 include exceptional gains of US$913 million arising on the sale of certain operations of which US$827 million relate to Rio Tinto plc and US$137 million relate to Rio Tinto Limited. In 2003 Rio Tinto Group net earnings under UK GAAP are stated after exceptional gains totalling US$126 million which arose on the sale of certain operations by Rio Tinto Limited. In 2002 Rio Tinto Group operating profit under UK GAAP is stated after charging US$962 million for asset write downs, of which US$529 million relates to Rio Tinto plc and US$433 million relates to Rio Tinto Limited. In addition, group operating profit for 2002 includes US$116 million for environmental remediation charges which all relate to Rio Tinto plc. In 2002 net earnings for the Rio Tinto Group include US$763 million for asset write downs of which US$623 million relates to Rio Tinto plc and US$225 million relates to Rio Tinto Limited. In addition the Group’s net earnings for 2002 include US$116 million for environmental remediation charges which all relate to Rio Tinto plc. In 2001 Rio Tinto Group operating profit under UK GAAP is stated after charging US$715 million for exceptional asset write downs, of which US$644 million relates to Rio Tinto plc and US$71 million relates to Rio Tinto Limited. In 2001 Rio Tinto Group net earnings under UK GAAP are after charges of US$583 million for asset write downs of which US$551 million relates to Rio Tinto plc and US$52 million relates to Rio Tinto Limited. Under UK GAAP asset write downs and the environmental remediation charges are classified as ‘exceptional' but none of these items would be classified as ‘extraordinary’ items under US GAAP.
(b)	These figures are the same under both UK and US GAAP.
(c)	A cumulative adjustment was made in 2000 to reflect the application of Staff Accounting Bulletin No. 104 (‘SAB104’) Revenue recognition in financial statements. The effect of SAB 104 is described on page A-70.
(d)	The results for all years relate wholly to continuing operations.
(e)	The decrease in Rio Tinto Limited shareholders’ funds in 2000 reflects the buy back of 91,000,000 shares from Rio Tinto plc in that year.
(f)	The historical data for 2000-2003 has been reclassified for the impact of reporting the reimbursement of certain shipping and handling costs incurred by the Group as “turnover” rather than a reduction of “net operating costs”. See note (c) on page A-2.Footnotes.

Rio Tinto 2004 Form 20-F 8

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RISK FACTORS
The following describes some of the risks that could affect Rio Tinto. There may be additional risks unknown to Rio Tinto and other risks, currently believed to be immaterial, could turn out to be material. These risks, whether they materialise individually or simultaneously, could significantly affect the Group’s business and financial results. They should also be considered in connection with any forward looking statements in this document and the cautionary statement below.

Economic condition
Commodity prices, and demand for the Group’s products, are influenced strongly by world economic growth, particularly that in the US and Asia. The Group’s normal policy is to sell its products at prevailing market prices. Commodity prices can fluctuate widely and could have a material and adverse impact on the Group’s asset values, revenues, earnings and cash flows. Further discussion can be found on page 14, Business environment and markets, and on page 39, commodity prices.

Exchange rates
The Group’s asset values, earnings and cash flows are influenced by a wide variety of currencies due to the geographic diversity of the Group’s sales and areas of operation. The majority of the Group’s sales are denominated in US dollars. The Australian and US dollars are the most important currencies influencing costs. The relative value of currencies can fluctuate widely and could have a material and adverse impact on the Group’s asset values, costs, earnings and cash flows. Further discussion can be found on page 37, exchange rates, reporting currencies and currency exposure.

Acquisitions
The Group has grown partly through the acquisition of other businesses. Business combinations commonly entail a number of risks and Rio Tinto cannot be sure that management will be able effectively to integrate businesses acquired or generate the cost savings and synergies anticipated. Failure to do so could have a material and adverse impact on the Group’s costs, earnings and cash flows.

Exploration and new projects
The Group seeks to identify new mining properties through an active exploration programme. There is no guarantee, however, that such expenditure will be recouped or that existing mineral reserves will be replaced. Failure to do so could have a material and adverse impact on the Group’s financial results and prospects.
The Group develops new mining properties and expands its existing operations as a means of generating shareholder value. Increasing regulatory, environmental and social approvals are, however, required which can result in significant increases in construction costs and/or significant delays in construction. These increases could materially and adversely affect a project’s economics, the Group’s asset values, costs, earnings and cash flows.

Reserve estimation
There are numerous uncertainties inherent in estimating ore reserves. Reserves that are valid at the time of estimation may change significantly when new information becomes available. Fluctuations in the price of commodities, exchange rates, increased production costs or reduced recovery rates may render lower grade reserves uneconomic and may, ultimately, result in a restatement. A significant restatement could have a material and adverse impact on the Group’s asset values, costs, cash flows and earnings.

Political and community
The Group has operations in jurisdictions having varying degrees of political instability. Political instability can result in civil unrest, expropriation, nationalisation, renegotiation or nullification of existing agreements, mining leases and permits, changes in laws, taxation policies or currency restrictions. Any of these can have a material adverse effect on the profitability or, in extreme cases, the viability of an operation.
Some of the Group’s current and potential operations are located in or near communities that may now, or in the future, regard such an operation as having a detrimental effect on their economic and social circumstances. Should this occur, it might have a material adverse impact on the profitability or, in extreme cases, the viability of an operation. In addition, such an event may adversely affect the Group’s ability to enter into new operations in the country.

Technology
The Group has invested in and implemented information system and operational initiatives. Several technical aspects of these initiatives are still unproven and the eventual operational outcome or viability cannot be assessed with certainty. Accordingly, the costs and benefits from these initiatives and the consequent effects on the Group’s future earnings and financial results may vary widely from present expectations.

Land and resource tenure
The Group operates in several countries where title to land and rights in respect of land and resources (including indigenous title) may be unclear and may lead to disputes over resource development. Such disputes could disrupt relevant mining projects and/or impede the Group’s ability to develop new mining properties.

Health, safety and environment
Rio Tinto operates in an industry that is subject to numerous health, safety and environmental laws and regulations as well as community expectations. Evolving regulatory standards and expectations can result in increased litigation and/or increased costs all of which can have a material and adverse effect on earnings and cash flows.

Mining operations
Mining operations are vulnerable to a number of circumstances beyond the Group’s control, including natural disasters, unexpected geological variations and industrial actions. These can affect costs at particular mines for varying periods. Mining, smelting and refining processes also rely on key inputs, for example fuel and electricity. Appropriate insurance can provide protection from some, but not all, of the costs that may arise from unforeseen events. Disruption to the supply of key inputs, or changes in their pricing, may have a material and adverse impact on the Group’s asset values, costs, earnings and cash flows.

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Rehabilitation
Costs associated with rehabilitating land disturbed during the mining process and addressing environmental, health and community issues are estimated and provided for based on the most current information available. Estimates may, however, be insufficient and/or further issues may be identified. Any underestimated or unidentified rehabilitation costs will reduce earnings and could materially and adversely affect the Group’s asset values, earnings and cash flows.

Non managed operations
Rio Tinto cannot guarantee that management of mining and processing assets not subject to its management control will comply with the Group’s standards and objectives, nor that effective policies, procedures and controls will be maintained over those assets.

CAUTIONARY STATEMENT ABOUT FORWARD LOOKING STATEMENTS
This document contains certain forward looking statements with respect to the financial condition, results of operations and business of the Rio Tinto Group. The words “intend”, “aim”, “project”, “anticipate”, “estimate”, “plan”, “believes”, “expects”, “may”, “should”, “will”, or similar expressions, commonly identify such forward looking statements. Examples of forward looking statements in this annual report on Form 20-F include those regarding estimated reserves, anticipated production or construction commencement dates, costs, outputs and productive lives of assets or similar factors. Forward looking statements involve known and unknown risks, uncertainties, assumptions and other factors set forth in this document that are beyond the Group’s control. For example, future reserves will be based in part on market prices that may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include the ability to produce and transport products profitably, the effect of foreign currency exchange rates on market prices and operating costs, and activities by governmental authorities, such as changes in taxation or regulation, and political uncertainty.
In light of these risks, uncertainties and assumptions, actual results could be materially different from any future results expressed or implied by these forward looking statements which speak only as at the date of this report. Except as required by applicable regulations or by law, the Group does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information or future events. The Group cannot guarantee that its forward looking statements will not differ materially from actual results.

Item 4. Information on the Company

INTRODUCTION
Rio Tinto Limited and Rio Tinto plc operate as one business organisation, referred to in this report as Rio Tinto, the Rio Tinto Group or, more simply, the Group. These collective expressions are used for convenience only since both Companies, and the individual companies in which they directly or indirectly own investments, are separate and distinct legal entities.
      “Limited”, “plc”, “Pty”, “Inc”, “Limitada”, or “SA” has generally been omitted from Group company names, except to distinguish between Rio Tinto plc and Rio Tinto Limited.
      Financial data in United States dollars (US$) is derived from, and should be read in conjunction with, the Rio Tinto Group’s consolidated financial statements which are in US$. In general, financial data in pounds sterling (£) and Australian dollars (A$) have been translated from the consolidated financial statements at the rates shown on page 112 and have been provided solely for convenience; exceptions arise where data, such as directors’ remuneration, can be extracted directly from source records.
      Rio Tinto Group turnover, profit before tax and net earnings and operating assets for 2003 and 2004 attributable to the Group’s products and geographical areas are shown in Notes 26 and 27 to the consolidated financial statements on pages A-39 to A-43. In the Operational review, operating assets and turnover are consistent with the financial information by business unit on pages A-63 and A-64.
      The tables on pages 17 to 20 show production for 2002, 2003 and 2004 and include estimates of proven and probable reserves and mineral resources. The weights and measures used are mainly metric units; conversions into other units are shown on page 112. Words and phrases, often technical, have been used which have particular meanings; definitions of these terms are on pages 109 to 111.

AN OVERVIEW OF RIO TINTO
Rio Tinto is a leading international mining group, combining Rio Tinto plc and Rio Tinto Limited in a dual listed companies (DLC) structure as a single economic entity. Nevertheless, both Companies remain legal entities with separate share listings and registers. Rio Tinto plc is incorporated in England and Wales and Rio Tinto Limited is incorporated in Australia.
Rio Tinto’s international headquarters are in London whilst the Australian representative office in Melbourne provides support for the operations, undertakes external and investor relations and fulfils statutory obligations. The registered office of Rio Tinto plc is at 6 St James’s Square, London, SW1Y 4LD (telephone: +44 20 7930 2399) and the registered office of Rio Tinto Limited is at Level 33, 55 Collins Street, Melbourne, Victoria 3000 (telephone: +61 3 9283 3333).

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For legal purposes, Rio Tinto’s US agent is Shannon Crompton, Secretary of Rio Tinto’s US holding companies, 8309 West 3595 South, Magna, Utah 84044. Investor relations in the US are provided by Makinson Cowell US Limited, One Penn Plaza, 250 W 34th St, Suite 1935, New York, NY 10119.

*Objective, strategy and management structure*
Rio Tinto’s fundamental objective is to maximise the overall long term return to its shareholders by operating responsibly and sustainably in areas of proven expertise where the Group has competitive advantage. Its strategy is to maximise the net present value per share by investing in large, long life, cost competitive mines. Investments are driven by the quality of opportunity, not choice of commodity.
Rio Tinto’s mining interests are diverse both in geography and product. The Group consists of wholly and partly owned subsidiaries, joint ventures, associated companies and joint arrangements, the principal ones being listed in Notes 31 to 34 of the consolidated financial statements on pages A-52 to A-53.
Rio Tinto’s management structure is designed to facilitate a clear focus on business performance and the Group’s objective. The management structure, which is reflected in this report, is based on principal product and global support groups:
•	Iron Ore
•	Energy
•	Industrial Minerals
•	Aluminium
•	Copper
•	Diamonds
•	Exploration, and
•	Technology
The chief executive of each group reports to the chief executive of Rio Tinto.

2004 financial summary
On 31 December 2004, Rio Tinto plc had a market capitalisation of £16.4 billion (US$31.6 billion) and Rio Tinto Limited had a market capitalisation of A$19.5 billion (US$15.2 billion). The combined Group’s market capitalisation in publicly held shares at the end of 2004 was US$41.1 billion.
At 31 December 2004, Rio Tinto had consolidated operating assets of US$16.6 billion: 61 per cent were located in Australia and New Zealand and 27 per cent in North America. Group turnover, or sales revenue, in 2004 was US$14.6 billion (or US$11.8 billion excluding Rio Tinto’s share of joint ventures’ and associates’ turnover). Net earnings in 2004 were US$2,813 million.

History
The Rio Tinto Company was formed by investors in 1873 to mine ancient copper workings at Rio Tinto in southern Spain. The Consolidated Zinc Corporation was incorporated in 1905, initially to treat zinc bearing mine waste at Broken Hill, New South Wales, Australia.
      The RTZ Corporation (formerly The Rio Tinto-Zinc Corporation) was formed in 1962 by the merger of The Rio Tinto Company and The Consolidated Zinc Corporation. CRA Limited (formerly Conzinc Riotinto of Australia Limited) was formed at the same time by a merger of the Australian interests of The Consolidated Zinc Corporation and The Rio Tinto Company. Between 1962 and 1995, RTZ and CRA discovered important mineral deposits, developed major mining projects and also grew through acquisition.
      RTZ and CRA were unified in December 1995 through a DLC structure. Directed by a common board of directors, this is designed to place the shareholders of both companies in substantially the same position as if they held shares in a single enterprise owning all of the assets of both Companies.
      In June 1997, The RTZ Corporation became Rio Tinto plc and CRA Limited became Rio Tinto Limited, together known as the Rio Tinto Group. Since the 1995 merger, the Group has continued to invest in developments and acquisitions in keeping with its strategy.

RECENT DEVELOPMENTS
Share buybacks and issues 2004-2005 to date
In April 2004, Rio Tinto plc shareholders renewed approvals for the buyback of up to ten per cent of its own shares and Rio Tinto Limited shareholders renewed approvals to buy back up to 100 per cent of Rio Tinto Limited shares held by Tinto Holdings Australia Pty Limited (a wholly owned subsidiary of Rio Tinto plc) plus, on market, up to ten per cent of the publicly held capital in any 12 month period.
The Group announced on 3 February 2005, its intention to return up to US$1.5 billion of capital to shareholders, therefore, Rio Tinto plc and Rio Tinto Limited obtained renewal of their existing shareholder approvals at their respective annual general meetings in 2005. Both Companies also obtained shareholder approval for Rio Tinto Limited to make off market purchases of its shares within 12 months of the annual general meeting, within the overall limit of ten per cent of publicly held capital described above. This was to be through a tender process at a discount to the market price. The shareholders’ approval obtained would also allow Rio Tinto Limited to buy back its shares from Tinto Holdings Australia, after such an off market tender (at the same price), to maintain the proportional holding of Tinto Holdings Australia following the off market buyback. The number of shares which may eventually be bought back under these authorities will be determined by the directors, based on what they consider to be in the best interests of all shareholders.

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     In the year to 31 December 2004, neither Rio Tinto plc nor Rio Tinto Limited purchased any publicly held shares for cancellation in either Company. However, a further 1,346,874 Rio Tinto plc and 280,332 Rio Tinto Limited shares were issued in respect of the Companies’ employee share plans. During the year, options for a further 1,541,367 Rio Tinto plc and 1,339,834 Rio Tinto Limited shares were granted under Rio Tinto’s share plans.
      On 9 May 2005 Rio Tinto Limited announced the successful result of its off market share buy back. A total of approximately 27.3 million shares, representing 8.7 per cent of Rio Tinto Limited’s publicly held issued share capital (2.0 per cent of the Rio Tinto Group), were bought back at A$36.70 per share at a cost of approximately A$1 billion (US$780 million). The buy back price of A$36.70 per share represented a 14 per cent discount to the relevant volume weighted average price of Rio Tinto Limited shares sold on the ASX over the five trading days up to and including the closing date of the buy back. It also represented a discount of 15.6 per cent to the closing price for Rio Tinto Limited shares on 6 May 2005, of A$43.50.
      Under a separate buy back, Tinto Holdings Australia accepted the same A$36.70 buy back price for a proportion of its 37.5 per cent holding of Rio Tinto Limited shares so that there was no change in the proportional shareholding in Rio Tinto Limited as a result of the buy back. Rio Tinto Limited therefore bought back a further 16.4 million shares at a cost of approximately A$600 million (US$470 million).

Share buybacks and issues 2002-2003
In 2002, 887,000 Rio Tinto plc and 360,000 Rio Tinto Limited shares were issued under the Companies’ employee share plans and options were granted over 2.6 million Rio Tinto plc shares and 2.2 million Rio Tinto Limited shares. In 2003, 1,193,000 Rio Tinto plc and 240,000 Rio Tinto Limited shares were issued in respect of the Companies’ employee share plans. During 2003, options were granted over 2.7 million Rio Tinto plc and 1.6 million Rio Tinto Limited shares in respect of the Companies’ employee share plans.
In the years 2002 and 2003, neither Rio Tinto plc nor Rio Tinto Limited purchased any publicly held shares for cancellation in either Company.

Operations acquired and divested 2004-2005 to date
In January 2004, Rio Tinto completed the sale of its 100 per cent interest in the nickel mining company Mineração Serra da Fortaleza Ltda to Votorantim Metais, a Brazilian controlled mining company. Including an adjustment for future nickel prices, the total cash consideration was approximately US$80 million.
      A 20 per cent interest in the Sepon project in Laos, comprising a gold operation and the Khanong copper project, was sold to Oxiana Limited for a cash consideration of US$85 million.
      In March, Rio Tinto completed the sale of its shareholding in Freeport-McMoRan Copper & Gold Inc (FCX). Rio Tinto received net proceeds of US$882 million for its 23,931,100 FCX shares. Rio Tinto retains its 40 per cent joint venture interest in reserves discovered after 1994 at the Grasberg mine which is managed by FCX. The sale of FCX shares does not affect the terms of the joint venture nor the management of the Grasberg mine.
      In June, Rio Tinto completed the sale of its 100 per cent interest in Zinkgruvan Mining AB to South Atlantic Ventures. Zinkgruvan was acquired in 2000 as part of North. Rio Tinto received US$101 million in cash plus US$5 million for working capital, and can earn a further US$5 million over the next two years in price participation payments based on zinc, lead and silver prices. Also in June, Rio Tinto’s interest in the Boké bauxite deposit in west Africa was divested for US$12 million.
      Rio Tinto and Empresa de Desenvolvimento Mineiro completed the sale of their interests in the Neves Corvo copper mine in Portugal to EuroZinc for a cash consideration and a participation in the average copper price in excess of certain thresholds. Rio Tinto’s share of the consideration for its 49 per cent share of the mine was US$70 million. The remaining price participation rights relating to copper production from Neves Corvo, which was sold in the first half of the year, were themselves sold for US$22 million.
     The directors of Rio Tinto Zimbabwe (RioZim) agreed to a restructuring of Rio Tinto’s 56 per cent shareholding in RioZim. The Murowa diamond project in Zimbabwe had been a 50:50 joint venture between Rio Tinto and RioZim. As a result of the restructuring, Rio Tinto owns a direct 78 per cent interest in Murowa and RioZim became an independent Zimbabwean controlled, listed company owning the remaining 22 per cent of Murowa. Rio Tinto ceased to be an ordinary shareholder in RioZim but retains a reduced cash participation in RioZim’s assets other than the Murowa diamond project for a period of ten years. The transaction had no material effect on Rio Tinto.
      The sale of the Group’s 51 per cent interest in Rio Paracatu Mineração, the owner of the Morro do Ouro mine in Brazil, was completed on 31 December 2004 for US$250 million, subject to an adjustment for working capital.
      The sale to Nippon Steel of an eight per cent interest in the Hail Creek Joint Venture, and the increase in the combined share of the original participants, Marubeni Coal and Sumisho Coal Development, by two per cent was completed in the fourth quarter. Rio Tinto will receive about US$150 million for the sale of these interests in the Hail Creek Joint Venture together with the sale of a 47 per cent interest in the Beasley River iron ore deposit to its joint venture partners in Robe River, which includes Nippon Steel.
      In December Kennecott Energy successfully bid for an additional 177 million tonnes of in-situ coal reserves at West Antelope at a cost of US$146 million.

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In March 2005 the Group announced the sale of its entire holding in the Labrador Iron Ore Royalty Income Fund (LIORIF) for net cash proceeds of US$130 million. LIORIF has an equity interest of 15.1 per cent in, and receives royalties from, the Iron Ore Company of Canada. This transaction has no effect on Rio Tinto’s 59 per cent direct interest in the Iron Ore Company of Canada.

Operations acquired and divested 2002-2003
In January 2002, Kennecott Energy (KEC) purchased the North Jacobs Ranch coal reserves for US$380 million, payable in instalments over a five year period. The reserves are adjacent to KEC’s existing Jacobs Ranch operation and provide a basis for low cost expansion in line with market demand.
     Following the purchase of outstanding units in the Western Australian Diamond Trust, Rio Tinto’s interest in Argyle Diamonds increased from 99.8 per cent to 100 per cent.
     In August 2002, Comalco completed the acquisition of an additional 9.5 per cent interest in reduction lines 1 and 2 of the Boyne Island Smelter for US$80 million. This increased Comalco’s share in lines 1 and 2 of the smelter to 59.5 per cent from 50 per cent. Comalco’s interest in line 3 remains unchanged at 59.25 per cent.
     During the first half of 2002, Coal & Allied Industries completed the sale of its interest in the Moura Joint Venture for US$166 million and in Narama and Ravensworth for US$64 million. These were classified as assets held for resale and consequently their disposal had no effect on net earnings. In September, Rio Tinto acquired for cash in the market a further three per cent in Coal & Allied to bring its shareholding to 75.7 per cent.
     As a result of a refinancing in December 2002, in which the Labrador Iron Ore Royalty Income Fund (LIORF) chose not to participate, Rio Tinto’s interest in Iron Ore Company of Canada increased from 56.1 to 58.7 per cent.
     The sale of Rio Tinto’s 25 per cent interest in Minera Alumbrera Limited in Argentina, acquired as part of North, together with its wholly owned Peak gold mine in New South Wales, Australia, was completed in March 2003. The cash consideration was US$210 million.
     Rio Tinto Zimbabwe sold the Patchway gold mine in 2003. The Framework Agreement signed with the Government of Indonesia in 2002 for divestment of 51 per cent of Kaltim Prima Coal (KPC) to Indonesian interests lapsed in 2003 when no assignment of KPC’s offer was made or accepted within the required timeframe.
     On 21 July 2003 Rio Tinto and BP announced that they had agreed to sell their interests in KPC for a cash price of US$500 million, including assumed debt, to PT Bumi Resources, a public company listed on the Jakarta and Surabaya Stock Exchanges. The sale was completed on 10 October and each company received 50 per cent of the net proceeds.

Development projects 2004-2005 to date
Rio Tinto invested over US$2.2 billion in 2004 on development projects around the world.
     In December 2003, Hamersley Iron announced the US$920 million expansion of its port and mine capacity, with further expenditure on the rail network and power infrastructure being evaluated. In April 2005 a further US$290 million was committed to expand the existing iron ore mines. The partners in the Robe River Joint Venture approved US$214 million (Rio Tinto share US$113 million) to dual track a significant part of the Hamersley Iron rail line. Hamersley Iron will spend a further US$46 million to upgrade power infrastructure in the Pilbara. The port and mine expansions are on track for completion by the end of 2005.
     In January 2004, Rio Tinto approved the expansion of QIT-Fer et Titane Inc.’s upgraded slag (UGS) plant in Quebec, Canada. Total investment will be US$76 million and capacity will be increased from 250,000 tonnes per year to 325,000 tonnes per year in 2005.
     The owners of the Escondida copper mine in Chile approved expenditure of US$870 million (Rio Tinto share US$270 million) on a sulphide leach project to produce 180,000 tonnes (Rio Tinto share 54,000 tonnes) of copper cathode per annum for more than 25 years starting in the second half of 2006.
     Construction of the US$100 million second block cave at the underground Northparkes copper and gold mine in New South Wales, Australia was completed and production commenced in 2004.
     Development of the 54 per cent owned Eastern Range iron ore mine in Australia with a capacity of ten million tonnes per year was completed. First shipments started in the first half of 2004.
     Expansion of the Weipa bauxite mine in Queensland, Australia, was completed, resulting in an increase in production capacity to 16.5 million tonnes per annum. This supports the requirements of the new Comalco Alumina Refinery. A key component of the US$150 million expenditure is a 9.5 million tonne beneficiation plant for ore from the Andoom deposit. In 2005, a new US$42 million power station will be constructed to service the Weipa mining operations and surrounding communities.
     Construction of the first stage of Comalco’s new alumina refinery at Gladstone, Queensland commenced in January 2002 and was completed in late 2004, three months early and in line with its budget of US$750 million. Initial shipments from the 1.4 million tonnes per year plant started in early 2005. There is potential for the refinery capacity to increase to over four million tonnes per year in two additional stages when market conditions allow.
     Construction began in January 2003 on an expanded US$200 million HIsmelt^® plant at Kwinana in Western Australia. Cold commissioning commenced in late 2004 and the first hot metal was produced in the hot commissioning process during the second quarter of 2005. The full production rate of 800,000 tonnes per year is expected to be achieved in 2007.

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     Approval was given in 2004 for expansion of the Hail Creek coal mine in Australia to eight million tonnes per year at a cost of US$157 million. At the Diavik diamond mine in Canada construction begins in 2005 of a second dike at a cost of US$190 million to enable mining of a third orebody. Also approved was an optimisation study costing US$75 million including construction of an exploration decline to investigate underground mining.
     Kennecott Land’s Project Daybreak in Utah, US, a mixed use land development on a 1,800 hectare site, started in 2003, with the first land sales in 2004 that are expected to ramp up over a period of five to six years.
     Further detail on these investments and projects is provided in the operational review on pages 44 to 67.
     Development projects have been funded using internally generated funds and proceeds of asset disposals.

Development projects 2002-2003
Work on the Robe River Joint Venture’s US$450 million West Angelas iron ore mine and port facilities in Western Australia was completed in mid-2002 and the first shipments were made.
     Freeport Indonesia’s Deep Ore Zone (DOZ) underground block cave project was declared fully operational from 1 October 2002. This achieved design capacity of 25,000 tonnes of ore per day in 2002, a year earlier than originally projected. In the first quarter of 2003, Freeport Indonesia completed a further DOZ expansion to 35,000 tonnes per day at a cost of US$34 million.
     The Diavik diamond project in the Northwest Territories, Canada was completed in January 2003 three months early and within budget. Initial production commenced from the contact zone above the orebody with the main orebody accessed during the second half of 2003.
     Production ramp up at Palabora’s US$465 million underground copper mine in South Africa started in 2003 but was constrained by an inability to clear drawpoints blocked by poorly fragmented, large rocks.
     Development of the Escondida Norte satellite deposit at the 30 per cent owned Escondida copper mine in Chile was started in June 2003 to provide mill feed to keep Escondida’s capacity above 1.2 million tonnes of copper per year to the end of 2008. First production is expected by the end of 2005. Commissioning of the new US$1,045 million, 110,000 tonnes of ore per day Laguna Seca concentrator was completed in the second quarter of 2003.
     In 2003, Rio Tinto Coal Australia completed development of the US$255 million Hail Creek coking coal project in Queensland, Australia with an initial capacity of 5.5 million tonnes annually.

BUSINESS ENVIRONMENT AND MARKETS
Competitive environment
Rio Tinto is a major producer in all the metals and minerals markets in which it operates. It is generally among the top five global producers by volume. It has market shares for different commodities ranging from five per cent to 40 per cent. The competitive arena is spread across the globe, including eastern Europe, Russia and China.
Most of Rio Tinto’s competitors are private sector companies which are publicly quoted. Several are, like Rio Tinto, diversified in terms of commodity exposure, but others are focused on particular commodity segments. Metal and mineral markets are highly competitive with few barriers to entry. They can be subject to price declines in real terms reflecting large productivity gains, increasing technical sophistication, better management, and advances in information technology.
High quality, long life mineral resources, the basis of good financial returns, are relatively scarce. Rio Tinto’s ownership of or interest in some of the world’s largest deposits enables it to contribute to long term market growth. World production volumes are likely to grow at least in line with global economic activity. The emergence of China and eventually India as economic forces requiring metals and minerals for development could mean even higher market growth.

Economic overview
World economic activity in 2004 grew at the fastest rate since the 1970s, rising to over five per cent from three per cent the year before on a purchasing power parity basis. Trade growth accelerated even faster, to more than eight per cent in real terms, nearly double the rate seen in 2003.
     The increase in economic activity was widely based, led by the US and China which grew by 4.3 per cent and nine per cent respectively. Japan benefited from strong exports, which stimulated growth of four per cent. Growth elsewhere in Asia was also stimulated by exports. Latin America grew by five per cent, driven by the boom in demand for metals, oil and some agricultural products. European activity lagged, but higher exports enabled growth to rise to over two per cent.
      Inflation remained low by historical standards in spite of the large rise in prices of oil and other commodities. This reflected fierce competition in the manufacturing sector and generally weak labour markets.
      The US benefited from very low real interest rates and a loose fiscal policy in the run up to the presidential election. The twin deficits of government finance and trade increased rapidly. The fact that US growth was based on borrowing was underscored by the decline in the value of the US dollar, which fell eight per cent in trade weighted terms, following an 11 per cent fall in 2003. Some currencies are pegged to the US dollar, notably the Chinese renminbi, and the fall against freely traded currencies such as the euro and the Australian dollar was considerably greater.
      The other pillar of global growth was China, with GDP rising by nine per cent. This was driven by investment in fixed assets, which rose by more than 25 per cent for the second successive year, and industrial output, which grew more than 16 per cent, also for the second year running.

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     Growth was strongest in the first half and then slowed. This was most notable in Europe and Japan as their currencies strengthened against the US dollar. The picture in China was less clear. Growth there seems to have slowed from the earlier breakneck pace as the government signalled before the middle of the year that it wanted to reduce growth in investment in fixed assets and introduced curbs. Trade with China in many commodities eased considerably in the second half, but other factors including port congestion also contributed.
      Commodity markets had already started to improve in 2003, but the acceleration in economic activity and trade in 2004 tipped many of them into a zone of extreme tightness. Prices soared, aided by a declining US dollar. Fund activity fluctuated through the year, but provided strong support for prices overall. Demand for many products grew considerably faster than the world economy. Chinese growth continued to be very commodity intensive, and there was some rebuilding of stocks in the supply chain. Global steel production grew nine per cent, the fastest since 1973.
      Copper benefited more than most non ferrous metals from the acceleration in growth, as it was already in deficit and refined output was held back by a series of disruptions to mine output and by smelter capacity. Demand grew by seven per cent, the deficit in refined copper rose sharply and exchange stocks fell below the levels seen in the mid 1990s. Fund buying intensified pricing in a very tight physical market. The average cash LME price rose to US$1.30 per pound from 80 US cents per pound the year before, only just short of the highest ever price in nominal terms (not adjusted for inflation). In contrast, the copper concentrates market, which had been tight for several years, was well supplied in the second half.
      The seaborne iron ore trade continued to grow strongly with China’s iron ore imports nearly 40 per cent above their 2003 level. Price increases of nearly 20 per cent early in the year underlined the tightness of the market. The rapid growth in demand for iron ore caused a shortage of shipping capacity leading to the highest freight rates ever recorded.
      Prices for seaborne thermal coal rose by over 60 per cent. Even a rise of this magnitude, however, did not dampen the market and spot prices remained above the contract settlement price throughout the year. World seaborne thermal coal trade is estimated to have grown by about six per cent during 2004. Coking coal prices rose by less than those of thermal coal but significant increases in demand in Asia meant that some spot cargos were trading at very high prices.
      The North American aluminium market improved significantly in 2004 with demand growth of around ten per cent. Combined with demand in China, the primary aluminium market moved into deficit for the first time since 2000. The annual average price of aluminium increased accordingly to 78 US cents per pound in 2004 from 65 US cents the previous year. However, the rise was not as strong as for copper because stocks were higher. The spot price for alumina remained very high by historical standards throughout 2004 reflecting general market tightness and strong demand from Chinese aluminium smelters.
      The economic recovery in developed countries, the US in particular, benefited the demand for industrial minerals such as borates and titanium minerals. Demand growth for these products, however, generally continued to fall short of that achieved by metal markets. This was partly due to a lower exposure to the present stage of Chinese growth.
      Gold averaged US$409 per ounce, a 16 year nominal high, almost entirely driven by the falling US dollar. Many less widely traded metals also benefited from much higher prices, notably molybdenum, which averaged US$14 per pound for trader oxide, a 25 year nominal high, and silver, which averaged US$6.70 per ounce, up 40 per cent year on year.
      A discussion of the financial results for the three years to 31 December 2004 is given in the Financial review on pages 31 to 44.
      Comments on the financial performance of the individual product groups for the three years to 31 December 2004 are included in the operational review on pages 44 to 67. Details of production, reserves and information on Group mines are given on pages 17 to 20, A-85 to A-95 and 22 to 26, respectively. Analyses of Rio Tinto’s revenues by product group, geographical origin and geographical destination have been set out in Notes 26 to 27 to the consolidated financial statements on pages A-39 to A-43.

Marketing channels
Each business within each product group is responsible for the marketing and sale of their respective metal and mineral production. Consequently, Rio Tinto has numerous marketing channels, which now include electronic marketplaces, with differing characteristics and pricing mechanisms.
      In general, Rio Tinto’s businesses contract their metal and mineral production direct to end users under long term supply contracts and at prevailing market prices. Typically, these contracts specify annual volume commitments and an agreed mechanism for determining prices, for example, businesses producing non ferrous metals and minerals reference their sales prices to the London Metal Exchange (LME) or other metal exchanges such as the Commodity Exchange Inc (Comex) in New York. Fluctuations in these prices, particularly for aluminium, copper and gold, inevitably affect the Group’s financial results.
      Businesses producing coal and iron ore would typically reference their sales prices to annually negotiated industry benchmarks. In markets where international reference market prices do not exist or are not transparent, businesses negotiate product prices on an individual customer basis.
      Rio Tinto’s marketing channels include a network of regional sales offices worldwide. Some products in certain geographical markets are sold via third party agents or to major trading companies.

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Governmental regulations
Rio Tinto is subject to extensive governmental regulations affecting all aspects of its operations and consistently seeks to apply best practice in all of its activities. Due to Rio Tinto’s product and geographical spread, there is unlikely to be any single governmental regulation that could have a material effect on the Group’s business.
     Rio Tinto’s businesses in Australia, New Zealand, Papua New Guinea and Indonesia are subject to state and federal regulations of general application governing mining and processing, land tenure and use, environmental requirements, workplace health and safety, trade and export, corporations, competition, foreign investment and taxation. Some operations are conducted under specific agreements with the respective governments and associated acts of parliament. In addition, Rio Tinto’s uranium operation in the Northern Territory, Australia is subject to specific regulation in relation to its mining and export of uranium.
     US and Canada based operations are subject to local and national regulations governing land use, environmental aspects of operations, product and workplace health and safety and trade and export administration.
     The South African Mineral and Petroleum Resources Development Act 2002, as read with the Empowerment Charter for the South African Mining Industry, targets the transfer for fair value of 26 per cent ownership of South African mining assets to historically disadvantaged South Africans (HDSAs) within ten years. Attached to the Empowerment Charter is a “scorecard” by which companies will be judged on their progress towards empowerment and the attainment of the target transfer of 26 per cent ownership. The scorecard also provides that 15 per cent ownership should vest in HDSAs within five years of 1 May 2004. The Mineral and Petroleum Royalty Act, proposed for approval in 2005, will govern state royalties and introduce new royalty payments in respect of mining tenements in South Africa. The royalty will be calculated on a gross sales value basis in relation to any minerals extracted, rather than on the basis of profits generated. The South African government has confirmed that any such royalties would become payable only from 2009.

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METALS AND MINERALS PRODUCTION

		2002		2003		2004
		Production (a)		Production (a)		Production (a)

	Rio Tinto	Total	Rio Tinto	Total	Rio Tinto	Total	Rio Tinto
	% share (b)		share		share		share

ALUMINA (’000 tonnes)
Comalco Alumina Refinery (Australia) (c)	100.0	–	–	–	–	175	175
Eurallumina (Italy)	56.2	1,010	567	1,021	573	1,064	597
Queensland Alumina (Australia)	38.6	3,574	1,380	3,731	1,440	3,778	1,459

Rio Tinto total			1,947		2,014		2,231

ALUMINIUM (refined) (’000 tonnes)
Anglesey (UK)	51.0	136.8	69.8	141.9	72.4	144.8	73.8
Bell Bay (Australia)	100.0	163.9	163.9	166.6	166.6	162.0	162.0
Boyne Island (Australia) (d)	59.4	520.2	294.6	520.9	311.1	540.5	321.2
Tiwai Point (New Zealand)	79.4	333.9	265.9	334.4	266.5	350.3	279.5

Rio Tinto total			794.1		816.6		836.5

BAUXITE (’000 tonnes)
Boké (Guinea) (e)	–	12,041	482	12,060	418	5,773	179
Weipa (Australia)	100.0	11,241	11,241	11,898	11,898	12,649	12,649

Rio Tinto total			11,724		12,316		12,828

BORATES (’000 tonnes) (f)
Boron mine (US)	100.0	514	514	541	541	543	543
Borax Argentina (Argentina)	100.0	15	15	17	17	22	22

Rio Tinto total			528		559		565

COAL – HARD COKING (’000 tonnes)
Rio Tinto Coal Australia (g)
Hail Creek Coal (Australia) (h)	82.0	–	–	883	812	5,104	4,633
Kestrel Coal (Australia)	80.0	2,406	1,925	1,873	1,499	2,659	2,127

Rio Tinto total hard coking coal			1,925		2,311		6,760

*COAL – OTHER (’000 tonnes)**
Coal & Allied Industries (i)
Bengalla (Australia)	30.3	5,385	1,587	6,203	1,879	5,312	1,609
Hunter Valley Operations (Australia)	75.7	12,625	9,287	12,008	9,091	13,269	10,046
Mount Thorley Operations (Australia)	60.6	4,292	2,524	3,153	1,910	3,548	2,149
Moura (Australia) (j)	–	2,399	959	–	–	–	–
Narama (Australia) (j)	–	370	135	–	–	–	–
Ravensworth East (Australia) (j)	–	387	281	–	–	–	–
Warkworth (Australia)	42.1	6,882	2,817	5,868	2,469	6,954	2,926

Total Coal & Allied Industries other coal			17,590		15,348		16,729

Rio Tinto Coal Australia (g)
Blair Athol (Australia)	71.2	11,809	8,412	12,480	8,890	12,229	8,712
Kestrel Coal (Australia)	80.0	1,685	1,348	1,449	1,159	623	499
Tarong Coal (Australia)	100.0	5,685	5,685	6,538	6,538	7,004	7,004

Total Rio Tinto Coal Australia other coal			15,445		16,587		16,214

Total Australian other coal			33,035		31,935		32,943

Kaltim Prima Coal (Indonesia) (k)	–	17,740	8,870	12,655	6,327	–	–

Kennecott Energy
Antelope (US)	100.0	24,319	24,319	26,806	26,806	26,928	26,928
Colowyo (US)	(l)	4,889	4,889	4,535	4,535	5,788	5,788
Cordero Rojo (US)	100.0	34,724	34,724	32,671	32,671	35,233	35,233
Decker (US)	50.0	9,021	4,511	7,358	3,679	7,831	3,916
Jacobs Ranch (US)	100.0	28,784	28,784	32,418	32,418	34,979	34,979
Spring Creek (US)	100.0	8,093	8,093	8,069	8,069	10,892	10,892

Total US coal			105,320		108,177		117,734

Rio Tinto total other coal			147,225		146,439		150,677

* Coal – other includes thermal coal, semi-soft coking coal and semi-hard coking coal.
See notes on page 20

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		2002		2003		2004
		Production (a)		Production (a)		Production (a)

	Rio	Total	Rio	Total	Rio	Total	Rio
	Tinto		Tinto		Tinto		Tinto
	% share (b)		share		share		share

COPPER (mined) (’000 tonnes)
Alumbrera (Argentina) (m)	–	203.7	50.9	34.9	8.7	–	–
Bingham Canyon (US)	100.0	260.2	260.2	281.8	281.8	263.7	263.7
Escondida (Chile)	30.0	754.5	226.3	992.7	297.8	1,207.1	362.1
Grasberg – FCX (Indonesia) (n)	–	494.4	107.5	444.1	84.5	396.4	5.5
Grasberg – Joint Venture (Indonesia) (n)	40.0	370.0	148.0	271.7	108.7	120.0	48.0
Neves Corvo (Portugal) (o)	–	77.2	37.8	77.5	38.0	46.9	23.0
Northparkes (Australia)	80.0	38.4	30.7	27.1	21.7	30.0	24.0
Palabora (South Africa)	49.2	52.2	25.7	52.4	25.8	54.4	26.8

Rio Tinto total			887.1		867.0		753.1

COPPER (refined) (’000 tonnes)
Atlantic Copper (Spain) (n)	–	250.5	41.5	247.1	38.1	58.4	7.0
Escondida (Chile)	30.0	138.7	41.6	147.6	44.3	152.1	45.6
Kennecott Utah Copper (US)	–	293.7	293.7	230.6	230.6	246.7	246.7
Palabora (South Africa)	49.2	81.6	40.2	73.4	36.1	67.5	33.2

Rio Tinto total			416.9		349.1		332.6

DIAMONDS (’000 carats)
Argyle (Australia) (p)	100.0	33,519	33,503	30,910	30,910	20,620	20,620
Diavik (Canada)	60.0	–	–	3,833	2,300	7,575	4,545
Merlin (Australia)	–	117	117	62	62	–	–
Murowa (Zimbabwe) (q)	77.8	–	–	–	–	47	36

Rio Tinto total			33,620		33,272		25,202

GOLD (mined) (’000 ounces)
Alumbrera (Argentina) (m)	–	754	188	124	31	–	–
Barneys Canyon (US)	100.0	75	75	35	35	22	22
Bingham Canyon (US)	100.0	412	412	305	305	308	308
Cortez/Pipeline (US)	40.0	1,082	433	1,085	434	1,051	421
Escondida (Chile)	30.0	126	38	184	55	217	65
Grasberg – FCX (Indonesia) (n)	–	1,375	355	1,456	354	1,377	14
Grasberg – Joint Venture (Indonesia) (n)	40.0	1,655	662	1,806	722	207	83
Greens Creek (US)	70.3	103	72	99	70	86	61
Kelian (Indonesia)	90.0	539	485	469	422	328	295
Lihir (Papua New Guinea) (r)	14.5	607	99	551	88	599	87
Morro do Ouro (Brazil) (s)	–	225	115	201	103	188	96
Northparkes (Australia)	80.0	41	33	49	39	79	63
Peak (Australia) (m)	–	97	97	20	20	–	–
Rawhide (US)	51.0	82	42	64	32	50	25
Rio Tinto Zimbabwe (Zimbabwe) (t)	–	38	21	25	14	11	6
Others	–	17	8	14	7	13	7

Rio Tinto total			3,135		2,731		1,552

GOLD (refined) (’000 ounces)
Kennecott Utah Copper (US)	100.0	488	488	308	308	300	300

IRON ORE (’000 tonnes)
Channar (Australia)	60.0	10,594	6,356	10,347	6,208	9,759	5,855
Corumbá (Brazil)	100.0	858	858	1,074	1,074	1,301	1,301
Eastern Range (Australia) (u)	–	–	–	–	–	2,970	2,970
Hamersley Iron (Australia)	100.0	57,563	57,563	63,056	63,056	65,407	65,407
Iron Ore Company of Canada (Canada) (v)	58.7	12,758	7,168	14,225	8,353	11,139	6,541
Robe River (Australia)	53.0	35,860	19,006	45,136	23,922	48,459	25,684

Rio Tinto total			90,951		102,613		107,757


See notes on page 20

Rio Tinto 2004 Form 20-F 18

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		2002		2003		2004
		Production (a)		Production (a)		Production (a)

	Rio Tinto	Total	Rio Tinto	Total	Rio Tinto	Total	Rio Tinto
	% share (b)		share		share		share

LEAD (’000 tonnes)
Greens Creek (US)	70.3	22.3	15.7	22.5	15.8	19.8	13.9
Zinkgruvan (Sweden) (w)	–	24.7	24.7	31.8	31.8	11.2	11.2

Rio Tinto total			40.4		47.6		25.1

MOLYBDENUM (’000 tonnes)
Bingham Canyon (US)	100.0	6.1	6.1	4.6	4.6	6.8	6.8

NICKEL (mined) (’000 tonnes)
Fortaleza (Brazil) (x)	–	6.3	6.3	6.0	6.0	–	–

NICKEL (refined) (’000 tonnes)
Empress (Zimbabwe) (t)	–	6.4	3.6	6.2	3.5	2.9	1.6

SALT (’000 tonnes)
Dampier Salt (Australia)	64.9	7,186	4,667	7,135	4,633	7,380	4,792

SILVER (mined) (’000 ounces)
Bingham Canyon (US)	100.0	3,663	3,663	3,548	3,548	3,584	3,584
Escondida (Chile)	30.0	2,981	894	4,728	1,418	5,747	1,724
Grasberg – FCX (Indonesia) (n)	–	3,795	804	3,659	745	3,077	79
Grasberg – Joint Venture (Indonesia) (n)	40.0	2,607	1,043	2,815	1,126	1,961	784
Greens Creek (US)	70.3	10,912	7,668	11,707	8,226	9,707	6,821
Zinkgruvan (Sweden) (w)	–	1,554	1,554	1,841	1,841	651	651
Others	–	3,231	1,582	2,511	1,407	2,025	1,187

Rio Tinto total			17,207		18,311		14,830

SILVER (refined) (’000 ounces)
Kennecott Utah Copper (US)	100.0	4,037	4,037	2,963	2,963	3,344	3,344

TALC (’000 tonnes)
Luzenac Group (Australia/Europe/N. America) (y)	99.9	1,328	1,327	1,358	1,357	1,444	1,443

TIN (tonnes)
Neves Corvo (Portugal) (o)	–	345	169	203	100	120	59

TITANIUM DIOXIDE FEEDSTOCK (‘000 tonnes)
Rio Tinto Iron & Titanium (Canada/South Africa) (z)	100.0	1,274	1,274	1,192	1,192	1,192	1,192

URANIUM (tonnes U₃O₈)
Energy Resources of Australia (Australia)	68.4	4,486	3,068	5,134	3,512	5,143	3,517
Rössing (Namibia)	68.6	2,751	1,887	2,401	1,647	3,582	2,457

Rio Tinto total			4,955		5,158		5,974

ZINC (mined) (’000 tonnes)
Greens Creek (US)	70.3	66.5	46.7	69.1	48.5	62.7	44.1
Zinkgruvan (Sweden) (w)	–	48.0	48.0	64.5	64.5	29.7	29.7

Rio Tinto total			94.7		113.0		73.8


See notes on page 20

Rio Tinto 2004 Form 20-F 19

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*Production data notes*
(a)	Mine production figures for metals refer to the total quantity of metal produced in concentrates or doré bullion irrespective of whether these products are then refined onsite, except for the data for iron ore and bauxite which represent production of saleable quantities of ore.
(b)	Rio Tinto percentage share, shown above, is as at the end of 2004 and has applied over the period 2002 – 2004 except for those operations where the share has varied during the year and the weighted average for them is shown below. The Rio Tinto share varies at individual mines and refineries in the “others” category and thus no value is shown.


Rio Tinto share %
Operation	See Note	2002	2003	2004

Atlantic Copper	(n)	16.5	15.4	12.0
Argyle	(p)	99.9	100.0	100.0
Bengalla	(i)	29.4	30.3	30.3
Boyne Island	(d)	56.6	59.4	59.4
Grasberg	(n)	15.0	13.9	10.8
Hail Creek	(h)	–	92.0	90.8
Hunter Valley Operations	(i)	73.6	75.7	75.7
Iron Ore Company of Canada	(v)	56.2	58.7	58.7
Lihir	(r)	16.3	16.0	14.5
Mount Thorley Operations	(i)	58.9	60.6	60.6
Moura	(i) (j)	40.0	–	–
Narama	(i) (j)	36.4	–	–
Ravensworth East	(i) (j)	72.7	–	–
Warkworth	(i)	41.2	42.1	42.1


(c)	Comalco Alumina Refinery started production in October 2004.
(d)	Rio Tinto acquired an approximately five per cent additional interest in production from the Boyne Island smelter with effect from August 2002.
(e)	Rio Tinto completed the sale of its four per cent interest in the Boké mine on 25 June 2004. Production data are shown up to the date of sale.
(f)	Borate quantities are expressed as B2O3
(g)	Rio Tinto Coal Australia was previously known as Pacific Coal.
(h)	Hail Creek commenced production in the third quarter of 2003. Rio Tinto reduced its shareholding in Hail Creek from 92.0 per cent to 82.0 per cent on 15 November 2004.
(i)	Rio Tinto increased its stake in Coal & Allied Industries from 72.7 per cent to 75.7 per cent during September 2002.
(j)	On 14 March 2002, Coal & Allied completed the sale of its interests in Narama and Ravensworth. Coal & Allied sold its interest in the Moura coal mine with effect from 24 May 2002. Production data are shown up to the dates of sale.
(k)	Rio Tinto had a 50 per cent share in Kaltim Prima and, under the terms of its Coal Agreement, the Indonesian Government was entitled to a 13.5 per cent share of Kaltim Prima’s production. Rio Tinto’s share of production shown is before deduction of the Government share. Rio Tinto completed the sale of its interest in PT Kaltim Prima Coal on 10 October 2003. Production data are shown up to the date of sale.
(l)	Kennecott Energy has a partnership interest in the Colowyo mine but, as it is responsible under a management agreement for the operation of the mine, all of Colowyo’s output is included in Rio Tinto’s share of production.
(m)	Rio Tinto completed the sale of its 25 per cent interest in Minera Alumbrera together with its wholly owned Peak gold mine on 17 March 2003. Production data are shown up to the date of sale.
(n)	From mid 1995 until 30 March 2004, Rio Tinto held 23.93 million shares of Freeport-McMoRan-Copper & Gold (FCX) common stock from which it derived a share of production. This interest was sold on 30 March 2004. Also, through a joint venture agreement with FCX, Rio Tinto is entitled, as shown separately in the above tables, to 40 per cent of additional material mined as a consequence of expansions and developments of the Grasberg facilities since 1998.
(o)	Rio Tinto completed the sale of its 49 per cent interest in Somincor on 18 June 2004. Production data are shown up to the date of sale.
(p)	Rio Tinto’s interest in Argyle Diamonds increased from 99.8 per cent to 100 per cent on 29 April 2002, following the purchase of the outstanding units in the Western Australian Diamond Trust.
(q)	Ore mining and processing at Murowa commenced during the third quarter of 2004.
(r)	Following a placement of shares on 13 November 2003, Rio Tinto’s interest in Lihir moved from 16.3 per cent to 14.5 per cent.
(s)	Rio Tinto sold its interest in Morro do Ouro on 31 December 2004. Production data are shown up to the date of sale.
(t)	As a result of the corporate restructuring completed on 8 July 2004, Rio Tinto has ceased to be an ordinary shareholder in the renamed RioZim but will retain a reduced cash participation in its gold and nickel assets for a period of ten years.
(u)	Rio Tinto’s share of production includes 100 per cent of the production from the Eastern Range mine, which commenced production in March 2004. Under the terms of the joint venture agreement, Hamersley Iron manages the operation and is obliged to purchase all mine production from the joint venture.
(v)	Rio Tinto increased its shareholding in Iron Ore Company of Canada from 56.1 per cent to 58.7 per cent on 20 December 2002.
(w)	Rio Tinto completed the sale of its 100 per cent interest in the Zinkgruvan mine on 2 June 2004. Production data are shown up to the date of sale.
(x)	Rio Tinto completed the sale of its 100 per cent interest in the Fortaleza nickel mine on 16 January 2004. This was effective from 1 January 2004.
(y)	Talc production includes some products derived from purchased ores.
(z)	Quantities comprise 100 per cent of QIT and 50 per cent of Richards Bay Minerals’ production.

ORE RESERVES

Ore reserves prepared in accordance with Industry Guide 7 under the Unites States Securities Act of 1933 have been set out on pages A-85 to A-95.

Rio Tinto 2004 Form 20-F 20

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GROUP OPERATIONS (wholly owned unless stated otherwise)

	ALUMINIUM		COPPER AND GOLD		IRON ORE		TALC
	Operating sites		Operating sites		Operating sites		Operating sites
1	Anglesey Aluminium (51%)	20	Bougainville (not operating)	33	Corumbá		(only major sites are
2	Bell Bay		(54%)	34	Hamersley Iron mines:		shown)
3	Boyne Island (59%)	21	Cortez/Pipeline (40%)		Brockman	44	Ludlow
3	Comalco Alumina Refinery	22	Escondida (30%)		Marandoo	45	Talc de Luzenac (99.9%)
3	Gladstone Power Station	23	Grasberg joint venture (40%)		Mt Tom Price	46	Yellowstone
	(42%)	24	Kelian (90%)		Paraburdoo	47	Three Springs
3	Queensland Alumina (39%)	19	Kennecott Utah Copper		Yandicoogina
4	Eurallumina (56%)	25	Lihir (14%)		Channar (60%)		TITANIUM DIOXIDE
5	Tiwai Point (79%)	26	Northparkes (80%)		Eastern Range (54%)		FEEDSTOCK
6	Weipa	27	Palabora (49%)	35	Iron Ore Company of		Operating sites
		28	Rawhide (51%)		Canada (59%)	48	QIT-Fer et Titane Lac Allard
	BORATES			34	Robe River mines: (53%)	49	QIT-Fer et Titane Sorel
	Operating sites		Projects		West Angelas		Plant
7	Boron	29	Resolution (55%)		Pannawonica	50	Richards Bay Minerals (50%)
8	Coudekerque Plant
9	Tincalayu		DIAMONDS		Projects		Projects
10	Wilmington Plant		Operating sites	36	HIsmelt^®(60%)	51	QIT Madagascar Minerals
		30	Argyle	37	IOC Pellet Plant (59%)		(80%)
	COAL	31	Diavik (60%)	38	Simandou
	Operating sites	32	Murowa (78%)	39	Orissa (51%)		URANIUM
11	Antelope						Operating sites
12	Bengalla (30%)				NICKEL	52	ERA (68%)
13	Blair Athol (71%)				Projects	53	Rössing (69%)
14	Colowyo (20%)			40	Eagle
11	Cordero Rojo						ZINC, LEAD, SILVER
15	Decker (50%)				POTASH		Operating sites
13	Hail Creek (82%)				Projects	54	Greens Creek (70%)
16	Hunter Valley Operations			41	Rio Colorado Potash
	(76%)
11	Jacobs Ranch				SALT
17	Kestrel (80%)				Operating sites
16	Mt Thorley Operations			42	Dampier (65%)
	(61%)			43	Lake MacLeod (65%)
15	Spring Creek			42	Port Hedland (65%)
18	Tarong
16	Warkworth (42%)						Mines and mining projects

	Projects						Smelters, refineries and
13	Clermont (50%)						processing plants remote
12	Mt Pleasant (76%)						from mine

Rio Tinto 2004 Form 20-F 21

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INFORMATION ON GROUP MINES (wholly owned unless stated otherwise)

*Mine*	*Location*	*Access*	*Title/lease*

ALUMINIUM

Comalco	Weipa, Queensland, Australia	Road, air, and port	Queensland Government lease expires in 2041 with 21 year extension, then two years’ notice of termination

COPPER

Escondida (30%)	Atacama Desert, Chile	Pipeline and road to deep sea port at Coloso	Rights conferred by Government under Chilean Mining Code

Grasberg (40% joint venture)	Papua, Indonesia	Pipeline, road and port	Indonesian Government Contracts of Work expire in 2021 with two ten year extensions

Kennecott Minerals	Nevada, US	Road	Patented and unpatented mining claims
Cortez/Pipeline (40%)

Kennecott Minerals	Alaska, US	Port	Patented and unpatented mining claims
Greens Creek (70%)

Kennecott Utah Copper	Near Salt Lake City, Utah, US	Pipeline, road and rail	Owned
Bingham Canyon

Northparkes (80%)	Goonumbla, New South	Road and rail	State Government mining lease issued in 1991 for 21 years
	Wales, Australia

Palabora (49%)	Phalaborwa, Northern	Rail and road	Lease from South African Government until deposits exhausted and base metal claims owned by Palabora
	Province, South Africa

DIAMONDS

Diavik (60%)	Northwest Territories, Canada	Air, ice road in winter	Mining leases from Canadian federal government

Argyle Diamonds	Kimberley Ranges, Western Australia	Road and air	Mining tenement held under Diamond (Argyle Diamond Mines Joint Venture) Agreement Act 1981-83; lease extended for 21 years from 2004

Murowa (78%)	Zvishavane, Zimbabwe	Road and air	Claims and mining leases

ENERGY

Coal & Allied Industries	New South Wales, Australia	Road, rail and port	Leases granted by State
(76%)
Bengalla (30%)
Hunter Valley Operations
(76%)
Mount Thorley (61%)
Warkworth (42%)

Energy Resources of	Northern Territory, Australia	Road	Leases granted by State
Australia (68%)
Ranger

Rio Tinto 2004 Form 20-F 22

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*Mine*	*History*	*Type of mine*	*Power source*

ALUMINIUM

Comalco	Bauxite mining commenced in 1961; Major upgrade completed in 1998 to incorporate Alcan’s adjacent Ely reserve in overall mining plan; Rio Tinto interest increased from 72.4% to 100% in 2000; In 2004 a mine expansion was completed to lift annual capacity to16.5 million tonnes	Open cut	On site generation; new power station under construction

COPPER

Escondida (30%)	Production started in 1990 and expanded in phases to 2002 when new concentrator was completed; approval in 2003 for Norte project	Open pit	Supplied from SING grid under two contracts with Norgener to 2008

Grasberg (40% joint venture)	Joint venture interest acquired 1995; capacity expanded to over 200,000 tonnes of ore per day in 1998 with addition of underground production of more than 35,000 tonnes per day in 2003	Open pit and underground	Long term contract with US-Indonesian consortium operated,

Kennecott Minerals	Gold production started at Cortez in 1969; Pipeline in 1997	Open pit	Public utility
Cortez/Pipeline (40%)	Gold production started at Cortez in 1969; Pipeline in 1997	Open pit	Public utility

Kennecott Minerals	Redeveloped in 1997	Underground/drift and fill	On site diesel generators
Greens Creek (70%)	Redeveloped in 1997	Underground/drift and fill	On site diesel generators

Kennecott Utah Copper Bingham Canyon	Interest acquired in 1989; modernisation includes smelter complex and expanded tailings dam	Open pit	On site generation supplemented by long term contracts with Utah Power and Light

Northparkes (80%)	Interest acquired in 2000; production	Open pit and underground	Supplied from State grid
	started in 1995

Palabora (49%)	Development of 20 year underground mine commenced 1996 with open pit closure in 2003	Open pit and underground	Supplied by ESKOM via grid

DIAMONDS

Diavik (60%)	Deposits discovered 1994-1995; construction approved 2000; diamond production started 2003	Open pit to underground	On site diesel generators; installed capacity 27MW

Argyle Diamonds	Studies into further development options, including underground mining, continue; interest increased from 59.7% following purchase planned of Ashton Mining in 2000	Open pit to underground	Long term contract with Ord Hydro Consortium and on site generation back up

Murowa (78%)	Discovered 1997; small scale production started 2004 Open pit		Supplied by ZESA

ENERGY

Coal & Allied Industries	Lemington acquired late 2000 and integrated with Hunter Valley Operations. Peabody Australian interests acquired in 2001. Moura, Narama and Ravensworth interests divested in 2002	Open cut	State owned grid
(76%)
Bengalla (30%)
Hunter Valley Operations
(76%)
Mount Thorley (61%)
Warkworth (42%)

Energy Resources of	Mining commenced 1981; interest acquired through North in 2000	Open pit	On site diesel / steam power generation
Australia (68%)
Ranger

Rio Tinto 2004 Form 20-F 23

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*Mine*	*Location*	*Access*	*Title/lease*

ENERGY

Kennecott Energy	Wyoming, Montana and Colorado, US	Rail and road	Leases from US and State Governments and private parties, with minimum coal production levels, and adherence to permit requirements and statutes
Antelope
Colowyo (20%)
Cordero Rojo
Decker (50%)
Jacobs Ranch
Spring Creek

Rio Tinto Coal Australia	Queensland, Australia	Conveyor, road, rail and port	Leases granted by State
Blair Athol (71%)
Kestrel (80%)
Hail Creek (82%)
Tarong

Rössing Uranium (69%)	Namib Desert, Namibia	Rail, road and port	Federal lease

INDUSTRIAL MINERALS

Boron	California, US	Road, rail and port	Owned

Dampier Salt (65%)	Dampier, Lake MacLeod and Port Hedland, Western Australia	Road and port	Mining leases expiring in 2013 at Dampier, 2018 at Port Hedland and2021 at Lake MacLeod with options to renew in each case

Luzenac	Trimouns, France (other smaller operations in Australia, Europe and North America)	Road and rail	Owner of ground (orebody) and long term lease agreement to 2012

QIT-Fer et Titane	Saguenay County, Quebec ,Canada	Rail and port (St Lawrence River)	Mining covered by two Concessions granted by State in 1949 and 1951 which, subject to certain Mining Act restrictions, confer rights and obligations of an owner

Richards Bay Minerals (50%)	Richards Bay, KwaZulu- Natal, South Africa	Rail, road and port	Long term renewable leases; State lease for Reserve 4 initially runs to end 2022; Ingonyama Trust lease for Reserve 10 runs to 2010

IRON ORE

Hamersley Iron	Hamersley Ranges, Western Australia	Railway (owned by Hamersley Iron and operated by Pilbara Rail Company) and port (owned by Hamersley Iron and operated by Pilbara Iron)	Agreements for life of mine with Government of Western Australia
Brockman
Marandoo
Mount Tom Price
Paraburdoo
Yandicoogina
Channar (60%)
Eastern Range (54%)

Iron Ore Company of	Labrador City, Province of Labrador and Newfoundland	Railway and port facilities in Sept-Iles, Quebec (owned and operated by IOC)	Sublease with the Labrador Iron Ore Royalty Income Fund which has lease agreements with the Government of Newfoundland and Labrador that are due to be renewed in 2020 and 2022
Canada (59%)
(Rio Tinto also holds a 19%
interest in the Labrador Iron
Ore Royalty Income Fund
which owns 15.1% of IOC)

Robe River (53%)	Pilbara region, Western Australia	Railway (owned by Robe River Iron Associates and operated by Pilbara Rail Company) and port (owned by Robe River Iron Associates and operated by Pilbara Iron)	Agreements for life of mine with Government of Western Australia
Mesa J
West Angelas

Rio Tinto Brasil	Matto Grosso do Sul, Brazil	Road, air and river	Government licence for undetermined period
Corumbá

OTHER

Kelian (90%)	Kalimantan, Indonesia	Road, river and port	Contract of Work with Indonesian Government for 30 years

Lihir Gold (14%)	Lihir Island, Papua New Guinea	Own road, airstrip and port	Special Mining Lease with Papua New Guinea Government expires in 2035

Rio Tinto 2004 Form 20-F 24

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*Mine*	*History*	*Type of mine*	*Power source*

ENERGY

Kennecott Energy	Antelope, Spring Creek, Decker and Cordero acquired in 1993, Colowyo in 1995, and Jacobs Ranch in 1998; additional North Jacobs Ranch reserves purchased in 2002; West Antelope additional reserves 2004	Open cut	Supplied by IPPs and Cooperatives through national grid service
Antelope
Colowyo (20%)
Cordero Rojo
Decker (50%)
Jacobs Ranch
Spring Creek

Rio Tinto Coal Australia	Production started for export at Blair Athol and adjacent power station at Tarong in 1984. Kestrel acquired and recommissioned in 1999. Hail Creek production commenced 2003	Open cut (Blair Athol, Tarong and Hail Creek) and underground (Kestrel)	State owned grid
Blair Athol (71%)
Kestrel (80%)
Hail Creek (82%)
Tarong

Rössing Uranium (69%)	Production began in 1978	Open pit	Namibian National Power

INDUSTRIAL MINERALS

Boron	Mine redesign project completed on budget and schedule in 2000	Open pit	On site cogeneration units


Dampier Salt (65%)	Construction of the Dampier field started in 1969; first shipment in 1972. Lake MacLeod was acquired in 1978 as an operating field	Solar evaporation of seawater (Dampier and Port Hedland) and underground brine (Lake MacLeod); dredging of gypsum from surface of Lake MacLeod	Dampier supply from Hamersley Iron Power; Lake MacLeod from Western Power and on site generation units; Port Hedland from Western Power



Luzenac	Production started in 1885; acquired in 1988. (Australian mine acquired in 2001)	Open pit	Supplied by EdF and on site generation units
			Supplied by EdF and on site generation units

QIT-Fer et Titane	Production started 1950; interest acquired in 1989	Open pit	Long term contract with Quebec Hydro
	Production started 1950; interest acquired in 1989		Long term contract with Quebec Hydro

Richards Bay Minerals	Production started 1977; interest acquired 1989; fifth dredge commissioned 2000	Beach sand dredging	Contract with ESCOM
(50%)

IRON ORE

Hamersley Iron	Annual capacity increased to 68 million tonnes during 1990s; Yandicoogina first ore shipped in 1999 and port capacity increased; Eastern Range mine started 2004	Open pits	Supplied by Hamersley Iron Power
Brockman			Supplied by Hamersley Iron Power
Marandoo
Mount Tom Price
Paraburdoo
Yandicoogina
Channar (60%)
Eastern Range (54%)

Iron Ore Company of Canada (59%) (Rio Tinto also holds a 19% interest in the Labrador Iron Ore Royalty Income Fund which owns 15.1% of IOC)	Current operation began in 1962 and has processed over one billion tonnes of crude ore since; annual capacity now 17.5 million tonnes of concentrate of which 12.5 million tonnes can be pelletised. Interest acquired in 2000 through North	Open pit	Supplied by Newfoundland Hydro under long term contract





Robe River (53%)	First shipment in 1972; annual sales reached 30 million tonnes in late 1990s; interest acquired in 2000 through North; West Angelas first ore shipped in 2002 and port capacity increased	Open pit	Supplied by Robe River Iron Associates; West Angelas supplied by Hamersley Iron Power
Mesa J
West Angelas


Rio Tinto Brasil	Iron ore production started 1978; interest acquired in 1991	Open pit	Supplied by ENERSUL
Corumbá	Iron ore production started 1978; interest acquired in 1991

OTHER

Kelian (90%)	Gold production started in 1992 and will cease in 2005	Open pit	Kelian’s own 29MW generating station with six identical 4.9MW rated units
	Gold production started in 1992 and will cease in 2005

Lihir Gold (14%)	Production started in 1997; refinancing in 1999 and merger with Niugini Mining in 2000	Open pit	12 diesel unit power plant, four steam wells (geothermal power) producing ten per cent of requirements

Rio Tinto 2004 Form 20-F 25

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INFORMATION ON GROUP SMELTERS, REFINERIES AND PROCESSING PLANTS
(wholly owned unless stated otherwise)


*Smelter, refinery or plant*	*Location*	*Title/lease*	*Plant type/product*	*Capacity*

ALUMINIUM GROUP

Anglesey Aluminium (51%)	Holyhead, Anglesey, Wales	100% Freehold	Aluminium smelter producing aluminium billet, block, sow	145,000 tonnes per year aluminium
Anglesey Aluminium (51%)	Holyhead, Anglesey, Wales		Aluminium smelter producing aluminium billet, block, sow	145,000 tonnes per year aluminium

Bell Bay	Bell Bay, Northern Tasmania, Australia	100% Freehold	Aluminium smelter producing aluminium ingot, block, t-bar	167,000 tonnes per year aluminium
	Bell Bay, Northern Tasmania, Australia		Aluminium smelter producing aluminium ingot, block, t-bar	167,000 tonnes per year aluminium

Boyne Smelters (59%)	Boyne Island, Queensland, Australia	100% Freehold	Aluminium smelter producing aluminium ingot, billet, t-bar	541,000 tonnes per year aluminium
	Boyne Island, Queensland, Australia		Aluminium smelter producing aluminium ingot, billet, t-bar	541,000 tonnes per year aluminium

Comalco Alumina Refinery	Gladstone, Queensland, Australia	97% Freehold	Refinery producing alumina	1,400,000 tonnes per year alumina
Comalco Alumina Refinery	Gladstone, Queensland, Australia	3% Leasehold	Refinery producing alumina	1,400,000 tonnes per year alumina

Eurallumina (56%)	Portoscuso, Sardinia, Italy	39% Freehold	Refinery producing alumina	1,065,000 tonnes per year alumina
	Portoscuso, Sardinia, Italy	61% Leasehold	Refinery producing alumina	1,065,000 tonnes per year alumina

Gladstone Power Station (42%)	Gladstone, Queensland, Australia	100% Freehold	Thermal power station	1,680 megawatts
Gladstone Power Station (42%)	Gladstone, Queensland, Australia

New Zealand	Tiwai Point, Southland, New Zealand	19.6% Freehold	Aluminium smelter producing aluminium ingot, billet, t-bar	350,000 tonnes per year aluminium
Aluminium Smelters (NZAS) (79%)	Tiwai Point, Southland, New Zealand	80.4% Leasehold	Aluminium smelter producing aluminium ingot, billet, t-bar	350,000 tonnes per year aluminium

Queensland Alumina (39%)	Gladstone, Queensland, Australia	73.3% Freehold	Refinery producing alumina	3,778,000 tonnes per year alumina
Queensland Alumina (39%)	Gladstone, Queensland, Australia	26.7% Leasehold	Refinery producing alumina	3,778,000 tonnes per year alumina

COPPER GROUP

Kennecott Utah Copper	Magna, Salt Lake City, Utah, US	100% Freehold	Flash smelting furnace / Flash convertor furnace copper refinery	335,000 tonnes per year refined copper


Palabora (49%)	Phalaborwa, South Africa	100% Freehold	Reverberatory Pierce Smith copper refinery	130,000 tonnes per year refined copper
	Phalaborwa, South Africa		Reverberatory Pierce Smith copper refinery	130,000 tonnes per year refined copper

INDUSTRIAL MINERALS

Boron	California, US	100% Freehold	Borates refinery	584,000 tonnes per year boric oxide
				584,000 tonnes per year boric oxide

QIT-Fer et Titane Sorel Plant	Sorel-Tracy, Quebec, Canada	100% Freehold	Ilmenite smelter	1,100,000 tonnes per year titanium dioxide slag, 900,000 tonnes per year iron
QIT-Fer et Titane Sorel Plant	Sorel-Tracy, Quebec, Canada


Richards Bay Minerals (50%)	Richards Bay, South Africa	100% Freehold	Ilmenite smelter	1,060,000 tonnes per year titanium dioxide slag
Richards Bay Minerals (50%)	Richards Bay, South Africa			1,060,000 tonnes per year titanium dioxide slag

IRON ORE GROUP

Hlsmelt^®(60%) Kwinana, Western Australia		100% Leasehold	Hlsmelt^®ironmaking plant producing pig iron	800,000 tonnes per year pig iron
Hlsmelt^®(60%) Kwinana, Western Australia			Hlsmelt^®ironmaking plant producing pig iron	800,000 tonnes per year pig iron

IOC Pellet Plant (59%)	Labrador City, Newfoundland, Canada	100% Subleased land	Pellet induration furnaces producing multiple iron ore pellet types	12,500,000 tonnes per year pellet
				12,500,000 tonnes per year pellet

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Item 5. Operating and Financial Review and Prospects

CHAIRMAN’S LETTER
Dear shareholder
The recovery in the global economy that gathered momentum in 2003 continued in 2004. As a result of strong demand across our portfolio of metals and minerals, accompanied by increased prices, we achieved a record financial performance.
      An important factor has been the strength in metal and minerals demand in the US and Asia, where China has been prominent but markets in Japan and elsewhere have also recovered. Rio Tinto holds a long established position in these markets; 40 years in the case of Japan and 30 years in China. Our strong position today reflects these long term customer relationships.
      China’s rapid economic development has led to the adoption by the Government of measures to achieve more balanced growth in the economy. However, we continue to believe that China’s growth trend will remain well above the global average in the years ahead.
      In 2004, commodity prices were higher across the board and the US dollar was more stable against our main producing currencies than in 2003. Adjusted earnings* were a record US$2,221 million, US$839 million or 61 per cent above 2003 and exceeding the previous high of US$1,662 million achieved in 2001. Net earnings were US$2,813 million, or 204 US cents per share, including a US$592 million net gain on exceptional items.
      Total cash flow from operations including dividends from joint ventures and associates at US$4,449 million was also a record and 28 per cent higher than 2003. An active portfolio management programme, focused on the disposal of non core assets, generated an additional US$1.5 billion in cash. This has further strengthened our balance sheet, allowing us to undertake a major capital investment programme.
      While our record financial performance reflects the strong markets for our products, it also underlines the quality of our asset portfolio which has been developed over many years on the basis of a long term commitment to shareholder value.
      Investments over recent years have created a platform for earnings growth. This, coupled with a positive view of future growth prospects, has given the board confidence to increase our annual dividend to 77 US cents per share for 2004 an increase of 20 per cent from 2003. This also means that the 2005 interim dividend payable in September can be expected to be 38.5 US cents per share. We intend to maintain our progressive dividend policy from this higher baseline. The board has also decided the current strength of the Group’s cash flow means that in addition to comfortably funding the current and planned investments, capital can be returned to shareholders without reducing our flexibility to pursue other development opportunities. Subject to market conditions, Rio Tinto’s intention, therefore, is to return up to US$1.5 billion of capital to shareholders during the course of 2005 and 2006 through share buyback programmes.
      A sustainable business also requires commitment to social and environmental performance alongside delivery of consistently strong financial results. While much remains to be done in this area we are very encouraged by an increasingly productive dialogue with stakeholder organisations. Our sustainable development programmes are responding positively to a range of issues including biodiversity, climate change and HIV/AIDS. The Group’s social and environmental contribution helps to sustain our pipeline of project opportunities in many countries and has a business case which I believe is compelling.
      The year 2005 will see the tenth anniversary of the formation of Rio Tinto’s dual listed structure and unified management, which has fully met its objectives and continues to provide great strength to Rio Tinto’s operations and governance.
      It is with great sadness I report the sudden death on 27 January 2005 of Bob Adams, our executive director for planning and development. Bob was a major contributor to Rio Tinto’s growth over 35 years, having joined our planning department in 1970. He was a key figure in building Rio Tinto into a leading international mining group. He was respected and liked by all who knew him and his wise counsel and advice will be sorely missed.
      At our forthcoming annual meetings we shall see the retirement of Sir Richard Giordano, Leon Davis and John Morschel, all of whom have been outstanding contributors to the board and to our continuing success. I should particularly like to thank Dick and Leon as deputy chairmen for the support they have given me in my initial period as chairman. Their long experience of the Group has been invaluable in a transition period.
      We recently welcomed three new colleagues to the board. Richard Goodmanson, executive vice president and chief operating officer of DuPont, was appointed on 1 December 2004.
      Ashton Calvert, former secretary of the Department of Foreign Affairs and Trade of the Government of Australia, and Vivienne Cox, executive vice president of BP plc for Integrated Supply and Trading and also for Gas Power and Renewables, were both appointed on 1 February 2005. Each of them will add to the overall skill and experience of the Rio Tinto boards which is a vital underpinning of our high standard of corporate governance.
      Looking forward, we expect to see continuing underlying demand growth for metals and minerals despite some economic uncertainties in 2005. We are now beginning to see a supply response to higher prices but this will take some time to impact on the currently tight markets. While prices may ease from current levels in 2005 we expect they will generally remain above the long term trend. The future direction of the US dollar remains a significant uncertainty and, as was the case in 2003, could have a major impact on earnings.

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In 2004 I had the opportunity to visit many of our operating locations. I have been impressed not only with the scale and complexity of the operations themselves but the depth of management and skill with which they are operated. I would therefore like to acknowledge the hard work and dedication of the Group’s employees throughout the world in 2004. Their commitment to Rio Tinto’s core values underpins the strong results they continue to deliver for shareholders.

Paul Skinner
Chairman
24 February 2005

*Adjusted earnings excludes the effect of exceptional items of such magnitude that their exclusion is necessary in order that adjusted earnings fulfil their purpose of reflecting the Group’s underlying performance. A reconciliation to net earnings can be found on pages A-2.

CHIEF EXECUTIVE’S REPORT

Note: Product group earnings are stated before exceptional items, net interest, exploration and evaluation costs and other central items. A reconciliation is shown on page A-63.

We saw very strong demand across our product range in 2004. This momentum is expected to continue into 2005 though it may be affected by the uncertainties of the US economy and the rate of growth in China. Good market conditions enable us to increase focus on capital management. Our record cash flow gives us considerable options for further organic growth based on our large reserve and resource position.

Operating performance
Product group earnings, excluding exceptional items, were a record US$2,544 million, compared with US$1,584 million in 2003.
      Higher metal and mineral prices and greater output from new projects were the main reasons for the strong result. Improved prices, mainly for copper, aluminium, iron ore and coal, combined with additional output from new or expanded projects such as Diavik in Canada (diamonds), Eastern Range, West Angelas and Hail Creek in Australia (iron ore and coking coal), and Escondida in Chile (copper).
     The depreciation of the US dollar against most major currencies had an effect on earnings, as did higher operating costs. While the mining industry benefits from higher prices received for the commodities we produce, as a business we also incur higher prices for consumables used in our operations.
     To address cost factors more rigorously, we are evolving our business processes to take advantage of Rio Tinto’s scale and to share leading practices around the Group as key levers to creating value. We have been successful in applying these principles in our information technology, procurement and shipping activities. We are working to extend greater capability and sharing of expertise to mining and processing operations, asset management and marketing, to maximise value on several fronts.

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In 2004 I announced a major reallocation of product group responsibilities. With the retirement of David Klingner as head of Exploration and Chris Renwick as chief executive, Iron Ore, Tom Albanese moved to Copper and Exploration, Sam Walsh to Iron Ore, Oscar Groeneveld to Aluminium, and Andrew Mackenzie was recruited to be chief executive Industrial Minerals. Preston Chiaro and Keith Johnson continue as chief executives of Energy and Diamonds respectively. Both David Klingner and Chris Renwick spent most of their working lives with Rio Tinto, each with 35 years’ service, making very valuable contributions in several areas of the business.

Strategy
Earlier this year the board discussed Rio Tinto’s strategic direction to provide a framework for our medium term decisions. The discussion reaffirmed our focus on mining operations to produce minerals and metals. Furthermore, we recognised that medium term growth will be biased towards growth from within – the development of brownfield and greenfield projects inherent in our existing assets.
     The Group has long maintained a commitment to exploration. I believe this is an increasingly important source of competitive advantage. The Group’s diversity and strength, particularly in Australia and North America, enable us to increase our involvement in less familiar territories of the world should opportunities present themselves.
     The centre of gravity of our operations has been firmly in the OECD countries where historically we have found the most opportunities. This need not always be the case. The generation of options globally is an important pathway to growth and we possess the technical, community and environmental management capabilities to do so. Also, a key building block will remain our ability to bring well thought out projects to fruition on time without compromising their performance.
     A more competitive mining industry is developing and Rio Tinto needs to improve faster to keep ahead. Our fundamental strategy will not change as it has stood the test of time, but we contemplate some changes in emphasis. We will continue to focus on large, long life, low cost operations and run them efficiently. Our growth will largely come from our existing operations and reserves, supplemented by opportunistic mergers, acquisitions, structures and alliances, where these make sense.
     While historically the decentralised model of Rio Tinto has delivered enormous benefits, to keep improving we are putting greater emphasis on Rio Tinto’s global scale and specialist skills. We need to continue to improve how we operate, recognising that operational excellence and commercial acumen go hand in hand.

New projects
Over 2005 and 2006, we plan to spend up to US$6 billion on new projects. We have many potential investment options including opportunities in alumina, coal, iron ore, industrial minerals, diamonds and copper. Most of these relate to the large, long life assets we already own. We believe these provide our primary route to value growth and should represent the priority use of shareholders’ funds.
     We have recently completed three development projects. Currently we have ten under way, and three more were approved late in 2004. In addition, we have development studies progressing on 15 more projects. Our level of success reflects efforts we have made over a number of years and is a tangible result of our commitment to exploration.
     Over the past year we have transferred five projects from exploration to the product groups where the necessary skills can be applied to take them through to the next level of evaluation. These projects – in copper, iron ore, nickel, gold and potash – emphasise the continuity of our growth potential for the medium term.
     With a strong market, the outlook for our iron ore businesses remains exciting. The expansion of capacity in Western Australia at a cost of US$1,300 million is the single largest project investment we have made in many years. The major elements of the programme are on track for completion by the end of 2005 with the result that Rio Tinto expects to have a managed capacity of over 170 million tonnes of iron ore per year.
     The expansion is part of a major capital expenditure programme in Western Australia that also includes the US$200 million HIsmelt^®iron making plant that will be commissioned early in 2005 after more than 20 years of research and development. The Comalco Alumina Refinery in Australia was successfully commissioned in the fourth quarter of 2004 and made its first shipment to China ahead of schedule.
     The Hail Creek coking coal mine reached its capacity of 5.5 million tonnes per annum in 2004 well ahead of our original expectations. An expansion of capacity to eight million tonnes is already under way for completion by 2006. This is an excellent example of how our focus on assets with large reserves gives us options to expand in line with demand. It is a large, high quality resource with reserves of nearly 200 million tonnes. Hail Creek also illustrates the value of patience and thoroughness; it was under study on and off for 30 years.
     The success of the Diavik diamond project in Canada, where overall performance has comfortably exceeded expectations, prompted us to bring forward development of a second orebody to help sustain the advantages that have been created. Development will necessitate construction of a second dike. Mining of the second orebody is scheduled to begin in early 2008. A study is also under way into the viability of underground mining, including the construction of an exploration decline.
     During 2004, we continued to pursue opportunities for asset disposals in a patient and disciplined manner. We sold our shareholding in Freeport-McMoRan Copper & Gold, receiving net proceeds of US$882 million while retaining our joint venture interest in production from the Grasberg mine. We locked in further value with the sale of the Zinkgruvan zinc mine in Sweden, and our interests in the Neves Corvo copper and tin mine in Portugal and the Morro do Ouro gold mine in Brazil. We restructured our interest in Rio Tinto Zimbabwe to focus on the Murowa diamond project in that country.

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Safety, health, environment and communities
There was a marked improvement in our safety record in 2004 even though there is considerable work still to be done to reach Rio Tinto’s goal of zero injuries and illnesses.
     I am sorry to report that there was one fatal accident at a managed operation. While this compares with six deaths at operations in 2003, it remains wholly unacceptable that anyone should be fatally injured at work. There were also a number of near misses. We will redouble our efforts to increase visible leadership from all levels of management and emphasise the role of employees themselves in developing safe work habits. There were 371 lost time incidents during the year, a 21 per cent decrease from 2003. The lost time frequency rate was 0.65 compared with 0.82 in 2003.
     The 2004 winners of the Chief Executive’s Safety Award were Rio Tinto Brasil’s Morro do Ouro gold mine for the second consecutive year, Quebec Metal Powders in Canada, and Rio Tinto Exploration Australasia, which was commended for its performance in 2003. The awards improve recognition of good performance based on Rio Tinto's safety targets and programmes.
     We continued to improve our understanding of the environmental implications of our activities regarding biodiversity, climate change, water and energy use, waste disposal and use of our products. There was no change in the number of significant environmental incidents (16) compared to 2003. There was, however, a decrease, from eight to four, in the number of significant spills.
     At Energy Resources of Australia (ERA) environmental incidents occurred that were unacceptable and which marred an otherwise commendable performance. Numerous changes to systems have been made and increased resources applied so that such shortcomings are not repeated. Three subsequent Australian Government audits were satisfactorily completed.
     To improve consistency and to share good practices, we developed standards and guidance to help our businesses to work more closely with people neighbouring our operations. They aim to arrive at an understanding of what we can do for mutual benefit and then to secure implementation of agreed objectives. We support over 2,000 socio-economic programmes covering health care, education, agriculture, and business development.
     We responded to the Asian tsunami disaster by committing A$1 million (about US$750,000) to the relief effort in countries where we are active. The funds will be donated through appropriate international agencies in Indonesia and India where we can leverage our local knowledge most effectively.

Outlook
The world economy is slowing to a more sustainable pace after growth accelerated sharply in 2004. If the slowdown is well managed, particularly in the US and China, which have been the key drivers for growth in recent years, it will be a welcome development for commodity markets. These are already severely stretched to meet demand. Developments in the foreign exchange markets remain a key economic uncertainty.
     Rio Tinto is benefiting from a very strong business environment as developing countries ramp up their demand for metals and minerals and mature economies enjoy relatively solid economic growth. While this outlook is encouraging for the short and medium term, there remain fundamental uncertainties on the world stage. Among them are the direction the US economy will take, the rate of growth in China and the sustainability of growth in Asia as a whole.
     Our record financial performance under strong market conditions in 2004 enabled us to focus on capital management to achieve a balance between future investment and rewards for shareholders. We have many options for investing in our future growth, with a strong suite of opportunities in the project pipeline. As always we will apply our rigorous capital appraisal processes.
     The world in which we operate is always changing and we are anticipating and reacting to those changes in order to remain successful. Barring the uncertainties I mentioned, the near term looks encouraging. Whatever the economic conditions, Rio Tinto has the assets and the people to maximise shareholder value in a sustainable way.
     In conclusion, I thank my management team and our valued employees all over the world for their continued support during 2004.

Leigh Clifford
Chief executive
24 February 2005

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FINANCIAL REVIEW
Financial risk management
The Group’s policies with regard to risk management are clearly defined and consistently applied. They are a fundamental tenet of the Group’s long term strategy.
     The Group’s business is mining and not trading. The Group only sells commodities it has produced. In the long term, natural hedges operate in a number of ways to help protect and stabilise earnings and cash flow, obviating the need to use derivatives or other forms of synthetic hedging for this purpose. Such hedging is therefore undertaken to a strictly limited degree, as described below.
     The Group has a diverse portfolio of commodities and markets, which have varying responses to the economic cycle.
     The relationship between commodity prices and the currencies of most of the countries in which the Group operates provides further natural protection. In addition, the Group’s policy of borrowing at floating US dollar interest rates helps to counteract the effect of economic and commodity price cycles.
     The Group’s Financial statements and disclosures show the full extent of its financial commitments including debt and similar exposures. The Group’s share of the net debt of joint ventures and associates is also disclosed.
     The risk factors to which the Group is subject that are thought to be of particular importance are summarised on pages 8 to 10.
     The effectiveness of internal control procedures continues to be a high priority in the Rio Tinto Group. A statement on this is included in Corporate governance on pages 85 to 86.
     The Group’s policies with regard to currencies, commodities, interest rates and treasury management are discussed below.

Adjusted earnings
UK Financial Reporting Standard 3 permits the presentation of an adjusted measure of earnings. As presented by Rio Tinto, this excludes the effect of exceptional items of such magnitude that their exclusion is necessary in order that adjusted earnings fulfil their purpose of reflecting the Group’s underlying performance. Except where otherwise indicated, earnings contributions from Group businesses and business segments exclude the effect of these exceptional items. Adjusted earnings is reconciled with net earnings on pages A-2.

Group operating results
2004 compared with 2003
Net earnings of US$2,813 million were US$1,305 million above 2003. Adjusted earnings of US$2,221 million were US$839 million above 2003. The principal factors explaining the changes in earnings are shown in the table below.

	US$ m

2003 Net earnings	1,508
Exclude: Exceptional gains	126

2003 Adjusted earnings	1,382
Prices	1,638
Exchange rates	(247	)
Inflation	(118	)
Grasberg slippage	(203	)
Volumes	270
Energy costs	(81	)
Other costs	(173	)
Other	(247	)

2004 Adjusted earnings	2,221
Add: exceptional net gains	592

2004 Net earnings	2,813

Stronger markets resulted in higher prices for most of the Group’s products. Compared with 2003, average copper prices of 130c/lb were over 60 per cent higher, average aluminium prices of 78c/lb were 20 per cent higher and average gold prices of US$409/oz were 13 per cent higher. Average molybdenum prices were over two and a half times those of 2003.
The benchmark iron ore price increased 18.6 per cent. This resulted in increased seaborne iron ore prices, mainly effective from 1 April 2004. The seaborne thermal coal market also strengthened during the year with the benefit of higher prices flowing through progressively in the second half of the year.
The US dollar weakened further against those currencies in which the Group incurs the majority of its costs. Against the Australian dollar it averaged 12 per cent weaker. The effect of this and other currency movements on operating costs reduced earnings by US$326 million. The effect on earnings of the revaluation of monetary items to period end exchange rates was also adverse, although relative to a more substantial charge in 2003 it had a positive effect of US$61 million. Gains on currency hedges initiated by North and Comalco before they became wholly owned subsidiaries in 2000 increased earnings by US$18 million compared with 2003.

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     Production of copper and gold from the Freeport managed Grasberg mine was significantly below 2003 as a consequence of the material slippage in the fourth quarter of 2003. The effect of this on volumes and costs, net of insurance, was to reduce 2004 earnings by US$203 million. Production had returned to normal by the fourth quarter of 2004.
     Excluding the effects of the Grasberg slippage, higher volumes, mainly from new projects at Diavik (diamonds), Hail Creek (coking coal), West Angelas (iron ore) and additional output from Escondida (copper) increased earnings by US$270 million. As a result of tropical cyclone Monty the volume growth from the Western Australian iron ore operations was more modest than would otherwise have been the case.
     Excluding the effect of inflation, higher energy costs and the Grasberg slippage, the impact on earnings of increased costs was US$173 million. Strong markets create cyclical cost pressures within the industry. Higher prices for skilled labour, steel, rubber, diesel, explosives and freight have all had an effect on operating costs.
     At Hamersley, costs were also higher due to increased material movement, including prestripping, and higher maintenance activity. Tropical cyclone Monty had a prolonged effect on the costs as well as volumes at Hamersley and Robe (iron ore). Adverse cost variances at Argyle (diamonds) were attributable largely to lower production and at Palabora (copper) to lower volumes and increased depreciation following the commissioning of the underground project.
     Excluding exceptional items, the effective tax rate of 29 per cent was in line with that of 2003.
     Other variances included the absence of earnings from divested businesses which reduced earnings by US$122 million.
     The East 1 Pushback project at Kennecott Utah Copper was approved in February 2005. This project is a higher value, lower capital intensive, but shorter life option than the previous mine plan which was predicated on development of an underground mine from 2013. Options to extend operations beyond 2017, including further open pit and underground developments, will be fully studied over the coming years but the results for 2004 include a one off, non cash charge of US$36 million due to the increase in the present value of environmental remediation provisions. Pending any extension of the assumed mine life beyond 2017 there will be an increase in annual charges for depreciation and amortisation of discount from 2005 of around US$45 million.
     In 2004 there were gains on disposals of undeveloped properties totalling US$38 million. Against this, the 2003 earnings of Rio Tinto Brasil included a benefit of US$32 million resulting from the part reversal of an impairment provision.
     The remaining ‘other’ variance includes business interruption insurance claims to the extent that the costs are retained in the Group and reversion to a higher effective tax rate in the US.
     The 2004 exceptional items of US$592 million include a net profit on disposals of businesses (US$913 million), a charge of US$160 million relating to Colowyo (coal) and a provision of US$161 million, after tax and outside shareholder interests, for the write down of the carrying value of Palabora’s copper assets.
     Gains relating to disposals of businesses include US$518 million profit on sale of the Group’s equity interest in Freeport-McMoRan Copper & Gold Inc. (FCX). Rio Tinto invested in the Grasberg ore body through purchase of an equity interest in FCX and participation in the Grasberg joint venture: these were two components of one investment decision. The investment occurred prior to the introduction of FRS10 and the goodwill arising was therefore eliminated directly against reserves in accordance with Rio Tinto’s then current UK GAAP accounting policy. On disposal of the equity interest in FCX, goodwill of US$228 million attributable to this part of the total investment was written back through reserves and deducted from the profit on disposal.
     Against a background of adverse financial results, a review of Palabora’s business was finalised in the third quarter of 2004. Following this review, the workforce was reduced by 13 per cent and the management levels by 20 per cent. These events triggered an assessment of the balance sheet value of Palabora’s copper assets, using forecast long term copper prices, which resulted in the provision for asset impairment.
     A detailed review of the mine plan and projected cash flows of the Colowyo coal business was completed in June 2004. This indicated that future operating and development costs are substantially higher than previously estimated. As a consequence, an exceptional charge was recorded in the first half of 2004 for the writedown of Colowyo’s fixed assets and recognition of related onerous contract obligations.
     The 2003 exceptional items of US$126 million relate to gains on the disposal of Kaltim Prima Coal and Peak/Alumbrera (gold, copper). No tax was payable on these gains.

2003 compared with 2002
Net earnings of US$1,508 million compared with US$651 million reported for 2002. Adjusted earnings of US$1,382 million were US$148 million below 2002. The principal factors explaining the changes in earnings are shown in the table below.

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	US$ m

2002 Net earnings	651
Exclude: Exceptional charges	(879	)

2002 Adjusted earnings	1,530
Prices	442
Exchange rates	(412	)
Inflation	(106	)
Volumes	38
Energy costs	(54	)
Other costs	(82	)
Other	26

2003 Adjusted earnings	1,382
Add: exceptional gains	126

2003 Net earnings	1,508

The weakening of the US dollar against the currencies in which most of the Group’s costs are denominated reduced earnings by US$412 million. The average levels of the Australian dollar, Canadian dollar and South African rand were respectively 20 per cent, 11 per cent and 39 per cent stronger in 2003 than in 2002. The effect of these and other currency movements on operating costs was to reduce earnings by US$352 million. The effect of the shift in exchange rates on balance sheet values expressed in the functional currencies of the relevant units further reduced earnings and this charge was US$100 million more than the corresponding charge in 2002. Gains on currency hedges initiated by North, Ashton and Comalco, before they became wholly owned subsidiaries in 2000, increased earnings by US$40 million relative to 2002.
     The prices of many products were stronger, increasing earnings by US$442 million. Copper prices averaged 13 per cent higher; gold 17 per cent and aluminium seven per cent. The copper price was 51 per cent higher at the end of the year than at the beginning and this led to a favourable effect from provisional pricing of US$39 million. Benchmark iron ore prices increased by nine per cent.
     Over the full year, seaborne thermal coal prices were on average seven per cent lower and realised uranium prices were lower due to some higher priced contracts expiring at Rössing.
     Overall, volume changes increased earnings by US$38 million. Lower gold and molybdenum volumes at Kennecott Utah Copper, as a result of reduced by product grades, partly offset volume growth from new mines at Diavik and West Angelas (iron ore) and capacity expansions at Escondida and Hamersley. The benefit of higher gold grades at Grasberg, particularly in the first half of the year, was negated by lower production following a slippage in the mine in the fourth quarter of the year. Robust demand for diamonds enabled Argyle to reduce inventories. Volumes of titanium dioxide feedstock were affected by weak markets.
     Turning to costs, higher oil, power and gas prices reduced earnings by US$54 million. Average oil prices were US$3.50 per barrel or 14 per cent higher than in 2002. Gas prices in the US market were also higher and there were also increases in electricity prices, principally in New Zealand.
     Excluding the effects of energy prices and the US$106 million impact of inflation, cost increases reduced earnings by US$82 million. Two significant events adversely affected cost performance in the period. In the first half of the year, there was a three week smelter shut down at Kennecott Utah Copper as a result of an acid plant failure. The slippage at the Grasberg mine in the fourth quarter impacted both production volumes and costs.
     Costs at Coal & Allied were affected by higher demurrage caused by a shortage of rail capacity in the Hunter Valley. Lower earnings at Rio Tinto Iron & Titanium included a charge associated with the partial write down of a customer receivable.
     Excluding exceptional items, the effective tax rate at 28.8 per cent compared with 31.2 per cent for 2002. The lower charge in 2003 reflected reduced tax payments in the US and a number of one off benefits including a credit of US$8 million resulting from the proposed entry into the Australian tax consolidation regime, with effect from 1 January 2003.
     The after tax net interest charge was US$36 million less than in 2002, due both to lower interest paid and higher capitalised interest. The net central cost of the Group’s pension schemes was about US$60 million higher than in 2002.
     The net earnings of Rio Tinto Brasil include a credit of US$32 million resulting from the reversal of part of an impairment provision relating to Fortaleza (nickel) recorded in a previous year.
     The 2003 exceptional items of US$126 million relate to gains on the disposal of Kaltim Prima Coal, Peak and Alumbrera. No tax was payable on these gains.

Cash flow
2004 compared with 2003
A record total cash flow from operations, including dividends from associates and joint ventures, of US$4,449 million, was 28 per cent above 2003. Working capital levels increased in absolute terms by US$60 million, which is a relatively small amount compared with the increase in sales and production levels.
Investment in the business continued. Capital expenditure and financial investment of US$2,085 million was US$412 million above 2003. Purchases of property, plant and equipment included the major expansion of iron ore capacity in Western Australia, the construction of the Comalco Alumina Refinery, and the purchase of West Antelope coal reserves by Kennecott Energy.

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Disposals of interests in businesses generated proceeds of over US$1.5 billion. The largest components of this were the sale of shares in FCX and the sale of Rio Tinto’s interest in the Morro do Ouro gold mine in Brazil.
The net cash inflow before management of liquid resources and financing, but after dividends, was US$1,888 million.

2003 compared with 2002
The Group’s operating cash flow remained strong. Total cash flow from operations of US$3,486 million, including dividends from associates and joint ventures, was only seven per cent below 2002 despite ten per cent lower adjusted earnings.
     Tax paid included an amount of US$106 million relating to the disputed tax assessments from the Australian Tax Office described in Note 29 of the consolidated financial statements. The amount paid has been recorded as a receivable in these accounts because the directors believe that the relevant tax assessments are not sustainable.
     Investment in the business continued at a high level. Capital expenditure and financial investment of US$1,673 million was US$197 million less than 2002. Purchases of plant and equipment included the expansion of iron ore capacity and the construction of the Comalco Alumina Refinery. Purchases less sales of investments in 2002 of US$323 million mainly related to US Treasury bonds held as security for the deferred consideration on the North Jacobs Ranch acquisition, of which US$76 million were sold in 2003.
     The sale of assets, principally Peak, Alumbrera and Kaltim Prima Coal, generated a cash inflow of US$405 million.

Balance sheet
Shareholders’ funds increased by US$2,547 million. Profits exceeded dividends declared by US$1,751 million and there was a write back of goodwill of US$228 million relating to the disposal of shares in FCX. Exchange rate translation changes increased shareholders’ funds by US$542 million.
     As a result of the strong cash flow, both from operations and from disposals, net debt fell from US$5,646 million to US$3,751 million. The ratio of net debt to total capital fell to 21.7 per cent from 33.8 per cent at 31 December 2003. Interest was covered 20 times (2003: 11 times).
     As detailed in Note 18 to the consolidated financial statements, US$806 million (19 per cent) of the Group’s borrowings at the end of 2004 will mature in 2005.
     At the year end, medium and long term borrowings totalled US$3,337 million. The amount issued under the US$3 billion European Medium Term Notes Programme was US$1.5 billion of which US$204 million is repayable within one year.
     In addition to the above, the Group’s share of the third party net debt of joint ventures and associates totalled US$602 million at 31 December 2004. This debt is set out in Note 14 to the consolidated financial statements, which includes a description of the Group’s responsibilities in relation to Colowyo’s debt. The debt held by other joint ventures and associates is without recourse to the Rio Tinto Group.

Listed Company operating results
The economic interests of Rio Tinto plc and Rio Tinto Limited were merged in December 1995 as a result of the Dual Listed Companies ('DLC') merger. The DLC merger has the effect that shareholders can be regarded as having interests in a single economic enterprise that is under common control and management. Accordingly the Operating and Financial Review and Prospects have been presented on a Group basis with the exception of the separate discussion and analyses relating to Rio Tinto plc and Rio Tinto Limited parts of the Group respectively provided below as a supplement to the discussion of the Rio Tinto Group set out above.

Rio Tinto plc - part of Rio Tinto Group
2004 compared with 2003
Rio Tinto plc's net sales revenue (referred to as consolidated turnover in the financial statements) was US$5,275 million (2003: US$4,092 million). The 29 per cent increase in 2004 is largely due to increases in commodity prices and also the effect of a full year of sales at Diavik.
Profit on ordinary activities before interest and tax was US$2,652 million, an increase of US$1,140 million compared with 2003. During 2004 higher copper prices contributed to increased profits at Kennecott Utah Copper and Escondida, where there were also higher volumes. 2004 profit also benefited from a full year of sales at Diavik. At Freeport the higher copper and gold prices were offset by the effects of lower production and increased costs arising from the material slippage in 2003. The absence of profit from divested operations also had an adverse impact on profit. 2004 profit on ordinary activities before interest and taxation includes net exceptional gains of US$275 million (2003: US$47 million). These comprise exceptional gains on disposal of interests in operations of US$833 million (2003: US$47 million); a charge of US$160 million relating to Colowyo (coal) and a charge of US$398 million (before tax and minority interests) for the write down of the carrying value of Palabora's copper assets.
In 2004, net interest payable decreased to US$69 million (2003: US$138 million), as a result of lower net debt which more than offset the effect of interest rate rises. Interest rates for the majority of Rio Tinto plc's borrowings are based on 3 month LIBOR, which averaged 1.6 per cent in 2004 and 1.2 per cent in 2003.

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     The effective tax rate was 21.3 per cent in 2004. The reduction from the 2003 tax rate of 26.1 per cent was largely due to the effects of exceptional items. Excluding these, the effective tax rate in 2004, at 28.3 per cent was higher than the 27.1 per cent for 2003 as a result of increased taxable profits and withholding tax in locations with higher effective tax rates.
     Net earnings of US$2,073 million compare with US$956 million in 2003. The increase of US$1,117 million includes the effect of net exceptional gains totalling US$506 million in 2004 and US$47 million in 2003.
     Total cash flow from operations (including dividends from joint ventures and associates) increased from US$1,710 million in 2003 to US$1,951 million in 2004. This is largely the result of dividends received from Rio Tinto Limited (on ordinary shares) and Escondida which offset reduced dividends from the Freeport joint venture, after the material slippage in 2003, and the non recurrence of a special dividend on the Rio Tinto Limited DLC Dividend Share.
      Capital expenditure and financial investment rose from US$1,097 million in 2003 to US$1,986 million in 2004 due to an increase of US$1,423 million in funds advanced to Rio Tinto Limited by Rio Tinto plc. In 2003 a subsidiary company of Rio Tinto plc acquired US$500 million of redeemable preference shares in a subsidiary company of Rio Tinto Limited.
     The net cash inflow from acquisitions and disposals of US$1,306 million in 2004 includes proceeds from the sales of Rio Tinto plc's interests in operations including: Freeport-McMoRan Copper & Gold Inc, Rio Paracatu Mineracao SA and Mineracao Serra de Fortaleza Limitada. The sale of the investment in Freeport-McMoRan Copper & Gold Inc does not affect the terms of the Grasberg joint venture. In 2003 the net cash inflow from disposals of interests in businesses was US$1,208 million and reflected the deferred payment by Rio Tinto Limited for the buy back in 2000 of some of its shares from Rio Tinto plc. Net debt fell from US$1,842 million to US$1,501 million during 2004.
     Shareholders’ funds increased to US$9,139 million at 31 December 2004 (31 December 2003: US$7,343 million), largely due to retained profit and exchange gains.

2003 compared with 2002
Rio Tinto plc's net sales revenue (referred to as consolidated turnover in the financial statements) was US$4,092 million (2002: US$3,993 million). The two per cent increase in 2003 is largely due to the commencement of sales at Diavik
     Profit on ordinary activities before interest and tax was US$1,512 million. The corresponding figure for 2002 was US$602 million lower, but suffered from exceptional charges of US$755 million. Iron and Titanium profits were lower in 2003 as a result of the weak US dollar, soft market conditions and the write down of a customer receivable. The pretax profit impact of reduced volumes at Kennecott Utah Copper was partly offset by benefits from higher copper prices. A loss at Rossing reflected lower prices and adverse exchange rates. 2003 profits also suffered from increased pension finance costs, resulting from the decrease in fund asset values. However, profits benefited in 2003 from Diavik's first year of operation; and there was an increase in operating profit contributed by joint ventures following expansion of capacity at Escondida.
     In 2003, net interest payable decreased to US$138 million (2002: US$156 million), as a result of lower net debt and reduced interest rates. Interest rates for the majority of Rio Tinto plc's borrowings are based on 3 month LIBOR, which averaged 1.2 per cent in 2003 and 1.8 per cent in 2002.
     The effective tax rate was 26.1 per cent in 2003. The reduction from the 2002 tax rate of 61.8 per cent is largely due to the effect of exceptional items. Excluding these, the effective tax rate in 2003, at 27.1 per cent, is lower than the 30.7 per cent for 2002 as a result of lower tax payments in the US.
     Net earnings of US$956 million compare with US$195 million in 2002. The increase of US$761 million includes the effect of exceptional charges of US$739 million in 2002, in contrast with gains of US$47 million in 2003.
     Total cash flow from operations was US$1,710 million (2002: US$1,976 million). Although 2003 operating profit was higher than in 2002, this largely resulted from the absence of exceptional non cash charges. Capital expenditure and financial investment in 2003 was US$1,097 million (2002: US$1,205 million). The decrease was largely due to

•	an increase in net funds advanced to Rio Tinto plc by Rio Tinto Limited; 2003: US$5 million (2002: US$(87) million)
•	a reduction in the purchase of property plant and equipment; as Diavik commenced production.
•	the acquisition by a subsidiary company of Rio Tinto plc of US$500 million of redeemable preference shares in a subsidiary company of Rio Tinto Limited.
•	the purchase, in 2002, of US$304 million of treasury bonds as security for the deferred consideration on the acquisition of the North Jacobs Ranch reserves.

The net cash inflow from acquisitions and disposals of US$1,208 million in 2003 reflects deferred payment by Rio Tinto Limited for the buy back in 2000 of some of its shares from Rio Tinto plc. Net debt fell from US$2,625 million in 2002 to US$1,842 million in 2003.
Shareholders funds increased to US$7,343 million at 31 December 2003 (31 December 2002: US$5,899 million), largely due to retained profit and exchange gains.

Rio Tinto Limited - part of Rio Tinto Group
2004 Compared with 2003
Rio Tinto Limited's net sales revenue (referred to as consolidated turnover in the financial statements) was US$6,524 million in 2004 (2003: US$5,476 million). The 19 per cent increase in revenue is largely due to increased volumes and prices at the Iron Ore and Coal operations,and increased prices and smelter output at Comalco. Stronger markets resulted in increased prices for most of the Group’s products. The disposal of Kaltim Prima Coal during 2003 had a negative impact on 2004 revenue.

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     In 2004 profit on ordinary activities before interest and tax was US$1,871 million (2003: US$1,391 million). The US dollar weakened further against the Australian and Canadian dollars, currencies in which the Group incurs a large proportion of its costs, reducing profit. Profit on disposal of interests in operations was US$139 million in 2004, similar to the US$126 million realised in 2003. Disposals in 2004 included Zinkgruvan AB and a 10% interest in Hail Creek.
     The effective tax rate in 2004 was 28 per cent, which compares with 28.7 per cent in 2003. However, excluding the effect of exceptional items, the effective tax rate in 2004 was 30.4 per cent (2003: 31.9 per cent) as a result of entry into the Australian consolidated tax regime.
     Net earnings increased to US$1,185 million (2003: US$884 million) and total cash flow from operations was US$2,622 million (2003: US$2,053 million) as a result of the factors above. The increase in dividends from joint ventures is largely attributable to Australian coal operations.
     Capital expenditure and financial investment increased from US$1,071 million in 2003 to US$1,522 million in 2004 as a result of continued expansion of iron ore capacity in Western Australia and the construction of the Comalco Alumina Refinery. Sales less purchases of other investments of US$110 million in 2004 is US$94 million higher than in 2003. Several investments were disposed of during the year, including the Sepon project in Laos.
     Equity dividends paid of US$330 million were US$135 million below 2003 payments despite an increase in the dividend on ordinary shares; in 2004 there was no dividend payment on the DLC dividend share held by Rio Tinto plc; in 2003 a payment of US$164 million was made.
     Rio Tinto Limited received US$1,423 million of funding from Rio Tinto plc which, combined with the factors mentioned above, resulted in a US$1,554 million decrease in net debt to US$2,250 million.
     Shareholders funds were US$5,515 million at 31 December 2004 (31 December 2003: US$4,324 million). Retained profit and exchange gains have contributed to the increase.

2003 Compared with 2002
Rio Tinto Limited's net sales revenue (referred to as consolidated turnover in the financial statements) was US$5,476 million in 2003 (2002: US$4,722 million). The 16 per cent increase in 2003 is largely due to increased volumes and prices at the Iron Ore operations and increased prices and smelter output at Comalco. The disposals of Kaltim Prima Coal and Alumbrera during the year resulted in a reduction in share of joint ventures' and associates' turnover.
     In 2003 profit on ordinary activities before interest and tax was US$1,391 million (2002: US$1,180 million after exceptional asset write downs of US$433 million). The weakening of the US dollar against the Australian dollar and Canadian dollar, in which a large proportion of the Group's costs are denominated reduced profit. However, 2003 profits benefited from exceptional gains on disposal of subsidiary, joint venture and associate, of US$126 million: whereas, 2002 profits were reduced by exceptional net write downs.
     In 2003, net interest payable decreased to US$100 million (2002: US$124 million), due largely to lower interest rates.
     The effective tax rate in 2003 was 28.7 per cent, which compares with 40.9 per cent in 2002. However, excluding the effect of exceptional items, the tax rate was 31.7 per cent in both years.
     Profits attributable to outside interests increased in 2003, primarily because 2002 was impacted by the exceptional asset write downs at IOC.
     Net earnings increased to US$884 million (2002: US$736 million) as a result of the factors above. Total cash flow from operations (including dividends from joint ventures and associates) was similar to 2002 at US$2,053 million (2002: US$ 2,043 million). The increase in cash flow from operating activities was offset by a reduction in dividends received from the coal joint ventures in 2003.
     Capital expenditure and financial investment increased as a result of continued expansion at Hamersley; and construction of the Comalco Alumina Refinery. During 2003 Rio Tinto Limited remitted US$1,208 million to Rio Tinto plc in respect of shares that were repurchased in 2000. In addition, a subsidiary of Rio Tinto Limited, issued US$500 million of redeemable preference shares to a subsidiary of Rio Tinto plc. The factors mentioned above combined to reduce cash flow and increase the level of net debt in 2003.

Liquidity and capital resources
Rio Tinto plc and Rio Tinto Limited enjoy strong long and short term credit ratings from Moody’s and Standard and Poor’s shown below.

	Long term	Short term	Outlook

Standard & Poor’s	A+	A-1	Stable
Moody’s	Aa3	P-1	Stable

Investors should be aware that a security rating is not a recommendation to buy, sell or hold securities, that it may be subject to revision or withdrawal at any time by the assigning rating organisation, and that each rating should be evaluated independently of the other.
The unified credit status of the Group is maintained through cross guarantees whereby contractual obligations of Rio Tinto plc and Rio Tinto Limited are automatically guaranteed by the other. These ratings continue to provide financial flexibility and consistent access to debt via money or capital markets and enable very competitive terms to be obtained.

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The Group’s commercial paper programmes are fully backed by bank standby facilities which totalled US$1.45 billion at 31 December 2004, of which US$0.85 billion was on terms exceeding one year. These facilities can be drawn upon at any time.
As at 31 December 2004, the Group had contractual obligations other than bank borrowings repayable on demand arising in the ordinary course of business as follows:

		Less	Between	Between
		than 1	1 and 3	3 and 5	After 5
US$ m	Total	year	years	years	years

Contractual cash obligations
Debt (a)	4,143	806	2,043	813	481
Operating leases	114	36	37	10	31
Unconditional purchase obligations	3,232	386	747	611	1,488
Deferred consideration	250	96	126	28	–
Other (b)	700	564	48	88	–

Total	8,439	1,888	3,001	1,550	2,000


(a)	Debt obligations include commercial paper backed by bank standby facilities.
(b)	Other relates to long term obligations including capital commitments.
(c)	Other long term liabilities of the Group not shown here include employee benefit obligations for which we expect cash funding to be US$1.4 billion within the next five years and US$1.6 billion between 2010 and 2014.

On the basis of the levels of obligations described above, the unused capacity under the Group’s commercial paper programmes, the Group’s anticipated ability to access debt and equity capital markets in the future and the level of anticipated internal cash generation, the directors believe that the Group has sufficient short and long term sources of funding available to meet its liquidity requirements.
     The Group’s committed bank standby facilities contain a financial undertaking that the Group’s consolidated income before interest and taxes for any annual accounting period shall not be less than three times consolidated interest payable for such period. The ratio for 2004 was 29.6 (2003: 15.2). The Group does not have any financial agreements that would be affected to any material extent by a reduction in the Group’s credit rating.
     The Group’s policy is to centralise surplus cash balances whenever possible.
     As at 31 December 2004 the Group had current assets amounting to US$874 million which are not expected to be used or converted into cash during the next 12 months, comprising US$836 million relating to accounts receivable and prepayments and US$38 million relating to inventories. Note 16 to the consolidated financial statements provides an analysis of the accounts receivable and prepayments falling due after more than one year. It includes a pension prepayment of US$581 million, representing the cumulative excess of the employer contributions paid to the Group’s deferred benefit pension schemes over the pension charges recognised in respect of those schemes under SSAP 24.

Off-balance sheet arrangements
In the ordinary course of business, to manage the Group’s operations and financing, Rio Tinto enters into certain arrangements, which for the purposes of Item 5 would be considered off-balance sheet arrangements.
     The Rio Tinto Group’s off-balance sheet arrangements are comprised principally of performance guarantees, commitments for capital and other expenditure, and certain derivative financial instruments.
     The aggregate amount of indemnities and other performance guarantees, on which no material loss is expected, is US$435 million.
     The Group has a partnership interest in the Colowyo Coal Company and has undertaken, via a subsidiary company which entered into a management agreement, to cause the partnership to perform its obligations under certain coal supply contracts. The debt owed by the Colowyo Coal Company, which has a book value of US$156 million, is to be serviced and repaid out of the proceeds of these contracts. During 2004, a provision of US$149 million has been recognised in respect of the Group’s obligations under the above management agreement. The debt held by other joint ventures and associates is without recourse to the Rio Tinto Group.
     Other commitments include contracted capital expenditure, operating leases and unconditional purchase obligations as set forth in the table of contractual obligations, included in the liquidity and capital resources section above.
     The Group holds certain derivative financial instruments for which the initial fair value and/or subsequent changes to fair value are not recorded under UK GAAP until the underlying contracts are settled or the hedged items to which they relate are recognised. For information on these derivative financial instruments, see Note 28 to the consolidated financial statements.

Exchange rates, reporting currencies and currency exposure
Rio Tinto’s assets, earnings and cash flows are influenced by a wide variety of currencies due to the geographic diversity of the Group’s sales and the countries in which it operates. The US dollar, however, is the currency in which the great majority of the Group’s sales are denominated. Operating costs are influenced by the currencies of those countries where the Group’s mines and processing plants are located and also by those currencies in which the costs of imported equipment and services are determined. The Australian and US dollars are the most important currencies influencing costs.

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In any particular year, currency fluctuations may have a significant impact on Rio Tinto’s financial results. A weakening of the US dollar against the currencies in which the Group’s costs are determined has an adverse effect on Rio Tinto’s net earnings. The approximate effects on the Group’s UK GAAP net earnings of ten per cent movements from the 2004 full year average exchange rates are as follows:

		2003		2004
	Average	Effect of	Average	Effect of
	exchange	10% change in	exchange	10% change in
	rate	full year average	rate	full year average
	US cents	US$ m	US cents	US$m

Australian dollar	65	141 ±	73	190 ±
Canadian dollar	71	26 ±	77	45 ±
Chilean peso	692	6 ±	611	6 ±
Indonesian rupiah	0.012	6 ±	0.011	3 ±
New Zealand dollar	58	6 ±	66	7 ±
South African rand	13	22 ±	16	20 ±
UK sterling	163	7 ±	183	7 ±
Other	n/a	10 ±	n/a	10 ±

These sensitivities are based on 2004 prices, costs and volumes and assume that all other variables remain constant. They take into account the effect of hedges as disclosed in Note 28 to the consolidated financial statements. These exchange rate sensitivities include the effect on operating costs of movements in exchange rates but exclude the impact through revaluation of foreign currency working capital. They should, therefore, be used with care.
After taking into account the effect of relevant derivative instruments, almost all of the Group’s net debt is either denominated in US dollars or in the functional currency of the entity holding the debt. The table below sets out the currency exposures arising from net monetary assets / (liabilities), other than net debt, which are not denominated in the functional currency of the relevant business unit. Gains and losses resulting from such exposures are recorded in the profit and loss account. The table below reflects the Group’s currency exposure after tax and outside interests:

				2003				2004
	Currency of exposure				Currency of exposure
US$m	US dollar	Other		Total	US dollar	Other		Total

Functional currency of business unit:
Australian dollar	251	(11	)	240	222	7		229
Canadian dollar	19	(1	)	18	21	-		21
South African rand	16	2		18	8	3		11
United States dollar	-	20		20	-	24		24
Other currencies	14	9		23	5	(16	)	(11	)

Total	300	19		319	256	18		274

In the case of the Australian dollar, for example, there is a significant degree of natural protection against cyclical fluctuations, in that the currency tends to be weak, reducing costs in US dollar terms, when commodity prices are low, and vice versa.
     Given the dominant role of the US currency in the Group’s affairs, the US dollar is the currency in which financial results are presented both internally and externally. It is also the natural currency for borrowing and holding surplus cash. Modest amounts of cash are held in other currencies for short term operational reasons.
     The Group finances its operations primarily in US dollars, either directly or using currency swaps, and a significant proportion of the Group’s US dollar debt is located in subsidiaries having functional currencies other than the US dollar. Exchange gains and losses relating to US dollar debt impact on the profit and loss accounts of such subsidiaries. Under UK GAAP however, such exchange gains and losses are excluded from the Group’s profit and loss account on consolidation with a corresponding adjustment directly to reserves. This means that financing in US dollars impacts in a consistent manner on the Group’s consolidated accounts irrespective of the functional currency of the particular subsidiary where the debt is located.
     The Group does not generally believe that active currency hedging would provide long term benefits to shareholders. Currency protection measures may be deemed appropriate in specific commercial circumstances and are subject to strict limits laid down by the Rio Tinto board. As set out in Note 28 to the consolidated financial statements, as at 31 December 2004 there were forward contracts, including synthetic forwards, to purchase A$1,113 million in respect of future trading transactions. From the Group’s perspective, these contracts offset the impact of exchange rate variations on a portion of the local currency costs incurred by various subsidiaries. A significant part of the above hedge book was acquired with North Ltd. North held a substantial hedge book on acquisition which has been retained but is not being renewed as maturities occur.

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The functional currency of most operations within the Rio Tinto Group is the local currency in the country of operation. Foreign currency gains or losses arising on translation of the net assets of these operations are shown as a movement in reserves. The approximate translation effects on the Group’s net assets of ten per cent movements from the year end exchange rates are as follows:

		2003		2004
	Closing	Effect of	Closing	Effect of
	exchange	10% change in	exchange	10% change in
	rate	closing rate	rate	closing rate
	US cents	US$m	US cents	US$m

Australian dollar	75	640 ±	78	650 ±
Canadian dollar	77	85 ±	83	115 ±
South African rand	15	21 ±	18	5 ±
UK sterling	178	11 ±	193	14 ±
Other	n/a	6 ±	n/a	7 ±

Interest rates
Rio Tinto’s interest rate management policy is generally to borrow and invest cash at floating rates. Short term US dollar rates are normally lower than long term rates, resulting in lower interest costs to the Group. Furthermore, cyclical movements of interest rates tend to compensate, to an extent, for those of commodity prices. In some circumstances, an element of fixed rate funding may be considered appropriate. At the end of 2004, only 20 per cent of the Group’s net debt was fixed rate. Based on the Group’s net debt at 31 December 2004, and with other variables unchanged, the approximate effect on the Group’s net earnings of a one percentage point increase in US dollar LIBOR interest rates would be a reduction of US$21 million.

Commodity prices
The Group’s normal policy is to sell its products at prevailing market prices. Exceptions to this rule are subject to strict limits laid down by the Rio Tinto board and to rigid internal controls. Rio Tinto’s exposure to commodity prices is diversified by virtue of its broad commodity spread and the Group does not generally believe commodity price hedging would provide long term benefit to shareholders.
     Metals such as copper and aluminium are generally sold under contract, often long term, at prices determined by reference to prevailing market prices on terminal markets, such as the London Metal Exchange and COMEX in New York, usually at the time of delivery. Prices fluctuate widely in response to changing levels of supply and demand but, in the long run, prices are related to the marginal cost of supply. Gold is also priced in an active market in which prices respond to daily changes in quantities offered and sought. Newly mined gold is only one source of supply; investment and disinvestment can be important elements of supply and demand. Contract prices for many other natural resource products are generally agreed annually or for longer periods with customers, although volume commitments vary by product.
     Approximately 40 per cent of Rio Tinto’s 2004 net earnings from operating businesses came from products whose prices were terminal market related and the remainder came from products priced by direct negotiation.
     The approximate effect on the Group’s net earnings of a ten per cent change from the full year average market price in 2004 for the following metals would be:

		2003		2004

	Average	Effect of	Average	Effect of
	market	10% change in	market	10% change in
	price	full year average	price	full year average
		US$m		US$m

Copper	80 c/lb	109 ±	130 c/lb	160 ±
Aluminium (3 month forward)	65 c/lb	95 ±	78 c/lb	110 ±
Gold	US$ 363 oz	52 ±	US$ 409 oz	40 ±

The above sensitivities are based on 2004 volumes and give the estimated impact on net earnings of changes in prices, assuming that all other variables remain constant. These should be used with care. The relationships between currencies and commodity prices is a complex one and movements in exchange rates can cause movements in commodity prices and vice versa. The sensitivities allow for the effect of the commodity hedges maturing in 2005, as disclosed in Note 28 to the consolidated financial statements.

Treasury management and financial instruments
Treasury activities operate as a service to the business of the Rio Tinto Group and not as a profit centre. Strict limits on the size and type of transaction permitted are laid down by the Rio Tinto board and are subject to rigorous internal controls. Corporate funding and overall strategic management of Rio Tinto’s balance sheet is handled by the London based Group Treasury.

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Rio Tinto does not acquire or issue derivative financial instruments for trading or speculative purposes; nor does it believe that it has exposure to such trading or speculative holdings through its investments in joint ventures and associates. Derivatives are used to separate funding and cash management decisions from currency exposure and interest rate management. The Group uses interest rate swaps in conjunction with longer term funds raised in the capital markets to achieve a floating rate obligation which is consistent with the Group’s interest rate policy. Currency swaps are used to convert debt or investments into currencies, primarily the US dollar, which are consistent with the Group’s policy on currency exposure management. No material exposure is considered to exist by virtue of the possible non performance of the counterparties to financial instruments held by the Group.
The derivative contracts in which the Group is involved are valued for the purposes of the Financial instrument disclosures in the Financial statements by reference to quoted market prices, quotations from independent financial institutions or by discounting expected cash flows.

Dividends
Dividends paid on Rio Tinto plc and Rio Tinto Limited shares are equalised on a net cash basis; that is without taking into account any associated tax credits. Dividends are determined in US dollars.
Rio Tinto’s progressive dividend policy aims to increase the US dollar value of dividends over time, without cutting them in economic downturns. Rio Tinto plc shareholders receive dividends in pounds sterling and Rio Tinto Limited shareholders receive dividends in Australian dollars, which are determined by reference to the exchange rates applicable to the US dollar two days prior to the announcement of dividends. Changes in exchange rates could result in a reduced sterling or Australian dollar dividend in a year in which the US dollar value is maintained or increased. The interim dividend for each year in US dollar terms will be equivalent to 50 per cent of the previous year’s total US dollar dividends.

Critical accounting policies and estimates
Dual listed company reporting
As explained in detail in Outline of dual listed companies’ structure and basis of financial statements, the consolidated financial statements of the Rio Tinto Group on pages A-2.2004 to A-84 deal with the results and assets and liabilities of both of the dual listed companies, Rio Tinto plc and Rio Tinto Limited, and their subsidiaries. They are prepared under UK GAAP and satisfy the obligations of Rio Tinto Limited, as laid down by the Australian Securities and Investments Commission. The consolidated financial statements also includes a statement setting out the effect of the adjustments to net earnings and to shareholders’ funds for the Group that would be required under Australian GAAP. The US dollar is the presentation currency used in these financial statements, as it most reliably reflects the Group’s global business performance.
The treatment of gains and losses on US dollar debt is described above in the section dealing with Exchange rates, reporting currencies and currency exposure.
For US reporting purposes separate financial statements are presented for Rio Tinto plc and the companies legally owned by it (‘the Rio Tinto plc part of the Group’); and for Rio Tinto Limited and the companies legally owned by it (‘the Rio Tinto Limited part of the Group’). In these separate financial statements, the consolidated figures for the Rio Tinto plc part of the Group include Rio Tinto plc’s 37.54% share of Rio Tinto Limited accounted for by the equity method.

Ore reserve estimates
The amounts presented under UK GAAP and Australian GAAP are based on the reserves and in some cases resources determined in accordance with the JORC Code.
For the purposes of preparing financial information under US GAAP, estimates of ore reserves are made in accordance with the SEC’s Industry Guide 7.

Asset carrying values
Charges for impairment of the carrying values of certain of the Group’s businesses and related contract obligations, net of tax and outside shareholder interests, amounted to US$321 million in 2004 and US$763 million in 2002. No significant impairment charges occurred in 2003.
     The carrying values are assessed by reference to the higher of disposal value and the net present value of forecast future cash flows. The cash flows are particularly sensitive to the change in two particular parameters: exchange rates and commodity selling prices. Management considers, that over the long term, there is a tendency for movements in commodity prices to compensate to some extent for movements in the value of the US dollar (and vice versa). But such compensating changes are not synchronised and do not fully offset each other. The great majority of the Group’s sales are based on prices denominated in US dollars. To the extent that the currencies of countries in which the Group produces commodities strengthen against the US dollar without commodity price offset, cash flows and, therefore, net present values are reduced.
     In the three years to 31 December 2004, the Australian dollar strengthened by 53% against the US dollar, the Canadian dollar strengthened by 32% and the South African rand by 121%. Taking these three years together, commodity prices rose substantially: for example, copper prices increased by 124%, aluminium by 47% and gold by 58%.
     Rio Tinto’s cash flow forecasts are based on assessments of expected long term commodity prices, which for most commodities are derived from an analysis of the marginal costs of the producers of these commodities. These assessments often differ from current price levels and are updated periodically.

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     In some cases, prices applying to some part of the future sales volumes of an Income Generating Unit are predetermined by existing sales contracts. The effects of such contracts are taken into account in forecasting future cash flows.
     The cash flows used in impairment reviews include the effects of derivatives and non-derivative financial instruments designated as hedges of the cash flows of the relevant Income Generating Unit. However, the impact of such instruments on valuations used in measuring impairment is not significant.
     For the majority of Rio Tinto’s businesses, by both number and by value, the net present value of the expected cash flows is substantially in excess of the carrying value in the balance sheet. For a minority of the businesses the carrying value is close to the net present value of the cash flows, and these are reviewed for impairment where appropriate. The effects of exchange rate and commodity price changes on the values of these units relative to their book values are monitored closely.
     Reviews of carrying values relate to Income Generating Units which, in accordance with FRS 11, are identified by dividing the entity into as many largely independent income streams as is reasonably practicable. In some cases the Business Units within the Product groups consist of several operations with independent income streams, which therefore constitute separate Income Generating Units.
     The expected future cash flows of Income Generating Units reflect long term mine plans which are based on detailed research, analysis and iterative modelling to optimise the level of investment and output and sequence of extraction. The plan takes account of all relevant characteristics of the ore body, including waste to ore ratios, ore grades, haul distances, chemical and metallurgical properties of the ore impacting on process recoveries and capacities of processing equipment that can be used. The mine plan is therefore the basis for forecasting production output in each future year and production costs.
     The useful lives of the major assets of an Income Generating Unit are usually dependent on the life of the ore body to which they relate. Thus the lives of mining properties, smelters, concentrators and other long-lived processing equipment generally relate to the expected life of the ore body. The life of the ore body, in turn, is estimated on the basis of the long term mine plan.
     The cash flow forecasts are based on best estimates of expected future revenues and costs. These may include net cash flows expected to be realised from extraction, processing and sale of mineral resources that do not currently qualify for inclusion in proven or probable ore reserves. Such non-reserve material is included where there is a high degree of confidence in its economic extraction. This expectation is usually based on preliminary drilling and sampling of areas of mineralisation that are contiguous with existing reserves. Typically, the additional evaluation to achieve reserve status for such material has not yet been done because this would involve incurring costs earlier than is required for the efficient planning and operation of the mine.
     In the case of undeveloped properties, there may be no proven and probable reserves to form a basis for the impairment review. The carrying values of these assets are reviewed twice per annum by the Audit committee. The review is based on a status report regarding the Group’s intentions for development of the undeveloped property. In some cases, the undeveloped properties are regarded as successors to ore bodies currently in production. It is intended that these will be developed and go into production when the current source of ore is exhausted.
     Cost levels incorporated in the cash flow forecasts are based on the current long term mine plan for the Income Generating Unit. Recent cost levels are considered, together with expected changes in costs that are compatible with the current condition of the business and meet the requirements of FRS 11 “Impairment of fixed assets and goodwill”.
     Under US GAAP, assumptions used in cash flow forecasts are principally the same as those used under UK GAAP, except that the estimated cash flows related to the liability for asset retirement obligations are excluded under US GAAP. Impairment is only recognised, under US GAAP, when the anticipated undiscounted cash flows are insufficient to recover the carrying value of the asset group. Once impairment is determined, an asset is written down to its fair value, which is normally calculated using discounted cash flows, similar to those under UK GAAP.
     Forecast cash flows are discounted to present values using Rio Tinto’s weighted average cost of capital with appropriate adjustment for the risks associated with the relevant unit, to the extent that such risks are not reflected in the forecast cash flows. For final feasibility studies and ore reserve estimation, internal hurdle rates are used which are generally higher than the weighted average cost of capital.
     The above rates are applied to net of tax cash flows expressed in real terms. However, where an asset is impaired, the amount of the impairment is determined by discounting the pre-tax cash flows at a pre-tax discount rate derived from the post tax discount rate, having regard to the tax characteristics of the Income Generating Unit.
     Final feasibility studies and ore reserve estimation are based on the exchange rates current at the time of the evaluation. For impairment reviews, a forecast of the long term exchange rate is made by reference to historical data.
     Forecast cash flows for ore reserve estimation and impairment testing are based on Rio Tinto’s long term price forecasts. For final feasibility studies these prices, and projected costs, are assumed to decline systematically in real terms.

Close down, restoration and environmental obligations
Provision is made for environmental remediation costs when the related environmental disturbance occurs, based on the net present value of estimated future costs. Where the ultimate cost of environmental disturbance is uncertain, there may be variances from these cost estimates which could affect future financial results.

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Close down and restoration costs are a normal consequence of mining, and the majority of close down and restoration expenditure is incurred at the end of the life of the mine. Although the ultimate cost to be incurred is uncertain, subsidiary companies have estimated their respective costs based on feasibility and engineering studies using current restoration standards and techniques.

Post retirement benefits
     UK GAAP post retirement benefits are accounted for in accordance with Statement of Standard Accounting Practice 24, which requires gradual recognition of the surpluses and deficits that emerge as a result of variances from actuarial assumptions.
     The most significant assumptions used in accounting for pension plans are the long term rate of return on plan assets and the discount rate. The long term rate of return on plan assets is used to calculate interest income on pension assets, which is credited to the Group’s profit and loss account. The discount rate is used to determine the net present value of future liabilities and each year the unwinding of the discount on those liabilities is charged to the Group’s profit and loss account.
     The expected rate of return on pension plan assets is determined as management’s best estimate of the long term return on the major asset classes i.e. equity, debt, real estate and other, weighted by the actual allocation of assets among the categories at the measurement date. The expected rate of return is calculated using geometric averaging.
     The sources used to determine management’s best estimate of long term returns are numerous and include country specific bond yields, which may be derived from the market using local bond indices or by analysis of the local bond market, and country specific inflation and investment market expectations derived from market data and analysts’ or governments’ expectations as applicable.
     In particular, the Group estimates long term expected real returns on equity i.e. returns in excess of inflation, based on the economic outlook, analysts’ views and those of other market commentators. This is the most subjective of the assumptions used and it is reviewed regularly to ensure that it remains consistent with best practice.
     The expected rate of return on pension plan assets is also used as the discount rate for UK GAAP.
     Valuations are carried out using the projected unit method.
     For 2004 the cost in relation to pensions included in the Group’s net earnings was US$82 million under US GAAP. Under UK GAAP, the net pensions cost was US$88 million. Within these costs the expected return on assets was US$163 million under US GAAP and US$166 million under UK GAAP.
      The impact on cash flow in 2004 of the Group’s pension plans, being the employer contributions to defined benefit and defined contribution pension plans, was US$143 million. In addition there were contributions of US$26 million in respect of unfunded healthcare schemes.
     In relation to pensions, it is currently expected that there will be no significant regular employer or employee contributions to the UK plan in 2005. Contributions are made to the main Australian plan according to the recommendation of the plan actuary and are primarily to a mixed defined benefit/defined contribution type arrangement. In North America, contributions are agreed annually in nominal terms. Whilst contributions for 2005 will not be determined until later in the year for some Group plans, the currently expected level of contributions by the Group to the plans in Australia, Canada and the US is expected to be similar in aggregate to that made in 2004. Since the Group’s healthcare schemes are unfunded, contributions for future years will be equal to benefit payments and therefore cannot be predetermined.
     Under US GAAP post retirement benefits are accounted for in accordance with Financial Accounting Standard No. 87 under which only those surpluses or deficits outside a ten per cent fluctuation corridor are spread.
     The discount rate under US GAAP is the implied yield available on AA rated corporate debt at the measurement date.
     For US GAAP, the average expected long term rate of return on assets used to determine 2004 pension cost was 6.6%. This will increase to 6.7% in 2005 primarily because of an increase in expected long term nominal equity returns. For 2004, the average future increase in compensation levels was assumed to be 4.2% and this will increase in 2005 to 4.6%; this increase reflects higher anticipated general inflation in the UK and North America. For US GAAP, the average discount rate used for the Group’s plans in 2004 was 5.9% and the average discount rate used in 2005 will be 5.6%. The decrease is attributable to lower corporate bond yields. As noted above, the expected long term rate of return on assets is also used as the discount rate under UK GAAP. The other UK GAAP assumptions vary slightly from those under US GAAP because of the differing measurement dates.
     Based on the known changes in assumptions noted above and other known factors such as increasing service cost and amortisation charges, and including the one time curtailment and settlement credit in 2004, the impact of pension costs on the Group’s net earnings in 2005 would be expected to increase by some US$36 million under US GAAP to US$118 million.
     Under US GAAP, there are net unrecognised losses in relation to the Group’s pension plans of US$532 million at 31 December 2004 net of tax and minorities. This will be written off to earnings over the average remaining service life of employees in the plans to the extent the losses exceed the 10% corridor on a plan by plan basis. The 2005 impact on the Group’s US GAAP net earnings will be a cost of US$26 million compared to a cost of US$22 million in 2004.
     The table below sets out the potential change in the Group’s 2004 UK GAAP and US GAAP net earnings (after tax and outside interests) that would result from hypothetical changes to post retirement assumptions and estimates. The sensitivities are viewed for each assumption in isolation although, under UK GAAP in particular, a change in one assumption is likely to result in a corresponding offset elsewhere.

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US$m	UK GAAP		US GAAP

Sensitivity of Group’s 2004 net earnings to changes in:
Expected return on assets
- increase of 1%	43		20
- decrease of 1%	(45	)	(20	)
Discount rate
- increase of 0.5%	20		6
- decrease of 0.5%	(22	)	(6	)
Salary increases
- increase of 0.5%	(6	)	(5	)
- decrease of 0.5%	6		5
Demographic - allowance for additional future mortality improvements
- overall increase of 5% in liability	(23	)	(16	)
- overall decrease of 5% in liability	20		15

Further information on UK GAAP and US GAAP for pensions is given on pages A-58 to A-59 and A-73 respectively. In addition, information under the UK post retirement accounting standard, FRS 17, is given on pages A-59 to A-62.

Overburden removal costs
In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can economically be extracted. The process of mining overburden and waste materials is referred to as stripping. During the development of a mine, before production commences, it is generally accepted that stripping costs are capitalised as part of the investment in construction of the mine.
     Stripping of waste materials continues during the production stage of the mine. Some mining companies expense these production stage stripping costs as incurred, while others defer such stripping costs. Those mining companies that expense stripping costs as incurred will report greater volatility in the results of their operations from period to period.
     Rio Tinto defers production stage stripping costs for those operations where this is the most appropriate basis for matching costs with the related economic benefits and the effect is material.
     The amount of stripping costs deferred is based on the ratio obtained by dividing the tonnage of waste mined either by the quantity of ore mined or by the quantity of minerals contained in the ore. In some operations, the quantity of ore is used, being a more practical basis for matching costs with the related economic benefits where there are important by products or where the grade of the ore is relatively stable from year to year.
     Information about the stripping ratios of the Business Units that account for the majority of the deferred stripping balance at 31 December 2004, and year in which deferred stripping is expected to be fully amortised, is set out in the following table:

	Actual stripping ratio for year			Life of mine stripping ratio
	2002	2003	2004	2002	2003	2004

Kennecott Utah Copper (2017)	2.05	1.86	1.83	1.19	1.24	1.24
Borax (2034)	25.00	23.00	20.50	16.00	16.00	18.70
Argyle Diamonds (2008)	7.29	6.10	6.70	4.40	4.10	4.91
Freeport Joint Venture (2014)	2.35	2.84	3.39	1.77	1.93	2.43
Diavik (2009)	24.93	20.31	14.52	8.87	8.54	4.69

     In addition, Escondida, Rio Tinto's 30 per cent owned joint venture, defers stripping costs based on the ratio of waste tonnes to pounds of copper mined. The actual stripping ratio for 2004 was 0.1145 (2003: 0.1024, 2002: 0.1458). The life of mine stripping ratio for 2004 was 0.1129 (2003: 0.1110, 2002: 0.1094). The deferred stripping balance is expected to be fully amortised in 2040.
     The life of mine waste-to-ore ratio is a function of an individual mine’s pit design and therefore changes to that design will generally result in changes to the ratio. Changes in other technical or economic parameters that impact on reserves will also have an impact on the life of mine ratio even if they do not affect the mine’s pit design. Changes to the life of mine ratio are accounted for prospectively.
     The reduction in the life of mine waste-to-ore ratio at Diavik resulted from the removal from the mine plan of a section of ore which would have required a high level of waste stripping. The increase in the life of mine ratio in 2003 at Utah Copper was caused by the discontinuation of the North concentrator operation. This resulted in certain lower grade material that would have been processed through the concentrator being reclassified as waste. Increases in the ratio for the Grasberg (Freeport Joint Venture) mine primarily relate to changes in the cut off grade at the open pit, caused by a reassessment of the optimal milling rate at the mill facility including a greater proportional contribution of total ore processed from the Deep Ore Zone underground mine.
     In operations that experience material fluctuations in the ratio on a year to year basis over the life of the mine, deferral of stripping costs reduces the volatility of the cost of stripping expensed in individual reporting periods, in relation to production of ore or contained minerals, as applicable. Stripping costs incurred in the period are deferred to the extent that the current period ratio exceeds the life of mine ratio. Such deferred costs are then charged against reported profits to the extent that, in subsequent periods, the ratio falls short of the life of mine ratio. The life of mine ratio is based on the proven and probable reserves of the operation.

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     In some operations, there are distinct periods of new development during the production stage of the mine. These may, for example, relate to a discrete section of the orebody. The new development will be characterised by a major departure from the life of mine stripping ratio. Excess stripping costs during such periods are deferred and subsequently amortised on a unit of production basis.
     Deferred stripping costs form part of the total investment in the relevant income generating unit, which is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable.
     During 2004, production stage stripping costs incurred by subsidiaries and equity accounted operations exceeded the amounts charged against pre tax profit by US$135 million. The net book value carried forward in property, plant and equipment and in investments in joint ventures and associated companies at 31 December 2004 was US$784 million.
     Amortisation of deferred stripping costs is included in depreciation of property, plant and equipment or in the Group’s share of the results of its equity accounted operations, as appropriate.

Contingencies
Disclosure is made of material contingent liabilities unless the possibility of any loss arising is considered remote. Contingencies are disclosed in Note 29 on page A-49. These include tax assessments of approximately A$500 million which, based on Counsels’ opinion, the Group expects to be successful in challenging.

New US accounting standards
Information on upcoming US accounting standards is provided in Note 42 on page A-71 to the consolidated financial statements.

International financial reporting standards
In 2005 Rio Tinto will be reporting its financial performance in accordance with International Financial Reporting Standards (IFRS) starting with the interim 2005 results. Restatements of full year and half year 2004 financial information under IFRS were included in a media release issued on 5 May 2005 and the differences from the amounts reported under UK GAAP were explained. This media release was filed with the SEC on Form 6-K for the month of May 2005. Restatement of 2004 financial information under IFRS resulted in an increase in net earnings of US$405 million compared to UK GAAP but underlying earnings increased by US$51 million. Shareholders’ equity at 31 December 2004 reduced by US$707 million.

Trend information
The Group’s worldwide operations supply essential minerals and metals that help to meet global needs and contribute to improvements in living standards, so changes in the demand for its products are closely aligned with changes in global GDP. Changes in the GDP of developing countries will have a greater impact on materials such as iron ore and coal that can be used to improve infrastructure whereas changes in the GDP of developed countries will have a greater impact on industrial minerals that have many applications in consumer products. Trends in production of the Group’s minerals and metals, consolidated turnover, earnings, total assets and shareholders’ funds are set out in the operational review on pages 27 to 67.

Forward looking statements
Forward looking statements are contained in this financial review and attention is drawn to the Cautionary statement on page 10.

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Rio Tinto’s Iron Ore group (RTIO) wholly owns Hamersley Iron in Western Australia. Hamersley wholly owns five mines and also operates the 60 per cent owned Channar mine and the 54 per cent owned Eastern Range mine on behalf of joint venture partners. The Channar mine is a joint venture with an Australian subsidiary of the China Iron & Steel Industry & Trade Group Corporation. The Eastern Range mine is owned in joint venture with the Shanghai Baosteel Group Corporation and was commissioned in April 2004.
     RTIO also includes Rio Tinto’s effective 53 per cent interest in Robe River Iron Associates’ two mines in Western Australia and Rio Tinto’s 59 per cent interest in Iron Ore Company of Canada. The Iron Ore group operates both enterprises, which were acquired in 2000. From 2005, RTIO also manages Rio Tinto Brasil which owns a 100 per cent interest in Mineração Corumbaense Reunida, known as Corumbá.
     In addition, RTIO includes the HIsmelt^®direct smelting technology developed in Western Australia and resources held globally, including Orissa (India) and the Simandou (Guinea) deposits.
     At 31 December 2004, the group accounted for 28 per cent of Rio Tinto’s operating assets, an increase of three per cent over the year. In 2004, the group contributed approximately 20 per cent of the Group’s turnover and 26 per cent of adjusted earnings.
     In 2003, Rio Tinto reached agreement with its joint venture partners in Robe River to allow closer cooperation between the Pilbara operations of Hamersley and Robe. In 2004, a new company, Pilbara Iron, was formed to enable the sharing of rail, port and power infrastructure as well as management of non infrastructure assets, including mobile and other mining equipment, and site and corporate services. Coordination was progressively implemented during 2004. Together with Pilbara Rail Company, which runs the combined rail assets of Hamersley and Robe, the two entities manage RTIO’s iron ore assets in the Pilbara as an optimised and integrated operation. Pilbara Iron, including employees seconded to Pilbara Rail Company, employs 2,880 people.
     RTIO Expansion Projects was created in September 2003 to manage the growing portfolio of projects and studies in the Pilbara. The Expansion Projects team operates closely with Pilbara Iron, but is managed independently in order to minimise the impact on operations through project study and implementation phases.
     For the contract year commencing April 2005 Hamersley Iron reached agreement with Nippon Steel on price increases of 71.5 per cent for lump, fine and Yandi ore.
     RTIO employs almost 6,000 people worldwide. Chris Renwick retired as chief executive Iron Ore in December 2004, and was succeeded by Sam Walsh, who is based in Perth, Western Australia.

Financial performance
2004 compared with 2003
RTIO’s contribution to 2004 earnings was US$569 million, US$70 million higher than in 2003.
Demand for iron ore continued to be extremely strong across the product range throughout 2004. In addition to strong demand from China where iron ore imports rose 40 per cent compared to 2003, the Japanese steel industry operated near capacity and crude steel production in Korea and Taiwan was at record levels. Reflecting the strength of the market, 18.6 per cent price increases were achieved for fiscal year 2004 for both lump and fines following the nine per cent increases agreed to in 2003.
In June, new long term agreements with leading Chinese steel mills for the sale of an incremental 40 million tonnes per annum of iron ore were announced. These agreements, together with supply arrangements reached with Nippon Steel and the Shanghai Baosteel Group earlier in the year, underpin the current phase of Rio Tinto’s expansion of port, rail and mine capacity that is on schedule for completion at the end of 2005.

2003 compared with 2002
RTIO’s contribution to 2003 earnings was US$499 million, US$47 million higher than in 2002.
Demand for iron ore continued to be extremely strong throughout 2003, particularly from China, where imports of iron ore were 30 per cent higher than 2002. Strong demand for iron and steel in China bolstered demand for iron ore in other markets, with Japan, Korea and Taiwan all at record levels.
Price increases reflected the strong market, with a nine per cent increase for 2003 achieved in May.

Hamersley Iron (Rio Tinto: 100 per cent)
Hamersley Iron operates seven mines in Western Australia, including two mines in joint venture, 630 kilometres of dedicated railway, and port and infrastructure facilities located at Dampier. These assets are run as a single operation managed and maintained by Pilbara Iron. Hamersley employs approximately 70 people who work in Sales and Marketing. Hamersley has fewer employees than in 2003 as the majority of employees have been transferred to Pilbara Iron.
     In 2003, Hamersley completed option analysis studies to increase its system capacity to ensure its ability to meet the needs of customers and the strong growth in demand for iron ore, particularly in China.
     As a consequence, in December 2003, Rio Tinto approved a US$920 million expansion of the Dampier port, Yandicoogina mine, additional rail assets and feasibility study costs.
     The port expansion will increase Dampier’s export capacity from 74 million tonnes per annum to 116 million tonnes per annum. The Yandicoogina mine expansion will increase its output to 36 million tonnes per annum; capacity was increased to 24 million tonnes per annum in 2004.
     Commissioning of the Yandicoogina expansion will take place in the second half of 2005. Completion of the port expansion is scheduled for late 2005, with progressive commissioning from mid-2005.

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Expansion work is continuing to provide additional rail, power and other infrastructure to complement the new port and mine requirements. Construction is well advanced to interconnect the power systems of Hamersley and Robe. Plans are at an advanced stage to expand and convert Paraburdoo power generation to being gas fired. Pre-development studies to further increase the capacity of existing mines and develop new mines are being progressed.
Construction of the US$67 million Eastern Range mine was completed in mid-April and its first product was shipped in the second quarter. Located ten kilometres east of Paraburdoo, the mine services an unincorporated joint venture between Hamersley Iron and Shanghai Baosteel Group Corporation, China’s largest iron and steelmaker. The joint venture, in which Hamersley holds a 54 per cent equity share, will supply ten million tonnes of standard Hamersley iron ore products per year over 20 years.

2004 operating performance
Hamersley Iron’s total production in 2004 was 78.1 million tonnes, 4.7 million tonnes more than in 2003. Rio Tinto’s share of this production was 74.2 million tonnes. Production was severely disrupted in early March by tropical cyclone Monty that required port facilities to be closed, and resulted in significant flood damage to the operations. Most operations returned to normal by the end of April, though the Tom Price mine continued to be affected into July, adversely affecting volumes, product mix and costs.
     Shipments by Hamersley totalled 76.5 million tonnes, including sales through joint ventures. Hamersley’s shipments to China also reached a record level at 39.5 million tonnes, making China by far the single largest destination for Hamersley Iron ore.
     Production from all mines was stretched to achieve these levels, placing cost and other operating stresses on the Hamersley system.
     Costs increased in preparation for volume growth, with increased material movement, pre-stripping and higher maintenance activity. Costs of key mining inputs were inflated as a result of the high level of activity across the mining industry. Drilling and exploration programmes and pre-development studies all added significantly to 2004 costs.
     The Pilbara Rail Company, formed in 2002, which effectively integrates the rail networks of Hamersley and Robe River into a single operation, continued to deliver operational efficiencies. Additional locomotives and ore cars were commissioned to enhance the overall system capacity.
     In the spirit of closer cooperation with Robe, Hamersley shipped four million tonnes of product from its Yandicoogina mine through Robe’s Cape Lambert port facilities, now operated by Pilbara Iron. This has resulted in increased operational flexibility and relieves congestion at Dampier.
     Hamersley Iron is currently undertaking an extensive drilling programme that is expected to accelerate conversion of its resource base into reserves. Focused on supporting strategic mine development options, it is one of the largest drilling efforts in Hamersley’s history.
     In 2004, the Australian Industrial Relations Commission ratified the Rio Tinto Iron Ore Federal Award agreed between Hamersley Iron, Robe River, Pilbara Iron and the Australian Workers Union.
     Hamersley continued to work sustainable development principles into its daily operations throughout the year. The Environmental Management System, certified to ISO 14001, passed the second audit conducted by an external accreditation body. The IronSafe system was launched in 2004, which aligns internal and external health and safety policies, procedures and documentation, throughout Rio Tinto’s Western Australian based iron ore operations.

	Million tonnes

Hamersley’s total sales of iron ore to major markets in 2004
China	39.5
Japan	19.0
Other Asia	14.5
Europe	3.5

Total	76.5

NOTE: This table includes 100 per cent of all sales through joint ventures.

Robe River Iron Associates (Rio Tinto: 53 per cent)
Robe River Iron Associates (Robe) is an unincorporated joint venture in which Mitsui (33 per cent), Nippon Steel (10.5 per cent) and Sumitomo Metal Industries (3.5 per cent) also have interests. Robe is the world’s fourth largest seaborne trader in iron ore, employing approximately 570 people, which is fewer than in 2003 as many employees have been transferred to Pilbara Iron.
Robe operates two open pit mining operations in Western Australia. Mesa J is located in the Robe Valley, north of the town of Pannawonica. The mine produces Robe River fines and lump, which are pisolitic iron ore products. The West Angelas mine, opened in 2002, is located approximately 100 kilometres west of the town of Newman. The mine produces West Angelas fines and lump, which are Marra Mamba iron ore products.
West Angelas mine production reached its original design rate of 20 million tonnes per year in the first quarter of 2004, two years earlier than planned. This increased Robe’s production capacity to a nominal 50 million tonnes per year. In 2003, Robe obtained approval to expand West Angelas to 25 million tonnes per year. Work started on the US$105 million expansion in early 2004 and completion is expected by mid 2005.

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The rail expansion project to duplicate almost 145 kilometres of track and associated interconnection and infrastructure to increase the capacity of the Pilbara Rail main line is progressing. Robe uses a dedicated rail system, operated by Pilbara Rail, to transport ore from its mines to the company’s deepwater port facilities at Cape Lambert.
Robe exports under medium and long term supply contracts with major integrated steel mill customers in Japan, Europe, South Korea and China.

2004 operating performance
Robe’s total production in 2004 was a record 48.5 million tonnes, comprising 30 million tonnes from Mesa J, and 18.5 million tonnes from West Angelas. Production of Mesa J ore was affected in the first quarter by flooding caused by tropical cyclone Monty although production levels returned to normal by the end of April. Product quality was affected for a prolonged period. Robe’s total sales were 50.4 million tonnes, with strong demand in all major markets.
     Sales were 31.2 million tonnes of Mesa J and 19.2 million tonnes of West Angelas products. Sales growth was based on increased West Angelas tonnage availability and focused primarily on Japan, where all customers exercised their tonnage options. Further penetration of the Chinese market was also achieved, with sales to China now accounting for one quarter of Robe’s sales. Increased marketing effort in China resulted in the signing of long term agreements with large steel mill customers.
     Further studies are under way to improve understanding of the orebody at West Angelas and to determine appropriate mining strategies. In pit stockpiles were introduced in 2004 which has successfully reduced grade variation.
     As part of a commitment to sustainable development, Robe updated its long term closure plans for each operation in consultation with community stakeholders.

	Million tonnes

Robe’s total sales of iron ore to major markets in 2004
Japan	26.6
China	13.0
Europe	8.2
Other Asia	2.6

Total	50.4

Iron Ore Company of Canada (Rio Tinto: 58.7 per cent)
Rio Tinto’s interest in Iron Ore Company of Canada (IOC) is 58.7 per cent. Mitsubishi (26.2 per cent) and the Labrador Iron Ore Royalty Income Fund (15.1 per cent) are also shareholders in IOC, Canada’s largest iron ore pellet producer. IOC operates an open pit mine, concentrator and pellet plant at Labrador City, Newfoundland, together with a 420 kilometre railway to port facilities and the partially refurbished pellet plant at Sept-Iles, Quebec.
     Products are transported on IOC’s railway to Sept-Iles. The port is ice free all year and handles ore carriers of up to 255,000 tonnes. IOC exports its concentrate and pellet products to major North American, European and Asia Pacific steel makers.
     The Sept-Iles pellet plant remains closed, following the suspension in September 2001 of the US$240 million refurbishment project.
     A five year labour contract expired at the end of February 2004. As part of the change programme at IOC, a new contract was sought which would include more flexible working arrangements. Negotiations for the new contract started in January but despite protracted negotiations the workforce went on strike on 19 July, finally returning to work on 28 September. Mine operations were halted for ten weeks though ship loading from stockpiles continued for part of this period. IOC employs approximately 1,800 people.

2004 operating performance
Net earnings were US$3 million compared with US$7 million in 2003. The reduction in earnings was attributable to the lost production caused by a ten week strike.
Pellet production in the first half of 2004 showed a six per cent improvement over the corresponding period in 2003. Although operations recovered well from the shutdown, second half results were significantly affected and, as a result, full year total production was down 22 per cent on the 2003 level.
During 2004, IOC maintained its focus on the cost reduction programme that commenced in 2002. While progress has been slower than originally anticipated, the new labour agreement provides a further key element in improving the efficiency of the operation. The new agreement, taken together with the further gains made in 2004 in improving the reliability of key production systems, leaves IOC well placed to benefit in 2005. Emphasis remains on improving safety performance.

	Million tonnes

IOC’s total sales of iron ore to major markets in 2004
Europe	5.7
North America	3.7
Asia Pacific	2.1

Total	11.5

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Mineração Corumbaense Reunida (Corumbá) (Rio Tinto: 100 per cent)
Corumbá has been transferred to the Iron Ore group in 2005 to accommodate plans to expand production at the mine to 15 million tonnes per year from one million tonnes. In 2004, Corumbá produced 1.3 million tonnes of iron ore which was barged along the Paraguay River to South American and European customers. Logistic options are being considered for expanded export sales, including supplies to a proposed steel making project at Corumbá. Total resources at Corumbá are over 400 million tonnes of lump ore grading 62.7 per cent iron. There are 420 employees.

Iron ore group projects
HIsmelt^®(Rio Tinto: 60 per cent)
The HIsmelt^®project is a joint venture between Rio Tinto (60 per cent interest through its subsidiary, HIsmelt^®Corporation), US steelmaker Nucor Corporation (25 per cent), Mitsubishi Corporation (10 per cent), and Chinese steelmaker Shougang Corporation (5 per cent). The project has received approval for Australian federal government support of A$125 million.
     The HIsmelt^®process is a direct iron smelting technology developed largely by Rio Tinto that will convert iron ore fines into high quality pig iron (96 per cent iron content) without the use of coke ovens and sinter plants. Notably, the technology allows efficient processing of ore fines with higher levels of impurities.
     A pilot plant to demonstrate the technology is being expanded to commercial scale at Kwinana in Western Australia. Construction began in January 2003. The plant will have a production capability of 800,000 tonnes of pig iron per year. Cold commissioning commenced in late 2004 and the first hot metal was produced in the hot commissioning process during the second quarter of 2005 after which it is planned the plant will ramp up to 60 per cent of capacity in the first year, 90 per cent in the second, to reach full capacity in the third. Significant industrial relations issues occurred in the latter half of 2004, resulting in 170,000 lost hours of construction.
     In 2003, HIsmelt^®signed a process licence agreement with the Laiwu Steel Group Ltd of China to allow for the development of an ironmaking facility using HIsmelt^®technology. HIsmelt^®has 100 employees.

Orissa, India (Rio Tinto: 51 per cent)
RTIO has a 51 per cent interest in Rio Tinto Orissa Mining, a joint venture with the state owned Orissa Mining Company. The joint venture holds rights to iron ore leases in Orissa, which it is seeking to develop. RTIO has recently appointed a project director to expedite the development of operations in India.

Simandou (Rio Tinto: 100 per cent)
The Simandou deposit in Guinea, west Africa, moved from Rio Tinto Exploration to full project status as part of RTIO in October 2004. Simandou is a greenfields discovery with potential to host significant resources of high grade iron ore. A prefeasibility study, started in fourth quarter 2004, will assess mining and transport options necessary to bring Simandou into production as quickly as possible. The Government of Guinea has an option to take a 20 per cent interest on a commercial basis.

Rio Tinto Energy group’s coal interests are in Australia and the US. They supply internationally traded and domestic US and Australian markets. It also includes Rössing Uranium in Namibia and Energy Resources of Australia which supply uranium oxide for electricity generation.
In 2003, Rio Tinto formed a single management organisation for the Energy group’s coal assets in Australia. Rio Tinto and Coal & Allied (Rio Tinto: 75.7 per cent) agreed to combine Coal & Allied corporate and service functions with those of Pacific Coal to increase efficiencies and lower costs. Pacific Coal (Rio Tinto: 100 per cent) was renamed Rio Tinto Coal Australia (RTCA). Effective 1 February 2004, RTCA manages both Pacific Coal’s existing assets and Coal & Allied’s assets in the Hunter Valley in a centralised management structure which provides for shared costs.
At 31 December 2004, the Energy group accounted for 13 per cent of Group operating assets and, in 2004, contributed 20 per cent of Rio Tinto’s turnover and 16 per cent of adjusted earnings.
Preston Chiaro, chief executive Energy, is based in London.

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Financial performance
2004 compared with 2003
The Energy group’s 2004 contribution to adjusted earnings was US$365 million, US$208 million higher than in 2003.
Results benefited from a strengthening market for thermal coal and the entry of the new Hail Creek mine into a rising market for coking coal.

2003 compared with 2002
The Energy group’s 2003 contribution to adjusted earnings was US$157 million, US$196 million lower than in 2002. A lower export thermal coal price and a stronger Australian dollar were the principal components of the reduced result.

Kennecott Energy (Rio Tinto: 100 per cent)
Kennecott Energy (KEC) wholly owns and operates four open cut coal mines in the Powder River Basin of Montana and Wyoming, US and has a 50 per cent interest in, but does not operate, the Decker mine in Montana. KEC also manages the Group’s interest in Colowyo Coal in Colorado, US. In total it employs some 1,770 people.
One of the largest US producers, KEC sells to electricity generators predominantly in mid western and southern states. Sales are made under multiple year contracts and on a spot basis for one year or less.
The domestic US market for low sulphur coal continues to grow due to its competitive cost per delivered energy unit and restrictions on sulphur emissions by utilities. Continued strong demand for low cost and low sulphur western coal is expected to increase with the announcement of numerous new coal fired generation projects and increased utilisation of existing coal generation capacity in the US.

2004 operating performance
KEC’s attributable production of 118 million tonnes of coal was nine per cent higher than in 2003 as a result of higher demand for low sulphur coal. Earnings of US$119 million were 35 per cent higher than 2003 earnings of US$88 million. This increase represents higher realised prices and sales volumes and a lower tax charge. KEC also made progress in implementing value delivery initiatives that led to cost reductions, productivity improvements, reduced capital requirements and value adding marketing benefits. These benefits were partially offset by higher fuel prices.
     A detailed review of the mine plan and projected cash flows of the Colowyo coal business was completed in June 2004. This indicated that future operating and development costs are substantially higher than previously estimated. As a consequence of this, an exceptional charge of US$160 million was recorded in the first half of 2004 for the writedown of Colowyo’s fixed assets and recognition of related contract obligations. This is excluded from adjusted earnings.
     Modified mining practices lowered the high wall and waste piles at Cordero Rojo and were successful in alleviating the instability issues that had affected production in 2003.
     KEC successfully bid for an additional 177 million tonnes of in-situ coal reserves at West Antelope at a cost of US$146 million.
     The improved safety performance of 2003 was sustained into 2004.

Rio Tinto Coal Australia (Rio Tinto: 100 per cent)
Rio Tinto Coal Australia (RTCA), formerly Pacific Coal, manages the Group’s Australian coal interests. These comprise the Blair Athol (Rio Tinto: 71 per cent), Kestrel (Rio Tinto: 80 per cent), Tarong (Rio Tinto: 100 per cent) and Hail Creek (Rio Tinto: 82 per cent) coal mines and the Clermont deposit (Rio Tinto: 50 per cent). RTCA also provides management services to Coal & Allied Industries for day to day operation of its four mines.
     About 60 per cent of Blair Athol thermal coal is sold to its two Japanese joint venture partners under contracts extending to 2008 and 2010. The rest is sold by long term and annual agreements to European and southeast Asian customers.
     Production from the wholly owned Tarong mine is sold to Tarong Energy Corporation, an adjacent state owned power utility. A ten year contract for up to 7.5 million tonnes annually expires in 2010.
     Kestrel, the only underground mine, sells mainly metallurgical coal to customers in Japan, south east Asia, Europe and Central America generally on annual agreements.
     After the first commercial shipments in October 2003, the new coking coal mine at Hail Creek ramped up to its production capacity of 5.5 million tonnes per annum during 2004. Acceptance has been strong in all markets, resulting in a decision in mid 2004 to expand production to eight million tonnes per year at a total cost of US$157 million. During 2004, a further two per cent of the asset was sold to existing joint venture partners and eight per cent to Nippon Steel Corporation which entered a 15 year coal purchase contract.
     RTCA employs some 904 people.

2004 operating performance
RTCA’s earnings of US$180 million were 157 per cent higher than in 2003 due to new production from Hail Creek, stronger demand and improved prices. Export thermal coal prices increased by 40 per cent, export coking coal prices increased by 20 per cent and domestic prices by 28 per cent.
Blair Athol shipments were constrained during the year by infrastructure: early in the year by failure of loading equipment at the Dalrymple Bay Coal Terminal and late in the year by port congestion.

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     Production decreased from 12.5 million tonnes to 12.2 million tonnes while sales were 11.8 million. Kestrel’s production of 3.3 million tonnes matched 2003 while shipments of 3.2 million tonnes of coking and thermal coal were 13 per cent lower than in 2003. The production sequence in 2004 involved two longwall changes. At Tarong, production increased by seven per cent to seven million tonnes in line with increased demand from Tarong Energy Corporation. Hail Creek production was 5.1 million tonnes of which 4.7 million tonnes were shipped.
     Rio Tinto’s share of coal production was 23 million tonnes, an increase of 22 per cent on 2003, principally resulting from production ramp up at Hail Creek.
     Although Blair Athol achieved a 75 per cent reduction over 2003 in lost time injury frequency rate, the business overall improved safety performance by only 15 per cent and fell well short of the best ever recorded in 2002.

Coal & Allied Industries (Rio Tinto: 75.7 per cent)
Coal & Allied Industries (Coal & Allied) is publicly listed on the Australian Stock Exchange and had a market capitalisation of A$2.9 billion (US$2.2 billion) at 31 December 2004. In 2003, a committee of independent Coal & Allied directors, negotiated an agreement with Rio Tinto to combine Coal & Allied’s corporate and management functions with those of Rio Tinto Coal Australia. The combined management organisation lowers costs, achieves economies of scale and removes duplicated functions for both Coal & Allied and Rio Tinto.
     Coal & Allied’s assets are all located within the Hunter Valley in New South Wales, Australia. It wholly owns Hunter Valley Operations, has an 80 per cent interest in Mount Thorley Operations and a 55.57 per cent interest in the contiguous Warkworth mine, and a 40 per cent interest in the Bengalla mine which abuts its wholly owned Mount Pleasant development project. Coal & Allied also has a 37 per cent interest in Port Waratah Coal Services.
     Coal & Allied produces thermal and semi soft coal. Most of its thermal coal is sold under contracts to electrical or industrial customers in Japan, Korea and elsewhere in Asia. The balance is sold in Europe and in Australia. Coal & Allied’s semi soft coal is exported to steel producing customers in Asia and Europe under a combination of long term contracts and spot business.
     Coal & Allied employs some 1,095 people.

2004 operating performance
Earnings of US$51 million were achieved compared with a loss of US$24 million in 2003. Export coal prices increased by 37 per cent. Good progress was made in implementing operational cost reductions including the agreement to combine corporate and management functions with those of RTCA, formerly Pacific Coal, and operational integration of the Mount Thorley and Warkworth operations, in order to improve performance in 2004 and beyond.
     At all operations, sales were constrained by insufficient rail infrastructure to meet producer demand. The Port Waratah Coal Services Port Allocation System was introduced in April 2004 to limit ship queues and reduce demurrage and will continue at least through 2005.
     At Hunter Valley Operations production increased from 12 million tonnes to 13.3 million tonnes while sales were 12.8 million tonnes. The integrated Mount Thorley Warkworth operations increased production from nine million tonnes to 10.5 million tonnes while sales were 10.1 million tonnes. At Bengalla, production decreased from 6.2 million tonnes to 5.3 million tonnes due to mine sequencing issues while sales were 5.8 million tonnes.
     Rio Tinto’s share of coal production was 16.7 million tonnes, an increase of nine per cent on 2003, principally resulting from expanded use of seven day rosters, improved productivity and use of contractors to meet strong market demand within the constraints of the Port Allocation System.
     Although the lost time injury frequency rate was reduced by 45 per cent from 2003, the result was overshadowed by a fatal injury to an employee of a contractor at Mount Thorley operations in May.

Rössing Uranium (Rio Tinto: 68.6 per cent)
Rössing produces and exports uranium oxide from Namibia to European, US and Asia Pacific electricity producers. Production has been lower than the 4,500 tonnes per year capacity for some years due to market conditions. Rössing employs approximately 830 people.

2004 operating performance
Total production of 3,582 tonnes of uranium oxide was 49 per cent higher than 2003 as a result of higher plant availability and improved market conditions. Expiring long term higher priced sales contracts have been replaced by contracts in line with 2004 market prices. Higher realised prices were more than offset by the strengthening of the Namibian dollar against the US dollar resulting in a loss of US$4 million compared with a loss of US$19 million in 2003. Initiatives to deliver cost savings continued, as did studies on opportunities to extend the mine beyond the life of the existing pit.
In 2004, Rössing’s safety performance continued to improve with a 66 per cent reduction in the lost time injury frequency rate.

Energy Resources of Australia (Rio Tinto: 68.4 per cent)
Energy Resources of Australia Ltd (ERA) is publicly listed and had a market capitalisation of A$1.3 billion (US$1.0 billion) at 31 December 2004. ERA employs approximately 260 people with 13 per cent of the operational workforce represented by Aboriginal people.

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ERA produces uranium oxide at the Ranger open pit mine, 260 kilometres east of Darwin in the Northern Territory. ERA also has title to the nearby Jabiluka mineral lease, which in 2003 was put on long term care and maintenance. Ranger has a 5,500 tonnes per year capacity and began production in 1981. Estimated ore reserves are sufficient to maintain uranium oxide production for approximately eight years at current rates. ERA’s operations including Jabiluka are surrounded by, but remain separate from, the World Heritage listed Kakadu National Park and especially stringent environmental requirements and governmental oversight apply. Uranium oxide from Ranger is sold to electricity utilities in Japan, Korea, Europe and North America.

2004 operating performance
Uranium oxide production of 5,143 tonnes was above the previous year in response to greater sales commitments. Stronger prices were offset by the strengthening Australian dollar and resulted in earnings of US$19 million, an increase of US$8 million from 2003.
In response to a water contamination incident and a series of equipment radiation clearance breaches that occurred in late 2003 and early 2004, mining and processing operations were suspended for a total of 10 days to ensure that all work necessary to rectify the deficiencies was either complete or under way. In both cases, the government Supervising Scientist's report concluded that it is most unlikely that anyone suffered any long term health effects. ERA has since successfully passed three government audits and has committed to implementing the Australian Health and Safety Standard AS4801 in addition to ISO 14001. On 1 June 2005 ERA was fined A$150,000 in the Darwin Magistrate’s Court after having pleaded guilty to two charges related to these incidents.
Safety performance for 2004 deteriorated against 2003 in terms of lost time injuries.

Energy group projects
Clermont Coal (Rio Tinto: 50.1 per cent)
The Clermont deposit is near RTCA’s Blair Athol mine. It is suited to open cut development. A feasibility study commenced in 2004. Integration options with Blair Athol are available following the signing of a strategic alliance agreement by the Blair Athol and Clermont Joint Ventures. JPower joined the Clermont Joint Venture after acquiring a 15 per cent interest from Rio Tinto and Mitsubishi in 2003.

Mount Pleasant (Rio Tinto: 75.7 per cent)
Development of the Mount Pleasant project continued with further optimisation work in 2004 on the pre-feasibility study undertaken in 2002.

INDUSTRIAL MINERALS GROUP

Rio Tinto’s Industrial Minerals group produces borates, industrial salt, talc and titanium dioxide feedstock. Rio Tinto Borax, Rio Tinto Iron & Titanium, Luzenac and Dampier Salt, its principal businesses, are leading suppliers of their respective products.
The Industrial Minerals group employed approximately 7,000 people in 2004.

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At 31 December 2004, the Industrial Minerals group accounted for 13 per cent of the Group’s operating assets and contributed approximately 15 per cent of Rio Tinto’s turnover and 10 per cent of adjusted earnings in 2004.
Andrew Mackenzie replaced Tom Albanese as chief executive Industrial Minerals, and is based in London.

Financial performance
2004 compared with 2003
Industrial Minerals’ contribution to 2004 earnings was US$223 million, 45 per cent higher than in 2003, reflecting higher volumes and prices at Borax, increased prices at Rio Tinto Iron & Titanium and the partial reversal of a writedown taken in 2003 relating to a customer receivable. There was also a steady improvement in trading conditions for both the talc and salt businesses in 2004. These factors were partially offset by the strength of the Canadian dollar and South African rand against the US dollar.
Rio Tinto Borax’s earnings were 18 per cent higher at US$94 million. The borates business benefited from continued strength in the US housing market and increasing demand from China.
Rio Tinto Iron & Titanium earnings at US$95 million were 102 per cent higher than in 2003. Although the conventional feedstock market remained in oversupply, earnings benefited from stronger demand for iron, steel, rutile and zircon co-products. Production of conventional slags reflected market conditions, while production of upgraded slag (UGS) continued to run at capacity.

2003 compared with 2002
Industrial Minerals’ contribution to 2003 earnings was US$154 million, 46 per cent lower than in 2002, reflecting the significant weakening of the US dollar against both the Canadian dollar and South African rand and continued weakness across North American and European markets.
Rio Tinto Borax’s earnings were eight per cent lower at US$80 million. The cost base was negatively impacted by higher natural gas and diesel prices, rising employee benefit costs in California and net one off charges.
Rio Tinto Iron & Titanium earnings at US$47 million were 71 per cent lower than in 2002 due to the effect of the weak US dollar, soft market conditions and a charge associated with the writedown of a customer receivable in 2003.

Rio Tinto Borax (Rio Tinto: 100 per cent)
Rio Tinto Borax’s Boron mine in California’s Mojave Desert is the world’s largest borate mine. Borates are used in the US for vitreous applications, such as fibreglass, glass wool, high temperature glasses and enamels. The perborate industry, a major market in Europe, uses borates as bleach in detergents. Other uses include ceramics, fertilisers, flame retardants, wood preservatives and corrosion inhibitors.
Rio Tinto Borax’s US and UK research laboratories provide technical support and participate in collaborative projects with customers.

2004 operating performance
Production volumes were steady at 565,000 tonnes. Sales were nine per cent higher than 2003, due to good trading conditions driven by the US construction sector, growth from newer applications and Chinese demand.
The first phase of an expansion of boric acid capacity, announced in 2003, is scheduled to come on stream in 2005. Approval to commence a second phase expansion has been received, with construction to be completed by 2006.

Rio Tinto Iron & Titanium (Rio Tinto: 100 per cent)
Rio Tinto Iron & Titanium (RIT) comprises the wholly owned QIT-Fer et Titane (QIT) in Quebec, Canada and the 50 per cent interest in Richards Bay Minerals (RBM) in KwaZulu-Natal, South Africa. Both produce titanium dioxide feedstock used by customers to manufacture pigments for paints and surface coatings, plastics and paper, as well as iron and zircon co-products.
QIT’s proprietary process technology enables it to supply both the sulphate and chloride pigment manufacturing methods. Its upgraded slag (UGS) plant supplies the growing chloride sector and is designed for expansion in line with demand up to a capacity of 600,000 tonnes per year from its current level of 250,000 tonnes. During 2003 RIT announced an expansion of its UGS plant to 325,000 tonnes per annum, with new production on schedule to commence in 2005.
RBM’s ilmenite has a low alkali content which makes its feedstock suitable for the chloride pigment process. RBM has the capacity to produce one million tonnes of feedstock annually.

2004 operating performance
Demand for titanium dioxide pigment improved strongly throughout 2004. However, the feedstock side of the industry continued to be affected by the general oversupply of conventional chloride and sulphate slag feedstocks and feedstock inventory levels at some pigment producers. In contrast, demand for very high grade chloride feedstock products, such as UGS, remains strong. Overall, RIT production of titanium dioxide feedstocks was the same as 2003, reflecting both market conditions and the effect of the introduction of new capacity.
Demand for iron and steel coproducts was exceptionally strong during 2004, with prices reaching historic highs. Zircon markets continued to be very tight.

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Dampier Salt (Rio Tinto: 64.9 per cent)
Dampier Salt (DSL) is now the world’s largest salt exporter. It produces industrial salt by solar evaporation at Dampier, Port Hedland and Lake MacLeod, where it also mines gypsum, in Western Australia.
The chemical industry in Asia is the principal customer for DSL’s salt whilst gypsum’s main use is in wallboard and cement manufacture.

2004 operating performance
Dampier Salt’s earnings in 2004 were unchanged, at US$10 million. While trading conditions were improved through higher volumes, earnings were impacted by the weakness of the US dollar and escalating costs in north western Australia. Salt production was three per cent higher than 2003, at 7.4 million tonnes (Rio Tinto share: 4.8 million tonnes).
Commissioning of a new process plant at Dampier began in December 2004.

Luzenac Group (Rio Tinto: 99.9 per cent)
The Luzenac Group operates talc mines, including the world’s largest, in south west France, and processing facilities in Australia, Austria, Belgium, Canada, France, Italy, Japan, Mexico, Spain, the UK and the US.
Luzenac products are used internationally. Principal uses are in paper, paints, cosmetics, ceramics, agricultural and plastics industries.

2004 operating performance
Earnings in 2004, at US$24 million, were 41 per cent higher than the previous year reflecting recovery in the US paper industry and new product developments. Luzenac’s production in 2004 was six per cent higher than 2003 at 1.44 million tonnes.
Sales volumes were slightly higher than from 2003, while prices showed gradual improvement.

Industrial minerals group projects
QIT Madagascar Minerals (Rio Tinto: 80 per cent)
RIT manages QIT Madagascar Minerals (QMM), in which an agency of the Government of Madagascar has a 20 per cent interest. QMM was formed to evaluate and, if appropriate, develop large mineral sand deposits in the south east of Madagascar.
In November 2001, QMM was granted an environmental permit by the Government for the proposed minerals sands project. The permit requires QMM to comply with a full range of social and environmental obligations throughout the life of the project.
A feasibility study is progressing and RIT is working with the Government, as well as all other interested and affected parties, with a view to making a decision on development in 2005.

Rio Colorado Potash (Rio Tinto: option to acquire 100 per cent)
Rio Tinto entered into an option agreement in 2003 to acquire 100 per cent of Potasio Rio Colorado SA, an Argentine company holding the mineral rights and other assets of the Rio Colorado potash project. The project is located 1,000 kilometres south west of Buenos Aires, in the provinces of Mendoza and Neuquen. The option runs until late 2005, during which time Rio Tinto will evaluate the commercial potential for developing the project. A pilot plant was commissioned in 2004 as part of this evaluation.

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Rio Tinto’s Aluminium group encompasses its wholly owned, integrated aluminium subsidiary, Comalco, and its 51 per cent share in Anglesey Aluminium.
At 31 December 2004, the Aluminium group accounted for 23 per cent of Rio Tinto’s operating assets and in 2004 contributed 17 per cent of Group turnover and 15 per cent of adjusted earnings.
Oscar Groeneveld succeeded Sam Walsh as chief executive Aluminium, and is based in Brisbane, Australia.

Financial performance
2004 compared with 2003
Rio Tinto Aluminium’s contribution to 2004 earnings was US$334 million, an increase of 67 per cent.
Stronger aluminium prices increased earnings by US$162 million with the average three months aluminium price in 2004 at 78 US cents per pound compared with 65 US cents per pound in 2003. The effect of the weakening US currency reduced Aluminium’s earnings by US$55 million.

2003 compared with 2002
Aluminium’s contribution to 2003 earnings was US$200 million, a decrease of 22 per cent from 2002.
Stronger aluminium prices increased earning by US$51 million with the average three month aluminium price in 2003 at 65 US cents per pound compared with 61 US cents per pound in 2002. The effect of the weakening US currency reduced Aluminium’s earnings by US$111 million.

Rio Tinto Aluminium
Rio Tinto Aluminium is a major supplier of bauxite, alumina and primary aluminium to world markets. It employs about 3,850 people.
      Rio Tinto Aluminium has a large, wholly owned bauxite mine on Cape York Peninsula, Queensland. A US$150 million mine expansion was completed on time to supply the bauxite requirements of the Comalco Alumina Refinery. Approximately 90 per cent of the bauxite from Weipa is shipped to alumina refineries at Gladstone, Queensland and Sardinia, Italy.
      Construction of the first stage of the wholly owned Comalco Alumina Refinery at Gladstone in Queensland was completed in late 2004, ahead of schedule and close to the budget of US$750 million. Operations have commenced and first shipments were made in November 2004, three months ahead of schedule. The refinery is expected to produce 1.4 million tonnes of alumina annually, with full capacity due to be reached by the end of 2006. There is potential for capacity to be increased to over four million tonnes per year in two additional stages and a small team is working on a feasibility study for Stage Two. The majority of the refinery’s Stage One output will go into Rio Tinto Aluminium smelters. The balance will be placed in the traded alumina market. The refinery enables Rio Tinto Aluminium to add further value to the Weipa bauxite deposit and strengthen both Rio Tinto Aluminium’s and Australia’s positions in the world alumina market.
      In 2004, Comalco sold its four per cent interest in the Boké bauxite deposit in West Africa to other shareholders in the joint venture for US$12 million. The gain of US$4 million has been excluded from adjusted earnings.
      In 2003, Comalco signed a long term alumina supply agreement with Norsk Hydro, to supply 300,000 tonnes of alumina in 2005 and then 500,000 tonnes of alumina per year for more than 20 years. This agreement underpins the investment in the Comalco Alumina Refinery.
      Rio Tinto Aluminium’s primary aluminium is produced by smelters at Boyne Island at Gladstone (59.4 per cent), Bell Bay (100 per cent) in Tasmania, Tiwai Point (79.4 per cent) in New Zealand and Anglesey Aluminium (51 per cent) in Wales, UK.

2004 operating performance
Overall, Rio Tinto’s share of bauxite production in 2004 increased by four per cent above 2003, despite a first quarter affected by wet weather and the sale of Boké in June 2004.
Bauxite production at Weipa was 12.6 million tonnes, six per cent higher than in 2003. Weipa bauxite shipments increased eight per cent, to 12.3 million tonnes, compared with 2003 levels.

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     QAL production increased by one per cent compared to 2003, despite an interruption to the refinery’s power supply. This interruption reduced production by approximately 85,000 tonnes (33,000 tonnes Rio Tinto share) but otherwise QAL enjoyed strong production for the balance of the year. Eurallumina production increased four per cent over 2003 levels.
     Rio Tinto Aluminium’s share of aluminium production from its four smelters at 837,000 tonnes was 20,000 tonnes above 2003 production. Attributable metal shipments for 2004 were 841,000 tonnes, an increase of 21,000 tonnes, and went to similar destinations as in 2003, primarily Japan, Australia, Europe and Korea.
     Production at Anglesey increased by two per cent, Boyne Island increased by four per cent, Tiwai Point increased by five per cent. The Bell Bay smelter suffered equipment failure in June in the electrical switchyard, resulting in a three per cent decrease in production. The equipment has been replaced and production returned to normal levels.

Aluminium group projects
Weipa mine expansion (Rio Tinto: 100 per cent)
The US$150 million mine expansion at Weipa in 2004 is expected to increase capacity to 16.5 million tonnes of bauxite per year. The mining upgrade relates to a move to simultaneous mining at Weipa’s Andoom and East Weipa mines and involves a change in ore characteristic (fine ore) to that previously being mined. The majority of the expenditure for the project was on a 9.5 million tonne beneficiation plant to allow mining of lower grade fine ores. The next activity will be the construction of a new US$42 million power station for the Weipa mining operations and surrounding communities.

Rio Tinto’s Copper group comprises Kennecott Utah Copper in the US and interests in the copper mines of Escondida in Chile, Grasberg in Indonesia, Northparkes in Australia, Palabora in South Africa, and the Resolution Copper project in the US. The group also has management responsibility for Kennecott Minerals Company and Kennecott Land in the US.
     In March 2004, Rio Tinto sold its holding in Freeport-McMoRan Copper and Gold Inc. (FCX) to FCX for net consideration of US$882 million. Later in the year, it divested its interests in the Zinkgruvan and Neves Corvo mines for a net consideration of US$193 million which included a profit sharing adjustment and the sale of the rights to future price participation on the Neves Corvo sale. Sale of the Fortaleza nickel complex in Brazil was completed in early 2004 for total cash consideration of about US$80 million. The sale of Rio Tinto’s 51 per cent interest in Rio Paracatu Mineração for US$250 million was completed at the end of the year. Responsibility for Rio Tinto Brasil, owner of the Corumbá iron ore mine, was transferred to the Iron Ore group. The gains arising from business disposals by the Copper group have been excluded from adjusted earnings.
     At 31 December 2004, the Copper group, which also produces gold as a significant co-product, accounted for 19 per cent of the Group’s operating assets and, in 2004, contributed approximately 22 per cent of Rio Tinto’s turnover, of which 70 per cent was from copper and the remainder mostly from gold. It accounted for 39 per cent of adjusted earnings in 2004.
     Tom Albanese, who took over from Oscar Groeneveld as chief executive Copper, is based in London.

Financial performance
2004 compared with 2003
The Copper group’s contribution to earnings was US$856 million, US$416 million higher than in 2003. The average price of copper was 130 US cents per pound compared to 80 US cents in 2003. The average gold price of US$409 per ounce increased by 13 per cent.
Kennecott Utah Copper’s contribution to earnings of US$293 million compared with US$88 million in 2003.
Rio Tinto’s share of earnings from Escondida increased by US$294 million to US$416 million. Mined production of copper was up 22 per cent due to the resumption of full production at the beginning of 2004.

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The earnings contribution from the Grasberg joint venture decreased by US$66 million to US$38 million chiefly as a result of the material slippage in October 2003. Early in 2004 efforts were directed at accelerating the removal of waste material to restore safe access to the higher grade area of the open pit. Production activities in this area resumed in the second quarter and grades improved during the second half.
Palabora recorded a loss of US$21 million in 2004 due to the negative effect of the stronger rand in relation to the US dollar combined with lower volumes and higher costs due to continued delays in reaching production capacity in the underground mine.

2003 compared with 2002
The Copper group’s contribution to earnings was US$440 million in 2003, US$99 million higher than in 2002. The average price of copper was 80 US cents per pound compared to 71 US cents in 2002. The average gold price of US$363 per ounce increased by 17 per cent.
     Kennecott Utah Copper’s 2003 contribution to earnings of US$88 million was broadly in line with 2002.
     Rio Tinto’s earnings from Escondida increased to US$122 million despite constrained output in response to weak market demand. Mined production of copper was up 32 per cent (Rio Tinto’s share) due to the commissioning of the new Laguna Seca concentrator.
     The Grasberg joint venture’s earnings contribution decreased by US$5 million to US$127 million chiefly as a result of the material slippage in October. This had an adverse effect on both volumes and costs. In the fourth quarter, only lower grade material was mined from the open pit and near term mine sequencing operations were directed to restoration of safe access to the higher grade areas. Despite full production from the underground mine, mill throughput was still significantly below capacity.
     Earnings at Palabora decreased to US$1 million in 2003 due to the negative effect of the stronger rand in relation to the US dollar combined with lower volumes and higher costs due to delays in reaching production capacity in the underground mine.

Kennecott Utah Copper (Rio Tinto: 100 per cent)
Kennecott Utah Copper (KUC) operates the Bingham Canyon mine, Copperton concentrator and Garfield smelter complex, near Salt Lake City, US.
     KUC supplies more than ten per cent of annual US refined copper requirements and employs approximately 1,500 people. Negotiation of a new labour agreement, to last until September 2009, was concluded in June 2003. The agreement provided for greater flexibility in deployment of personnel and assignment of work.
     KUC provides some management services to the wholly owned Barneys Canyon gold mine due to its proximity to Bingham Canyon. Mining and milling at Barneys Canyon ended in 2001 but gold production continues until 2005. The operation employs about 20 people.
     KUC, as the owner of 53 per cent of undeveloped land in the Salt Lake Valley of Utah, formed Kennecott Land to develop about 16,000 hectares of the 37,200 hectares owned. The initial 1,800 hectare Daybreak project site lies in the path of expanding residential areas. Kennecott Land has the right to build roads, make utility connections and prepare the land for sale to builders who will construct houses for 30,000 people. Rio Tinto initially invested US$50 million. The first revenues were received in 2004.

2004 operating performance
Net earnings of US$293 million were US$205 million above 2003 assisted by higher metal prices. Byproduct grades, particularly gold and silver, remained at 2003 levels but are anticipated to return to life of mine averages in 2005. Molybdenum production was 48 per cent higher than in 2003 due to higher head grades and recoveries.
Refined copper production was seven per cent higher than in 2003. A project to enlarge the Bingham Canyon open pit was approved in February 2005. The East 1 pushback is expected to extend the life of the open pit to 2017. Capital expenditure on the project is budgeted to be US$100 million for mine facilities, a concentrator upgrade and mobile equipment, and US$70 million after 2008 for the relocation of the in pit crusher and dewatering facilities. The East 1 pushback is a higher value, lower capital intensive option than the previous mine plan which was predicated on development of an underground mine from 2013. Mine development options from 2017 will be reviewed in the context of the decision to proceed with the East 1 pushback, and include various open pit and underground alternatives. A one off non cash charge of US$36 million has been recorded in 2004 to reflect an increase in the present value of provisions for environmental remediation costs, based on the assumption that mining operations cease in 2017. Pending any extension of the assumed mine life beyond 2017, there will be an increase in the annual depreciation charge and amortisation of discount from 2005 of around US$45 million.

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	2002	2003	2004

Principal operating statistics at KUC 2002 – 2004
Rock mined (’000 tonnes)	150,331	135,204	129,196
Ore milled (’000 tonnes)	40,720	46,105	45,712
Head grades:
Copper (%)	0.69	0.67	0.63
Gold (g/t)	0.44	0.29	0.29
Silver (g/t)	3.42	3.02	3.04
Molybdenum (%)	0.034	0.027	0.033
Copper concentrates produced (’000 tonnes)	992	1,147	1,106
Production of metals in copper concentrates
Copper (’000 tonnes)	260.2	281.8	263.7
Gold (’000 ounces)	412	305	308
Silver (’000 ounces)	3,663	3,548	3,584
Molybdenum concentrates produced (’000 tonnes)	11.2	8.8	12.9
Contained molybdenum (’000 tonnes)	6.1	4.6	6.8
Concentrate smelted on site (’000 tonnes)	1,096	1,060	1,098
Production of refined metals
Copper (’000 tonnes)	293.7	230.6	246.7
Gold (’000 ounces)	488	308	300
Silver (’000 ounces)	4,037	2,963	3,344

Grasberg (Rio Tinto: 40 per cent joint venture)
Grasberg, in Papua, Indonesia, is one of the world’s largest copper and gold mines in terms of reserves and production. It is owned and operated by Freeport Indonesia (PTFI), the principal and 91 per cent owned subsidiary of the US based Freeport-McMoRan Copper & Gold Inc. (FCX).
To meet the mine’s social obligations to local communities, at least one per cent of Grasberg’s net sales revenues are committed to support village based programmes. In addition, two new trust funds were established in 2001 in recognition of the traditional land rights of the local Amungme and Komoro tribes. In 2004, PTFI contributed US$17.8 million (net of Rio Tinto portion) and Rio Tinto US$1.6 million in total to the funds.
As a result of training and educational programmes, Papuans represented more than a quarter of PTFI’s approximately 9,000 workforce by the end of 2004.

2004 operating performance
Grasberg open pit production was affected by two rock slippages in the last quarter of 2003. Consequently, a large part of 2004 was focused on ensuring a safe production environment into the future. This resulted in lower than predicted open pit copper and gold production due to a combination of lower tonnages and grades of ore exacerbated by using low grade ore from the pit to supplement mill production during the first four months of the year. Pit production stabilised during the second half of the year. In December 2004, Rio Tinto and FCX agreed the adjustment to the Participation Agreement and sharing of insurance proceeds attributable to the Grasberg pit slippage incidents. Rio Tinto’s share of insurance proceeds contributed US$20 million to net earnings.

	2002	2003	2004

Principal operating statistics for PTFI 2002-2004
Ore milled (’000 tonnes)	86,001	74,103	67,750
Head grades:
Copper (%)	1.14	1.09	0.87
Gold (g/t)	1.24	1.54	0.88
Silver (g/t)	3.60	4.03	3.85
Production of metals in concentrates
Copper (’000 tonnes)	864.4	715.8	516.4
Gold (’000 ounces)	3,030	3,262	1,584
Silver (’000 ounces)	6,402	6,474	5,037

Escondida (Rio Tinto: 30 per cent)
The low cost Escondida copper mine in Chile is one of the largest copper mines in the world, with a mine life expected to exceed 30 years at current rates of production. The mine is 57.5 per cent owned and managed by BHP Billiton.
     Approval was given in 2003 for the US$400 million Escondida Norte project. The satellite deposit will provide mill feed to maintain capacity at Escondida above 1.2 million tonnes per annum of copper in concentrate and cathode to the end of 2008 as existing Escondida mine grades decline. First production from Norte is expected in the fourth quarter of 2005. Rio Tinto’s share of the project cost is US$120 million.
     In 2004 a US$870 million sulphide leach project was approved involving the use of bacteria to leach copper from sulphide ores that would otherwise be discarded as waste. The project will produce 180,000 tonnes (Rio Tinto share 54,000 tonnes) of copper cathode metal per annum for more than 25 years. It is scheduled to start production during the second half of 2006.
     Escondida employs approximately 2,800 people directly, together with 2,400 contractor personnel.

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2004 operating performance
Escondida’s mined copper production was 22 per cent higher than in 2003. In late 2003 high clay content in the ore caused problems in recovering water from tailings that inhibited production from the new Laguna Seca concentrator. These problems were resolved in early 2004 and the concentrator achieved an average throughput of 105,216 tonnes per day during the year compared to the design capacity of 110,000 tonnes per day. Overall, Escondida ore tonnes milled were 17 per cent higher and copper grades six per cent higher than in 2003.

	2002	2003	2004

Principal operating statistics at Escondida 2002-2004
Rock mined (’000 tonnes)	306,620	300,386	377,356
Ore milled (’000 tonnes)	46,536	70,347	82,378
Head grade:
Copper (%)	1.58	1.43	1.51
Production of metals in concentrates
Copper (’000 tonnes)	622.6	847.0	1,045.6
Gold (’000 ounces)	126	184	217
Silver (’000 ounces)	2,981	4,728	5,747
Copper cathode (’000 tonnes)	138.7	147.6	152.1

Palabora (Rio Tinto: 49.2 per cent)
Palabora Mining Company (Palabora) is a publicly listed company on the Johannesburg Stock Exchange and operates a mine and smelter complex in South Africa.
Palabora has developed a US$465 million underground mine with a planned production rate of 30,000 tonnes per day of ore. Approximately 1.6 million tonnes of copper are expected to be produced over its 20 year life.
Palabora supplies most of South Africa’s copper needs and exports the balance. It employs approximately 1,700 people and labour agreements are negotiated annually.

2004 operating performance
Palabora recorded a net loss of US$21 million compared with earnings of US$1 million in 2003. With closure of the open pit mine in 2002 after 40 years of production, a start was made on commissioning of the underground block cave mining project. During 2003 and 2004 the ramp up to full production of 30,000 tonnes per day was hindered by fragmentation problems and poor performance of remote rock breaking equipment. The average production rate of underground ore mined during the last quarter of 2004 was 26,500 tonnes per day, with 27,250 tonnes per day in December, compared to the target of 30,000 tonnes per day.
The aggregate impact of the limited production from the underground mine, and the strength of the rand against the US dollar, partly offset by cost saving actions, adversely affected earnings, and led to additional borrowing requirements. In addition, this triggered an evaluation of the recoverable amount of Palabora’s copper business which resulted in a provision for asset impairment of US$161 million after tax and outside shareholders’ interests. This is excluded from adjusted earnings.
Palabora is selling its magnetite iron ore stockpile with completion expected in 2005, a by-product of previous and current copper mining, that is stored on site. The stockpile is estimated to contain over 235 million tonnes of material grading more than 55 per cent iron.

	2002	2003	2004

Principal operating statistics at Palabora 2002-2004
Ore milled (’000 tonnes)	9,933	11,415	8,657
Head grade:
Copper (%)	0.63	0.59	0.74
Copper concentrates produced (’000 tonnes)	167.9	163.3	187.7
Contained copper (’000 tonnes)	52.2	52.4	54.4
New concentrates smelted on site (’000 tonnes)	258.6	267.6	253.4
Refined copper produced (’000 tonnes)	81.6	73.4	67.5

Northparkes (Rio Tinto: 80 per cent)
Rio Tinto’s interest in the Northparkes copper-gold mine resulted from the acquisition of North Limited. Northparkes is a joint venture with the Sumitomo Group (20 per cent).
     Following an initial open pit operation at Northparkes in central New South Wales, Australia, underground block cave mining has been undertaken since 1997. With present and future developments, the operation has an expected life of 13 years at current production rates.
     The copper concentrate produced is shipped under long term contracts that provide for periodic negotiation of certain charges, as well as spot sales, to smelters in Japan (67 per cent), Australia (14 per cent) and other countries (19 per cent).
     Northparkes employs approximately 160 people together with 140 permanent contractors.

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2004 operating performance
Production from the first underground block cave ceased in early 2003 and is being replaced by the Lift 2 block cave which commenced production in 2004. Progress with mine development for Lift 2 was hampered by high rock stresses which adversely affected mine development but assists in the caving of the orebody with good fragmentation. The transition to Lift 2 was completed in 2004.

	2002	2003	2004

Principal operating statistics at Northparkes 2002-2004
Ore milled (’000 tonnes)	5,364	5,168	5,008
Head grade:
Copper (%)	0.86	0.67	0.79
Gold (g/t)	0.35	0.44	0.66
Production of contained metals
Copper (’000 tonnes)	38.4	27.1	30.0
Gold (’000 ounces)	40.8	48.6	79.4

Kennecott Minerals (Rio Tinto: 100 per cent)
Kennecott Minerals in the US manages the Greens Creek mine (Rio Tinto: 70 per cent) in Alaska and the Rawhide mine (Rio Tinto: 51 per cent) in Nevada. It also owns the Group’s interest in the Cortez gold mine (Rio Tinto: 40 per cent), also in Nevada. Ore extraction from Rawhide was completed in October 2002 and reclamation work is well advanced.
Kennecott Minerals employs approximately 300 people, excluding employees of non managed operations.

2004 operating performance
Net earnings of US$79 million were US$19 million above 2003, benefiting from higher gold prices. Gold production decreased by three per cent at the Cortez gold mine.

Greens Creek (Rio Tinto: 70.3 per cent)
In addition to gold, the Kennecott Greens Creek mine on Admiralty Island in Alaska produces silver, zinc and lead.

2004 operating performance
Mill throughput was three per cent higher than in 2003, but due to lower grades, silver and zinc production from Green’s Creek were 17 per cent and nine per cent lower, respectively, than in 2003.

Copper group projects
Resolution (Rio Tinto: 55 per cent)
The Resolution project is situated in Arizona, US, in the area of the depleted Magma (Superior) copper mine. In 2001, an agreement was signed with BHP Billiton Base Metals which allowed Rio Tinto to earn a 55 per cent interest in the project by spending US$25 million over six years. In 2003, five deep exploration drillholes intersected significant copper mineralisation, indicating a large deposit at depth. Rio Tinto completed earning its 55 per cent interest in the project in early 2004. The project is currently in the preliminary stages of a prefeasibility study. It is anticipated that studies will take some considerable time.

Cortez Hills (Rio Tinto: 40 per cent)
Rio Tinto holds a 40 per cent interest in the Cortez gold mine, a joint venture with Placer Dome. The mine is located in northeastern Nevada, US, and the associated area of interest includes the Cortez Hills deposit, discovered in 2003 which contains proven and probable reserves of 7.5 million ounces of gold. A feasibility study is in progress to determine the optimum sequencing for development of the deposits within the Cortez area of interest. It is anticipated that operating permits for Cortez Hills will be obtained in 2006, with initial gold production occurring in mid 2007.

Eagle (Rio Tinto: 100 per cent)
The Eagle project is a small tonnage, high grade nickel deposit located in Michigan, US, for which Kennecott Minerals has commissioned a prefeasibility study.

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With diamonds becoming a significant earner for Rio Tinto, the Diamonds product group was formed in 2003 from the former Diamonds & Gold group. The group comprises Rio Tinto’s 60 per cent interest in the Diavik Diamonds mine in Canada, the wholly owned Argyle mine in Australia, Rio Tinto’s 78 per cent interest in the Murowa mine in Zimbabwe which started production in 2004 and diamond sales and representative offices in Belgium and India.
      Rio Tinto is a leading proponent of the Kimberley Process which seeks to ensure that only legitimately mined and traded rough diamonds are introduced into the world market. Programmes are in place to ensure that firms operating to acceptable standards of social responsibility process diamonds mined by Rio Tinto. Rio Tinto sells its diamonds through its marketing arm, Rio Tinto Diamonds, according to their mine source in order to gain the benefits of origin.
     At 31 December 2004, Diamonds accounted for eight per cent of the Group’s operating assets and, in 2004, contributed five per cent of Rio Tinto’s turnover and eight per cent of adjusted earnings.
     Keith Johnson, chief executive, Diamonds, is based in London.

Financial performance
2004 compared with 2003
Diamonds contributed US$169 million to adjusted earnings, an increase of US$56 million from 2003, assisted by the continuing operating success of the Diavik Diamonds mine.
The diamond market continued to be strong. There was robust growth in retail jewellery sales in the US and the Japanese market grew for the first time in a number of years. Industry rough prices improved, particularly for large, clean, white rough diamonds for which demand has been consistently in excess of supply. Prices also increased for polished diamonds.

2003 compared with 2002
Diamonds in 2003 contributed US$113 million to adjusted earnings, up US$50 million from 2002, reflecting the startup of the Diavik Diamonds mine.
Demand for rough diamonds was strong throughout 2003 with the rough market outperforming the market for polished stones.

Diavik Diamonds (Rio Tinto: 60 per cent)
Diavik Diamond Mines (DDMI) owns Rio Tinto’s interest in and manages the unincorporated Diavik Diamonds joint venture in the Northwest Territories of Canada.
The project was completed in 2003 well ahead of schedule and within budget. Initial production of gem quality diamonds commenced in January 2003 with commissioning of the process plant. Production will build up over the next two years.
DDMI’s commitment to work with Aboriginal communities was formally concluded in five participation agreements, providing training, employment and business opportunities. Procurement contracts for the operating phase were negotiated with Aboriginal businesses.

2004 operating performance
Net earnings were US$145 million, US$104 million more than in 2003. Sales of diamonds continued to attract a high level of interest with prices being achieved at a significantly higher level than originally projected.
Production continued to ramp up during 2004 and exceeded expectations in nearly all respects. Record volumes were produced as the process plant comfortably exceeded design throughput on a consistent basis. Improving grades continued to reflect the processing of mud rich material that surrounds the kimberlite proper.
A strategic planning team, separate from mine operations, is studying how best to capture the upside of a stronger market and new geological information for both the A154South and A154North kimberlites. After 12 months of study, Rio Tinto approved the construction of the A418 dike at an expected cost of US$190 million. Construction is planned to commence in mid 2005. Rio Tinto also approved studies to investigate the feasibility of underground mining of three of the four kimberlite bodies. The studies will include the construction of an exploratory decline. The project is expected to cost US$75 million. Diavik includes some of the most valuable kimberlites in the world.

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Argyle (Rio Tinto: 100 per cent)
Rio Tinto owns and operates the Argyle diamond mine in Western Australia.
Production from Argyle’s major resource, the AK1 open pit mine, is expected to continue until 2007 with processing continuing for a short while thereafter. A feasibility study is under way into underground mining by the block caving method beneath the open pit. A decision is expected in 2005 relating to mine closure or further mine development. Development of an exploration decline commenced in 2003 to assist in confirming design criteria. The range of statutory approvals required for underground operation includes environmental and social impact assessments. Argyle employs approximately 780 people.

2004 operating performance
Net earnings of US$23 million were US$49 million lower than in 2003. Diamond production for 2004 was 33 per cent lower with 21 million carats produced. Tight mining conditions prevailed as a result of the deepening open pit which, together with abnormally wet weather, limited mine production. Lower grade ore from stockpiles supplemented ore from the mine.
Reserves decreased following the development of a new resource model and revised mine plan which resulted in some material being transferred to resources.

Murowa (Rio Tinto: 78 per cent)
Early in 2004, Rio Tinto and Rio Tinto Zimbabwe approved expenditure of US$11 million on a small scale plant to start diamond production at Murowa near Zvishavane in southern Zimbabwe.
     An updated feasibility study confirmed the existence of three kimberlite pipes representing a mining reserve of 18.7 million tonnes of ore at a grade of 0.9 carats per tonne.
     Commercial production commenced in the third quarter. Initial operations are focused on 1.3 million tonnes of weathered material containing 140,000 tonnes of enriched ore. A phased approach reduces the initial investment required and allows confirmation of marketing and regulatory arrangements prior to expansion, which could be considered within three years. Diamonds from Murowa are marketed through Rio Tinto Diamonds in Antwerp. Safeguards are in place regarding the chain of custody of the product. Zimbabwe is a signatory of the Kimberley Process.
     Following the decision to proceed with Murowa, the directors of Rio Tinto Zimbabwe (RioZim) agreed to a restructuring of Rio Tinto’s 56 per cent shareholding in RioZim. As a result of the restructure, Rio Tinto owns a direct 78 per cent interest in Murowa and has a residual economic interest in RioZim. RioZim became an independent, Zimbabwean controlled, listed company owning the remaining 22 per cent of Murowa.

2004 operating performance
Net earnings were US$1 million. The construction and commissioning of facilities and infrastructure was the main objective in 2004. While commissioning problems in the process plant delayed full capacity being reached, the fourth quarter saw the first parcel of diamonds successfully mined, processed and sold.

OTHER OPERATIONS
Other operations comprise the Lihir gold mine in Papua New Guinea, the Kelian gold mine in Indonesia and the Sari Gunay gold project in Iran.

Lihir (Rio Tinto: 14.5 per cent)
Lihir Gold is a publicly quoted company formed to finance and develop the Lihir mine in Papua New Guinea. Lihir Gold had a market capitalisation of A$1.49 billion (US$1.16 billion) at 31 December 2004.
Lihir directly employs approximately 1,070 people, of whom 91 per cent are Papua New Guinea nationals, including 36 per cent Lihirians. Some 1,600 contractors are also employed.

2004 operating performance
Lihir’s contribution to Rio Tinto’s earnings for 2004 included US$12 million resulting from the revaluation of ore stockpiles to restore these to the lower of cost and net realisable value taking account of changes in circumstances including higher gold prices.
Gold production at Lihir was 8.9 per cent higher than in 2003 due to higher throughput and higher head grades.

Kelian (Rio Tinto: 90 per cent)
Kelian Equatorial Mining (Kelian) operated an open pit gold mine in East Kalimantan, Indonesia.
Mining ceased in 2003 with production from stockpiled ore completed in February 2005. A mine closure consultative process was completed in 2003 with stakeholders agreeing on the key mine closure directions. Work is continuing on mine closure activities including establishment of post closure institutions, the upgrade of the Namuk tailings dam, and rehabilitation and revegetation. Work is planned for removal of camp and operating facilities and the camp site area prepared for future wetlands development.

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Kelian has been reducing employee and contractor numbers as it winds down its operations and focuses on mine closure activities. Settlement of compensation claims is continuing under a 2001 agreement and a number of programmes are in place to provide sustainable solutions for local communities and former employees after closure.

2004 operating performance
Rio Tinto’s share of Kelian’s production was 295,000 ounces in 2004, 30 per cent below the previous year, as a result of the processing of low grade stockpiles.

Project
Sari Gunay (Rio Tinto: 70 per cent)
The Sari Gunay (formerly Dashkasan) project in Iran entered the prefeasibility stage during the year. Work continued on the delineation of the sizeable body of gold mineralisation discovered in Kordestan province in western Iran. Drilling continued to outline additional mineralisation and to increase confidence in existing estimates.
Metallurgical test work and community and environmental baseline studies continued.

EXPLORATION GROUP
Rio Tinto Exploration seeks to discover or identify mineral resources that will contribute to the growth of the Rio Tinto Group. The discovery of new resources is essential to replace deposits as they are mined and to help meet the increasing global demand for minerals and metals.
     The Exploration group is opportunistic in approach and its resources are deployed on projects that show the best chance of delivering a world class deposit to Rio Tinto. Mineral exploration is a high risk activity. Rio Tinto’s statistics show that an average of only one in 350 mineral prospects that are drill tested result in a mine for the Group. Rio Tinto believes in having a critical mass of projects, selected through a rigorous process of prioritisation.
     The Exploration group is organised into four geographically based teams and a fifth team that looks for industrial minerals on a global basis. Additionally, a small focused project generation team covers the world for new opportunities.
     At the end of 2004, Rio Tinto was exploring in 30 countries for a broad range of commodities including copper, diamonds, nickel, industrial minerals, gold, bauxite, iron ore and coal. Exploration employs 191 geologists and geophysicists around the world and has a total complement of 880 people.
      Tom Albanese succeeded David Klingner as head of Exploration, and is based in London.

2004 operating performance
Exploration in 2004 focused on advancing the most promising targets across the spectrum of grassroots, generative, drill test stage, and near mine programmes. Encouraging results were obtained from a number of locations.
     Order of magnitude studies were completed on the Simandou (iron ore, Guinea) and Eagle (nickel-copper, Michigan, US) projects. Both projects have been transferred to relevant product group teams for pre-feasibility assessment. Since 2001 five projects have moved from exploration to the next stage of project evaluation including Resolution (copper, Arizona, US) and Potasio Rio Colorado (potash, Argentina). In addition to these projects, near mine exploration has also been undertaken. Where resources have been supplemented or additional resource discovered this has been has reported by the respective product group.
     Several projects are in the process of, or about to initiate, order of magnitude studies to assess their economic potential for advancement to pre-feasibility assessment. An order of magnitude study was commenced at the La Sampala nickel laterite resource in Indonesia, and is nearing completion.
     The çöpler and Marcona deposits discovered previously were divested in 2003 and 2004 respectively. In 2004, the Group’s interest in the Sepon project in Laos was sold.
     Diamond exploration continued in Canada, southern Africa, Mauritania, Brazil and India. A number of diamond bearing kimberlite pipes were discovered and follow up test work is in progress to gauge economic potential.
     Copper exploration continued in Turkey, Peru, Chile, Argentina and the US. Copper mineralisation was encountered in drilling in projects in Turkey and Peru, which warrant further follow up drill testing.
     Exploration focus on the bulk commodities iron ore, coal and bauxite has been increasing each year for the last several years and evaluation of several projects is continuing with the intention to progress two projects to product group handover in 2005.
     The Exploration group was active in the search for industrial mineral deposits in a number of parts of the world including North and South America, Europe, south east Asia and Turkey.
     The Exploration group continued to support brownfield work at a number of Rio Tinto operations. Additional work to develop the Argyle diamond mine continued. In the US and Argentina, active programmes were conducted in the vicinity of the Boron and Tincalayu mines. In Indonesia, exploration in and around the Grasberg mine led to the addition of further copper reserves.

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Financial performance
2004 compared with 2003
Cash expenditure on exploration in 2004 was US$193 million and the pre-tax charge to earnings was US$187 million, a US$60 million increase over 2003, reflecting increased iron ore exploration in Western Australia and acceleration of evaluation on significant projects by product groups during the year.

2003 compared with 2002
Cash expenditure on exploration in 2003 was US$130 million and the pre-tax charge to earnings was US$127 million, similar to 2002.

TECHNOLOGY GROUP
The Technology group provides technical assistance to Rio Tinto’s product groups and their businesses, and advises executive management. In support of the drive towards operational excellence, a key focus is to identify and implement best practices, to improve safety and environmental performance, maximise operating efficiency and add value across Rio Tinto.
     Technology staff include experienced professionals covering all the main industry related disciplines, while the Office of the Chief Technologist manages the Group’s involvement in external and collaborative research.
     The total staff in the Technology group at year end was 362 compared with 333 in 2003.
     Ian Smith, head of Technology, is based in London. He was formerly managing director, Aluminium Smelting, Comalco and succeeded John O’Reilly who moved to a part time role on 1 May 2005.

2004 operating performance
Technical Services
Technical Services continued to increase its involvement with Rio Tinto operations and also provided significant contributions at non managed operations. Activity over the year was again at record levels, with a strong focus on the enhancement of initiatives to improve performance and implement best practice such as in water management and metallurgical margin improvement. New initiatives recently commenced include Excellence in Mine Planning and Resource Management.
A number of current development projects are linked with external research programmes in order to leverage value for Rio Tinto. Others are focussed on innovation and best practice in key areas to add value in a shorter time frame.

Office of the Chief Technologist
The Office of the Chief Technologist is responsible for the identification and the transfer of technology based opportunities for the Group.
The external research portfolio covers a broad range of industry related initiatives. Some of these link directly with internal development projects. Work on improving efficiency and reducing costs is continuing in areas such as comminution, water usage and materials handling. A number of breakthrough projects are also being pursued.
The Rio Tinto Foundation for a Sustainable Minerals Industry approved a further 14 projects for funding.

Technical Evaluation and Project Management
Technical Evaluation continued in its principal role of providing independent review of all major investment proposals being considered by the Group. Risk assessment and management is an important and integral component of the project review process. The unit also continued with the programme of post investment reviews. It has established a database to consolidate the findings so that lessons learned from completed projects can be shared within the Group.
The Project Management Unit provides ongoing support to major project teams across Rio Tinto, both for projects in execution and those still in the feasibility stage. There was also continued involvement with some major projects at non managed operations. Two project management forums were held during the year focussing on collaboration between projects and lessons learned.

Asset Utilisation
This unit is now well established across the Group and its workload continued to expand. There has been particularly heavy involvement with the iron ore operations in Western Australia which is expected to continue through 2005. The process control group is now well established. The development of tools to improve performance continues, including on asset integrity and remote monitoring.
There is continuing emphasis on ensuring that safety, operability and maintainability issues are fully addressed and incorporated in all the unit’s work.

Financial performance
The charge for the Technology group against net earnings was US$25 million, compared with US$16 million in 2003. The increase was mainly due to the weaker US dollar and the greater level of activity in all Technology group units.

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GROUP SOCIETY AND ENVIRONMENT

The way we work
Rio Tinto is in business to create value by finding and developing world class mineral deposits and operating and eventually closing operations safely, responsibly and efficiently. To do so, the Group takes a disciplined and integrated approach to the economic, social and environmental aspects of all its activities.
      The approach to achieving this is through implementation of the policies described in The way we work, Rio Tinto’s statement of business practice, at all levels of the business.
      The statement, redistributed in 2003 in 19 languages, is the result of many months of wide internal consultation and discussion and represents shared values from around the Group. The document was published initially in January 1998. It was revised in 2002 in the light of experience, following further Group wide review and consultation, external benchmarking of policies against the best practice of other organisations and approval by the Rio Tinto board.
      The way we work commits the Group to transparency consistent with normal commercial confidentiality, corporate accountability and the application of appropriate standards and internal controls. It sets the basis for how Group companies' employees work and also provides guidance for joint venture partners and others. Every employee is responsible for implementing the policies in the document.
      Rio Tinto has adopted the Association of British Insurers’ 2003 disclosure guidelines on social responsibility in preparing this report. Details of the Group’s overall and individual businesses’ social and environmental performance continue to be published on the Rio Tinto website: www.riotinto.com/se and in the Sustainable development review.

Board responsibilities
The directors of Rio Tinto, and of Group companies, are responsible for monitoring adherence to the Group policies outlined in The way we work. Assurance for performance in these areas involves checking, reviewing and reporting each business’s implementation of the policies, their compliance with regulations and voluntary commitments, and the effectiveness of management and control systems, while also providing mechanisms for improvement.
      As discussed in the section on Corporate governance on pages 82 to 89, the boards established a process for identifying, evaluating and managing the significant risks faced by the Group. Directors meet regularly, have regular scheduled discussions on aspects of the Group’s strategy and full and timely access to the information required to discharge their responsibilities fully and effectively.
      Rio Tinto’s Compliance guidance requires that the identification of risk be systematic and ongoing. It recommends that each Group company undertakes a structured risk profiling exercise to identify, categorise and weigh the risks it faces in the conduct of its business. Each Group company puts systems in place to ensure that risks are reviewed at an appropriate frequency.
      Total remuneration is related to performance through the use of annual bonuses, long term incentives and stretching targets for personal, financial and safety performance.
      The board’s Committee on social and environmental accountability reviews the effectiveness of policies and procedures. The committee comprises four non executive directors and is chaired by the chairman of the main board. It meets three times annually with the chief executive and heads of Technology, Health, Safety and Environment and Communication and Sustainable Development.
      Reports for the committee summarise significant matters identified through Rio Tinto’s assurance activities. These include reviews every four years of each business to identify and manage strategic risks in relation to health, safety, and the environment; audits against Rio Tinto standards; annual risk management audits; risk reviews for specific concerns, such as cyanide management and smelter operations; procedures and systems for reporting critical and significant issues and incidents; completion of annual internal control questionnaires by all Group business leaders covering the full spectrum of business and operational risk; and findings and recommendations of the independent external assurance and data verification programme.

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Policies, programmes and results
Implementation of the policies in The way we work is discussed in the following sections named according to each policy area. Known risks arising from social and environmental matters and their management in Group businesses are described in the relevant Group operations section.

Safety
Safety is a core value and a major priority. Rio Tinto believes that all injuries are preventable and its goal is zero injuries. To achieve this, full and consistent implementation of and accountability for Rio Tinto’s comprehensive standards, guidelines, systems and procedures is required across the world. The Group is also building a supportive safety culture that requires visible leadership, ongoing education and training and a high level of participation by everyone in the workplace.
However, there is still some way to go in achieving the goal of zero. In 2004, very regrettably one contractor lost his life at a managed operation. The Group has demonstrated strong improvements in the lost time injury frequency rate (LTIFR) and all injury frequency rate (AIFR) from 2003, with reductions of 21 per cent and 15 per cent respectively. The LTIFR for 2004 was 0.65 per 200,000 hours worked by employees and contractors (2003: 0.82).
Fines for infringement of safety regulations totalled US$19,200 (2003: US$162,000).

Occupational health
Rio Tinto strives to protect physical health and well being in the workplace. This requires clear standards, consistent implementation, transfer of best practice and improvement through Group wide reporting and tracking of remedial actions.
      During 2004, Group businesses worked to implement the occupational health standards and 81 per cent of employees now work at an operation where the occupational health standards have been implemented. In 2004, there were 72 new cases of occupational disease per 10,000 employees, (2003: 107).
      Operations were temporarily suspended at Energy Resources of Australia’s (ERA) Ranger uranium mine in Australia during March 2004 following an incident of drinking water contamination. The government Office of the Supervising Scientist appointed independent health experts to investigate and advise on the potential for long term harm to workers as a result of the water contamination. They concluded that longer term health effects were most unlikely.
      Operations were again temporarily suspended at the end of August 2004 to review safety and health systems following the issue of two reports from the Office of the Supervising Scientist. One report concerned the incident of drinking water contamination and the other concerned radiation clearance procedures for equipment leaving site. Three Australian Government audits arising from the incidents have been satisfactorily completed. On 1 June 2005 ERA was fined A$150,000 in the Darwin Magistrate’s Court after having pleaded guilty to two charges related to these incidents Rio Tinto’s southern African operations are nearing full implementation of the Group HIV/AIDS strategy. This provides access to antiretroviral therapy that is affordable for employees and a partner. Operations in Asia and west Africa are in the process of refining their local strategies to meet Group requirements.
      In 2004, Rio Tinto set targets to focus attention on reducing noise induced hearing loss across the Group. The target of zero exposure of employees to a noise dose of more than 82 decibels (averaged over eight hours), after allowing for the use of hearing protection was not met, with 0.5 per cent of employees still exposed to noise greater than this limit.
      Fines for infringement of occupational health regulations in 2004 involved four operations, totalling US$257,000 (2003: US$900).

Environment
Wherever possible Rio Tinto prevents, or otherwise minimises, mitigates and remediates, harmful effects of the Group’s operations on the environment.
      To do this, the Group seeks to understand the environmental aspects and impacts of what it does, build what is learned into systems to manage and minimise those impacts, and set targets for improvement.
      After significant Groupwide consultation, Rio Tinto’s environment standards were finalised and approved in 2003 for implementation by June 2005. During 2004, significant work continued on ways to improve efficiency of greenhouse gas emissions, energy use and water withdrawn from the environment.
      By the end of 2004, 84 per cent of operations had implemented ISO 14001 or an equivalent environmental management system (EMS). All Rio Tinto operations are required to have a certified EMS by the end of June 2005: by the end of 2004, 72 per cent of operations had achieved this. There was no change in the number of significant environmental incidents (16) compared to 2003. There was a decrease in the number of significant spills from eight to four. Fines for infringements of environmental regulations involved three operations and totalled US$53,800 (2003: US$126,000).

Land access
Rio Tinto seeks to ensure the widest possible support for its proposals throughout the life cycle of the Group’s activities by coordinating economic, technical, environmental and social factors in an integrated process.
This involves negotiation of mining access agreements with indigenous landowners; responsible land management and rehabilitation; planning for closure; developing and implementing a biodiversity strategy; and forming strategic partnerships with external organisations.

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Political involvement
Rio Tinto does not directly or indirectly participate in party politics nor make payments to political parties or individual politicians.
A Business integrity guidance, addressing bribery, corruption and political involvement, was issued in 2003 to assist managers in implementing this policy. The guidance covers questions relating to compliance and implementation; gifts and entertainment; the use of agents and intermediaries; and “facilitation” payments.
Rio Tinto avoids making facilitation payments anywhere in the world. Bribery in any form is prohibited. Gifts and entertainment are only offered or accepted for conventional social and business purposes and then only at a level appropriate to the circumstances.

Communities
Rio Tinto sets out to build enduring relationships with its neighbours that are characterised by mutual respect, active partnership, and long term commitment.
     Every business unit is required to have rolling five year community plans which are updated annually. In 2004, a series of pilot studies were completed aimed at achieving a deeper level of understanding of the linkages between mining activities and the economies in which they take place.
     All Group businesses produce their own reports for their local communities and other audiences. Community assurance of the quality and content of these reports is increasing. This provides an opportunity for engagement with the community on their views of programmes sponsored by the operations.
     Businesses managed by Rio Tinto contributed US$87.8 million to community programmes in 2004 (2003: US$70 million). Of the total contributions, US$34.2 million was community investment and US$24.1 million in direct payments made under legislation or an agreement with a local community.

Human rights
Rio Tinto supports human rights consistent with the Universal Declaration of Human Rights and Rio Tinto respects those rights in conducting the Group’s operations throughout the world.
Rio Tinto also supports the UN Secretary General’s Global Compact, the US/UK Voluntary Principles on Security and Human Rights and the Global Sullivan Principles.
Rio Tinto’s Human rights guidance is designed to assist managers in implementing the Group’s human rights policy in complex local situations. It was revised and republished in 2003. In 2004, a web based training module was developed to instruct managers on what the policy means in practice and how to respond to difficult situations.

Employment
Rio Tinto recognises that business performance is closely linked to effective people development. It has a long term plan to strengthen approaches to the training and development of leaders in the Group.
     In 2004, a suite of formal leadership programmes was developed and implemented for both strategic and Group business leaders. In total, ten customised leadership development programmes, involving 225 participants, were successfully run in 2004 in partnership with leading business schools in Europe, North America and Australia. All product groups and businesses were represented. It is planned to run a further ten strategic and business leadership development programmes in 2005 involving about 250 participants.
     As well as using the open programmes run by the London Business School and International Institute for Management Development for future leaders, Rio Tinto commissioned the design of a customised, operational leadership programme to be launched in 2005 with eight programmes involving about 240 further participants from across the Group at manager and superintendent level.
     These programmes are all focused on ensuring that leaders, at all levels, are well prepared for the wide range of current and future challenges they will face in taking forward a complex and commercially successful organisation. All of these programmes are closely integrated with the core leadership competencies Rio Tinto has identified as necessary for effective leaders wherever they work in the organisation.
     Pilot programmes were undertaken in 2004 on the use of career development tools and their application to new and better approaches to coaching and mentoring employees. In 2005, Group wide workshops to improve the capability of all involved in managing careers are being organised.
     People development in Rio Tinto is focused on ensuring technical and professional competence. In 2004, five projects were undertaken to define these competencies in Marketing, Finance, Human Resources, Community Relations and Health, Safety and Environment teams. This led to a pilot development programme being successfully designed and delivered for early career Human Resources professionals.
     In 2005, all five streams will focus on implementing across the Group common professional development tools, programmes and systems. Competency in these functions will be extended to cover all other disciplines to ensure that the Group builds and strengthens its skills capability at all levels and to facilitate more effective collaboration on areas of common interest in different businesses.
     In the past few years, Rio Tinto has focused on strengthening and developing leaders; in 2005 the focus will be on developing talent and potential at all levels and building a stronger alignment between individual and business performance.

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     Rio Tinto requires safe and effective working relationships in all its operations. Whilst respecting different cultures, traditions and employment practices, common goals are shared, in particular the elimination of workplace injuries, and commitment to good corporate values and ethical behaviour.
      In 2004, Group companies employed 28,000 people (2003: 29,000) and, together with Rio Tinto’s proportionate share of those employed by joint ventures and associates, the total was 33,000 (2003: 36,000) mainly concentrated in Australia and North America. Wages and salaries paid in 2004 excluding Rio Tinto’s proportionate share of joint ventures and associates totalled US$1.7 billion (2003: US$1.5 billion).
      Retirement payments and benefits to dependants are provided in accordance with local conditions and good practice.
      Rio Tinto encourages the involvement of its employees in the Group’s performance through their participation in an employee share scheme. As stated in The way we work, the Group recognises the right of employees to choose whether or not they wish to be represented collectively.

Sustainable development
Rio Tinto believes that its businesses, projects, operations and products should contribute constructively to the global transition to sustainable development.
All businesses are required to assess the sustainable development case for their activities. Rio Tinto has committed itself to integrating the results of the Mining, Minerals and Sustainable Development (MMSD) analysis of 2002 into the Group’s policy and objectives, and developing measures to assess their implementation. As a founding member of the International Council on Mining and Metals, Rio Tinto is participating in dialogue and programmes to advance industry wide progress on key sustainable development priorities.
A Sustainable Development Leadership Panel (SDLP) was formed in 2004 to provide Group leadership and encourage businesses to make sustainable development considerations an integral part of business plans and decision making processes.

Openness and accountability
Rio Tinto conducts the Group’s affairs in an accountable and transparent manner, reflecting the interests of Rio Tinto shareholders, employees, host communities and customers as well as others affected by the Group’s activities.
Policies on transparency, business integrity, corporate governance and internal controls and reporting procedures are outlined in The way we work. In 2003, a Compliance guidance was issued to provide a framework to enable each Group business to implement and maintain a best practice compliance programme which should identify and manage risks associated with non compliance with laws, regulations, codes, standards and Rio Tinto policies.

Assurance and verification
To be accountable and transparent, assurance is provided to the Group and others that Rio Tinto policies are being implemented fully and consistently across the Group’s businesses and operations.
The overall objective of the external assurance and data verification programme is to provide assurance that the material in the Sustainable development review is relevant, complete, accurate and responsive, and, in particular, that Rio Tinto’s policies and programmes are reflected in implementation activities at operations. In 2004, Environmental Resources Management (ERM) undertook the external assurance and data verification programme and the results are available in Rio Tinto’s Sustainable development review (previously the Social and environment review).

Competition
Rio Tinto has adopted a specific antitrust policy requiring all employees to compete fairly and to comply with relevant laws and regulations. Under the policy, guidance is provided on contacts with competitors and benchmarking as well as implementation of the policy in individual businesses. As integral parts of the policy, all relevant employees will receive regular training and will be required to certify annually that they are not aware of any antitrust violations.

Item 6. Directors, Senior Management and Employees

CHAIRMAN
1. Paul Skinner (age 60)
Paul Skinner was appointed chairman in November 2003. He graduated in law from Cambridge University and in business administration from Manchester Business School. A director of Rio Tinto since 2001and chairman of the Nominations committee. He was previously a managing director of The “Shell” Transport and Trading Company plc and group managing director of The Royal Dutch/Shell Group of Companies, for whom he had worked since 1966. He is a director of Standard Chartered PLC and the Tetra Laval Group. He is also a member of the board of INSEAD business school. (notes b and d)

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EXECUTIVE DIRECTORS
2. Leigh Clifford (age 57)
Leigh Clifford became chief executive in 2000, having been a director of Rio Tinto plc since 1994 and Rio Tinto Limited since 1995. A mining engineer he is a bachelor of engineering and a master of engineering science. He has held various roles in the Group’s coal and metalliferous operations since joining in 1970, including managing director of Rio Tinto Limited and chief executive of the Energy group. He is a former director of Freeport-McMoRan Copper & Gold Inc and a non executive director of Barclays Bank plc.

3. Guy Elliott (age 49)
Guy Elliott became finance director of Rio Tinto in 2002. He holds an MA from Oxford and joined the Group in 1980 after gaining an MBA from INSEAD business school. He has subsequently held a variety of management positions, including being president of Rio Tinto Brasil from 1996 to 1999.

NON EXECUTIVE DIRECTORS
4. Ashton Calvert (age 59)
Ashton Calvert was appointed a director of Rio Tinto with effect from 1 February 2005. He recently retired as secretary of the Department of Foreign Affairs and Trade of the Government of Australia. He was educated at the University of Tasmania and, as a Rhodes scholar, also gained a doctorate in mathematics from Oxford University. During his career in the Australian foreign service he held appointments in Washington and, on four occasions, in Tokyo, where he was ambassador between 1993 and 1998 prior to his appointment as secretary. In these and other roles he developed extensive experience of the Asian countries which represent key markets for Rio Tinto. (notes b, d and e)

5. Sir David Clementi (age 56)
Sir David was appointed a director of Rio Tinto in January 2003. He is chairman of Prudential plc, prior to which he was Deputy Governor of the Bank of England. Sir David’s earlier career was with Kleinwort Benson where he spent 22 years, holding various positions including chief executive and vice chairman. A graduate of Oxford University and a qualified chartered accountant, Sir David also holds an MBA from Harvard Business School. (notes a, c and e)

6. Vivienne Cox (age 46)
Vivienne Cox was appointed a director of Rio Tinto with effect from 1 February 2005. She is currently executive vice president of BP p.l.c. for Integrated Supply and Trading and also for Gas Power and Renewables. She is a member of the BP group chief executive’s committee. She holds degrees in chemistry from Oxford University and in business administration from INSEAD. During her career in BP she has worked in chemicals, exploration, finance, and refining and marketing. (notes a and e)

7. Richard Goodmanson (age 57)
Richard Goodmanson was appointed a director of Rio Tinto on 1 December 2004 and is chairman of the
Committee on social and environmental accountability. He is executive vice president and chief operating officer of DuPont and holds degrees in civil engineering, economics, commerce and business administration. During his career he has worked at senior levels for McKinsey & Co, PepsiCo and American West Airlines, where he was president and CEO. He joined DuPont in early 1999 and in his current position has responsibility for the non US operations of DuPont with particular focus on growth in emerging markets. (notes c, d and e)

8. Andrew Gould (age 58)
Andrew Gould was appointed a director of Rio Tinto in 2002 and is chairman of the Audit committee. He holds a degree in economic history and is chairman and chief executive officer of Schlumberger Limited, where he has held a succession of financial and operational management positions, including that of executive vice president of Schlumberger Oilfield Services and president and chief operating officer of Schlumberger Limited. He joined Schlumberger in 1975 from Ernst & Young. (notes a, c and e)

9. Lord Kerr (age 63)
Lord Kerr was appointed a director of Rio Tinto in 2003. He has an MA from Oxford University and was a member of the UK Diplomatic Service for 36 years, heading the service from 1997 to 2002. On a secondment to the UK Treasury he was principal private secretary to two Chancellors of the Exchequer. His service abroad included spells as Ambassador to the European Union from 1990 to 1995, and to the US from 1995 to 1997. He is chairman of the Court and Council of Imperial College, London; a director of The “Shell” Transport and Trading Company plc and The Scottish American Investment Trust plc. Lord Kerr is also a Trustee of the Rhodes Trust. (notes a, d and e)

10. David Mayhew (age 65)
David Mayhew was appointed a director of Rio Tinto in 2000. He is chairman of Cazenove Group plc, which he joined in 1969. Cazenove is a stockbroker to Rio Tinto plc. (notes a and b)

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11. Sir Richard Sykes (age 62)
Sir Richard was appointed a director of Rio Tinto in 1997. Following Sir Richard Giordano’s retirement, he will become Rio Tinto’s senior independent director. He is chairman of the Remuneration committee. After reading microbiology, he obtained doctorates in microbial chemistry and in science. A former chairman of GlaxoSmithKline plc, Sir Richard is a director of Lonza Group Limited and is rector of Imperial College, London. He is a fellow of the Royal Society and a trustee of the Natural History Museum in London and of the Royal Botanic Gardens, Kew. (notes b, c and e)

Robert Adams died at his home on 27 January 2005. Robert Adams joined the Group in 1970 after reading natural sciences and economics and subsequently gaining an MSc from the London Business School. He had a long distinguished career with Rio Tinto and becoming a director of Rio Tinto plc in 1991 and of Rio Tinto Limited in 1995 with responsibility for planning and development. He was also a non executive director of Foreign & Colonial Investment Trust plc.

Sir Richard Giordano retired from the boards at the conclusion of the 2005 annual general meetings. He was previously the senior non executive director and a deputy chairman. He was also chairman of the Audit committee. He had been a director of Rio Tinto plc since 1992 and of Rio Tinto Limited since 1995. A lawyer by training, he spent 12 years at BOC Group, first as chief executive, then chairman. In 1993, Sir Richard became a director of British Gas, assuming the role of chairman in 1994. A former chairman of BG Group plc, he is a director of Georgia Pacific Corporation in the US and a trustee of Carnegie Endowment for International Peace.

Leon Davis also retired from the boards at the conclusion of the 2005 annual general meetings. He was previously the Group’s Australia based non executive deputy chairman. He became a director of Rio Tinto Limited in 1994 and of Rio Tinto plc in 1995. He is a metallurgist and holds a diploma in primary metallurgy and a DSc from Curtin University and the University of Queensland. During nearly 50 years with the Group he has held a number of managerial posts around the world, ultimately as chief executive from 1997 to 2000. A former director of Codan Pty. Limited, he is chairman of Westpac Banking Corporation and a director of Huysmans Pty Limited and Trouin Pty Limited, and is also president of the board of The Walter and Eliza Hall Institute of Medical Research.

Oscar Groeneveld served as a director until 1 October 2004 when he was appointed chief executive of the Aluminium group. See Senior management on page 70 for his full biography.

John Morschel also retired from the boards at the conclusion of the 2005 annual general meetings. He was appointed to the boards of Rio Tinto in 1998. Educated in Australia and the US, he spent most of his career with Lend Lease Corporation Limited in Australia, culminating as managing director, followed by two years as an executive director of the Westpac Banking Corporation. A former chairman of CSR Limited and Leighton Holdings Limited, he is chairman of Rinker Group Limited and is a director of ANZ Banking Group Limited, Tenix Pty Limited, Gifford Communications Pty Limited and Singapore Telecommunications Limited. He is also a patron of the Property Industry Foundation.

Lord Tugendhat served as director until 22 April 2004 when he retired by rotation following the 2004 annual general meetings. He holds a BA and MA in history from Cambridge University, and became a director of Rio Tinto in 1997. A former vice president of the Commission of the European Communities, and chairman of the Civil Aviation Authority, he was chairman of Abbey National plc from 1991 until 2002 when he was appointed chairman of Lehman Brothers Europe Limited.

Notes
a) Audit committee
b) Nominations committee
c) Remuneration committee
d) Committee on social and environmental accountability
e) Independent (as defined on pages 82 and 83)

SENIOR MANAGEMENT

1. Tom Albanese (age 47)
Tom Albanese was appointed chief executive of the Copper group and head of Exploration in 2004. He joined Rio Tinto in 1993 on Rio Tinto’s acquisition of Nerco. He holds a BS in mineral economics and an MS in mining engineering. He held a series of management positions before being appointed chief executive of the Industrial Minerals group in 2000.

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2. Preston Chiaro (age 51)
Preston Chiaro was appointed chief executive of the Energy group in 2003. He holds degrees in environmental engineering. He joined the Group in 1991 at Kennecott Utah Copper’s Bingham Canyon mine as vice president, technical services. In 1995 he became vice president and general manager of Boron operations in California. He was chief executive of Rio Tinto Borax from 1999 to 2003.

3. Oscar Groeneveld (age 51)
Oscar Groeneveld has been with the Group for 29 years and was appointed chief executive of the Aluminium group in October 2004. He has qualifications in engineering, science and management. He has occupied senior roles in coal, aluminium and technology and was Copper group chief executive from 1999 to 2004. Mr Groeneveld was also an executive director of the Group from 1998 to 2004.

4. Keith Johnson (age 44)
Keith Johnson was appointed chief executive, Diamonds in 2003. He holds degrees in mathematics and management and is a Fellow of the Royal Statistical Society. He joined Rio Tinto in 1991 and has held a series of management positions, most recently as managing director of Comalco Mining and Refining.

5. Andrew Mackenzie (age 48)
Andrew Mackenzie joined Rio Tinto in 2004 as chief executive Industrial Minerals. He has a BSc (geology) and a PhD (chemistry) and was previously group vice president, BP Petrochemicals. He spent 22 years with BP primarily in the UK and North America in senior positions including head of Capital Markets in BP Finance, chief reservoir engineer with oversight of oil and gas reserves and production, head of Government and Public Affairs worldwide and group vice president Technology which included responsibility for research and development and engineering.

6. Karen McLeod (age 58)
Karen McLeod was appointed head of Human Resources in 1999. She joined the Group in 1974 at Comalco, working in Aboriginal affairs. She holds a bachelor of social work and a masters in business administration and has held senior positions in human resources, business analysis, marketing and organisation development.

7. Ian Smith (age 47)
Ian Smith joined Rio Tinto in 2002 after more than 20 years in the resource industry which commenced with CRA, a Rio Tinto predecessor company. A mining engineer by profession, Ian also has qualifications in financial administration. He was appointed Head of Technology in May 2005 having previously been managing director, aluminium smelting, with Comalco in Australia.

8. Andrew Vickerman (age 50)
Andrew Vickerman is head of Communication and Sustainable Development. His responsibilities include media, public affairs, internal and external communications, as well as oversight of Rio Tinto’s work on sustainable development and with communities. He has BA (Hons), MA and PhD degrees in economics and, prior to joining Rio Tinto in 1991, worked as a development economist and as a consultant for the World Bank and United Nations agencies. Previous roles with Rio Tinto include finance director of Lihir Gold.

9. Sam Walsh (age 55)
Sam Walsh was appointed chief executive of the Iron Ore group in 2004. He holds a bachelor of commerce degree and joined Rio Tinto in 1991, following 20 years in the automotive industry at General Motors and Nissan Australia. He has held a number of management positions within the Group, including managing director of Comalco Foundry Products, CRA Industrial Products, Hamersley Iron Sales and Marketing, Hamersley Iron Operations, vice president of Rio Tinto Iron Ore (with responsibility for Hamersley Iron and Robe River) and from 2001 chief executive of the Aluminium group.

10. Charles Lenegan (age 54)
Charles Lenegan joined the Group in 1981 and has worked in senior roles in diamonds, coal, salt and gold business units in Australia, Indonesia and Zimbabwe. He was appointed managing director, Rio Tinto Australia in March 2004. He has a BSc in economics and is a chartered accountant.

John O’Reilly joined Rio Tinto in 1987, following 20 years’ operations experience in Africa and the Middle East. A metallurgical engineer by profession, he has held a series of management positions within the Group, including director of Rio Tinto Technical Services, chief executive officer, Lihir Gold, and head of the former Gold and Other Minerals group, before being appointed head of Technology in 1999. He moved to a part time role at the end of April 2005 and was succeeded by Ian Smith.

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COMPANY SECRETARIES
11. Anette Lawless (age 48)
Anette Lawless joined Rio Tinto in 1998 and became company secretary of Rio Tinto plc in 2000. Before joining Rio Tinto, she spent 11 years with Pearson plc, five of which as company secretary. She qualified as a chartered secretary in 1989 and became a fellow of the ICSA in 1992. She also holds an MA from the Copenhagen Business School.

12. Stephen Consedine (age 43)
Stephen Consedine joined Rio Tinto in 1983 and has held positions in Accounting, Treasury, and Employee Services before becoming company secretary of Rio Tinto Limited in 2002. He holds a bachelor of business and is a Certified Practising Accountant.

EMPLOYEES
Information on the Group’s employees including their costs, is on pages 66 to 67and in Note 3 to the consolidated financial statements on page A-17, in Note 30 on page A-51 and in Note 41 on page A-64.

REMUNERATION REPORT
Introduction
The boards of Rio Tinto (the board) have pleasure in presenting the Remuneration report to shareholders. The report covers the following information:

•	a description of the Remuneration committee and its duties;
•	a summary of the Group’s remuneration policy, including a description of the policy on directors’ and senior executive remuneration;
•	a résumé of the terms of directors’ service contracts and letters of appointment;
•	details of each director’s and certain senior executives’ remuneration and awards under long term incentive plans and the link to corporate performance;
•	details of directors’ interests in Rio Tinto shares; and
•	graphs illustrating the performance of the Group, including relative to the HSBC Global Mining Companies’ Index.

Remuneration committee
The following independent, non executive directors were members of the Remuneration committee during 200

• Sir Richard Sykes (chairman);

• Sir David Clementi;

• Richard Goodmanson (from 1 December 2004);

• Andrew Gould; and

• John Morschel.

The committee met five times during 2004. Members’ attendance is set out on page 83.
The committee’s responsibilities are set out in its Terms of Reference which can be viewed on Rio Tinto’s website. They include:

•	recommending any changes to the chairman’s fees;
•	recommending remuneration policy relating to executive directors and senior executives to the board;
•	reviewing and determining the remuneration of executive directors, product group chief executives and the company secretary of Rio Tinto plc;
•	reviewing and agreeing management’s strategy for remuneration and conditions of employment for executives; and
•	monitoring the effectiveness and appropriateness of executive remuneration policy and practice.

Advisors
Jeffery Kortum, Group advisor, remuneration, attends the committee’s meetings in an advisory capacity. The chairman, Paul Skinner, and the chief executive, Leigh Clifford, also participated in meetings of the committee, except where issues relating to their own remuneration were discussed. Anette Lawless, the company secretary of Rio Tinto plc, acts as secretary to the committee but is not present when issues relating to her own remuneration are discussed.
The committee appointed Kepler Associates, an independent consultant with no other links to the Group, to provide advice on executive remuneration matters.
To carry out its duties in accordance with its terms of reference, the committee monitors global remuneration trends and developments and draws on a range of external sources of data, including publications by remuneration consultants Towers Perrin, Hewitt Associates, Hay Group, Watson Wyatt and Monks Partnership.

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Corporate governance
The committee reviewed its terms of reference in 2004 and concluded that, in the course of its business, it had covered the main duties set out in the Combined Code as attached to the UKLA Listing Rules (the Code) and Principle 9 of the ASX Best Practice Corporate Governance Guidelines, and was constituted in accordance with the requirements of the Code and the ASX Best Practice Corporate Governance Guidelines.
The board considered the performance of the committee and determined that the committee had satisfactorily performed the duties set out in its terms of reference.
The 2004 Remuneration report was approved by shareholders at the 2005 annual general meetings.

Executive remuneration policy
Rio Tinto operates in a global market, where it competes for a limited resource of talented, internationally mobile executives. It recognises that to achieve its business objectives, the Group needs high quality, committed people.
Rio Tinto has, therefore, designed an executive remuneration policy to support its business goals by enabling it to attract, retain and appropriately reward executives of the calibre necessary to produce very high levels of performance.
The main principles of the Group’s executive remuneration policy are:

•	to provide total remuneration which is competitive in structure and quantum with comparator companies’ practices in the regions and markets within which the Group operates;
•	to achieve clear alignment between total remuneration and delivered personal and business performance, with particular emphasis on shareholder value creation;
•	to tie variable elements of remuneration to the achievement of challenging performance criteria that are consistent with the best interests of the Group and shareholders over the short, medium and long term;
•	to provide an appropriate balance of fixed and variable remuneration; and
•	to provide appropriate relativities between executives globally and to support executive placements to meet the needs of the Group.

Executive remuneration
Total remuneration is a combination of fixed and performance related elements, each of which is described below.
     The performance related, or variable, elements are the short and long term incentive plans, which are tied to the achievement of personal and business performance goals and are, therefore, at risk. The rest of the elements of the package are “fixed”, as they are not at risk, although some, such as base salary, are also related to performance.
     The composition of the total remuneration package is designed to provide an appropriate balance between the fixed and variable components, in line with Rio Tinto’s stated objective of aligning total remuneration with personal and business performance.
     Excluding allowances and pension/superannuation arrangements, the proportion of total direct remuneration provided by way of variable components comprising the Short Term Incentive Plan, the Share Option Plan and the Mining Companies Comparative Plan (STIP, SOP and MCCP) described below, assuming target levels of performance, is currently approximately 68 per cent for the chief executive, 62 per cent for the finance director and between 62 and 68 per cent for the product group heads.
     Full details of the directors’ annual remuneration before tax and excluding pension contributions are set out in Table 1 on pages 76 to 78.

Base salary
Base salaries for executive directors and product group chief executives are reviewed annually, taking into account the nature of the individual executive’s role, external market trends and personal and business performance. The Remuneration committee uses a range of international companies of a similar size, global reach and complexity to make this comparison.

Short term incentive plan (STIP)
STIP provides an annual cash bonus opportunity for participants and is designed to support overall remuneration policy by:

•	focusing participants on achieving goals which contribute to sustainable shareholder value; and
•	providing significant bonus differential based on performance against challenging personal, business, and other targets, including safety.

The Remuneration committee reviews and approves performance targets for executive directors and product group chief executives annually. The executive directors’ STIP payments are linked to three performance criteria: Group financial performance, Group safety performance and personal performance. The product group chief executives’ payments are linked to Group and product group financial performance, product group safety performance and personal performance. These criteria are partly measured on an actual basis and partly on a basis normalised for fluctuations of market prices and exchange rates. The target level of bonus for these participants for 2005 is 60 per cent of salary, the same as 2004. Executives may receive up to twice their target for exceptional performance against all criteria.
STIP awards in respect of 2004, payable in 2005, are included as annual cash bonus in Table 1 on page 76.

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Long term incentives
Shareholders approved two new long term incentive plans at the annual general meetings in 2004, the Share Option Plan and the Mining Companies Comparative Plan.
     The new plans are intended to provide the Remuneration committee with a means of linking management’s rewards to Group performance. The committee regards total shareholder return (TSR) as the most appropriate measure of a company’s performance for the purpose of share based long term incentive plans and both plans therefore use TSR as a performance measure.
     The new plans maintained the expected value of total executive remuneration at approximately the same level as before, but modified the relative proportions in which share options and performance shares may be awarded. For 2004 and 2005, this has meant a shift towards performance shares being the primary long term incentive vehicle.
     Details of awards under the long term incentive plans are set out in Table 4 on page 80.

Share Option Plan (SOP)
Each year, the Remuneration committee considers whether a grant of options should be made under the SOP, and if so, at what level. In arriving at a decision, the committee takes into consideration the personal performance of each executive as well as local remuneration practice.
No options will become exercisable unless the Group has met stretching performance conditions. For grants made prior to 2004:

• two thirds of options vest when the Group’s adjusted earnings per share growth for a three year performance period is at least nine percentage points higher than US inflation over the same period, as measured by the US Consumer Price Index;

• the balance of the grant vests when growth of at least 12 percentage points above US inflation has been achieved;

• Rio Tinto performance is tested against the performance condition after three years; and

• there is an annual retest on a three year rolling basis until options fully vest or lapse at the end of the option period.

Under the rules of the new plan, approved by shareholders at the 2004 annual general meetings, vesting will be subject to Rio Tinto’s TSR, measured over three years, equalling or outperforming the HSBC Global Mining Index. Rio Tinto’s TSR is calculated as a weighted average of the TSR of Rio Tinto plc and Rio Tinto Limited. If the TSR performance equals the index, the higher of one third of the original grant or 20,000 options will vest (subject to the actual grant level not being exceeded). The full grant vests if the TSR performance is equal to or greater than the HSBC Global Mining Index plus five per cent per annum. TSR performance at this level is equivalent to the upper quartile of the index. Between these points, options vest on a sliding scale, with no options becoming exercisable for a three year TSR performance below the index.
      In addition, the Remuneration committee retains discretion to satisfy itself before approving any vesting that the TSR performance is a genuine reflection of underlying financial performance.
     Options granted under the new plan before 31 December 2006 will be subject to a single fixed base retest five years after grant if they have not vested after the initial three year performance period, with options granted after 31 December 2006 not subject to any retest. These latter options will, therefore, lapse if they do not vest at the conclusion of the three year performance period.
     Prior to any options being released to participants for exercise, the Group’s performance against the criteria relevant to the SOP is examined and verified by the external auditors. If there were a change of control or a company restructuring, options would become exercisable subject to the satisfaction of the performance condition measured at the time of the takeover or restructuring.
     Where an option holder dies in service, qualifying options vest immediately, regardless of whether the performance conditions have been satisfied. The estate will have 12 months in which to exercise the options.
     The maximum grant under the SOP is three times salary, based on the average share price over the previous financial year. Under the SOP no options are granted at a discount. Executive directors may, however, be granted options at a discount under the Rio Tinto Share Savings Plan, described below.
     Share options granted to directors are included in Table 4 on page 80.

Mining Companies Comparative Plan (MCCP)
Rio Tinto’s performance share plan, the MCCP, provides participants with a conditional right to receive shares. The conditional awards will only vest if performance conditions approved by the committee are satisfied. Again, were there to be a change of control or a company restructuring, the awards would only vest subject to the satisfaction of the performance condition measured at the time of the takeover or restructuring. These conditional awards are not pensionable.
The performance condition compares Rio Tinto’s TSR with the TSR of a comparator group of 15 other international mining companies over the same four year period. The composition of this comparator group is reviewed regularly by the committee to provide continued relevance in a consolidating industry. The current members of this group are listed at the bottom of the table of comparators on page 74.
The maximum conditional award size under the current MCCP is two times salary (previously 70 per cent), calculated on the average share price over the previous financial year.

Rio Tinto 2004 Form 20-F 73

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The following table shows the percentage of each conditional award which will be received by directors and product group chief executives based on Rio Tinto’s four year TSR performance relative to the comparator group for conditional awards made after 1 January 2004:

Ranking in comparator group

	1st-2nd	3rd	4th	5th	6th	7th	8th	9th-16th

%	150	125	100	83.75	67.5	51.25	35	-

The historical ranking of Rio Tinto in relation to the comparator group is shown in the following table:

Ranking of Rio Tinto versus comparator companies
Period	Ranking out of 16

1993 – 97	4
1994 – 98	4
1995 – 99	2
1996 – 00	2
1997 – 01	2
1998 – 02	3
1999 – 03	7
2000 – 04	11

Current comparator companies:
Alcan, Alcoa, Anglo American, Barrick Gold, BHP Billiton, Freeport, Grupo Mexico, INCO, Newmont, Noranda, Phelps Dodge, Placer Dome, Teck Cominco, WMC and Xstrata

Before awards are released to participants, the external auditors and Kepler Associates independently review the Group’s performance compared to that of the comparator companies.
Awards are released to participants as either Rio Tinto plc or Rio Tinto Limited shares or an equivalent amount in cash. In addition, a cash payment to participants equivalent to the dividends that would have accrued on the vested number of shares over the four year period will be made.
Shares to satisfy the vesting may be acquired by purchase in the market, by subscription, or, in the case of Rio Tinto Limited, by procuring that Tinto Holdings Australia Pty Limited transfers existing shares to participants.

Performance of Rio Tinto
To illustrate the performance of the Companies relative to their markets, graphs showing the performance of Rio Tinto plc compared to the FTSE 100 Index and Rio Tinto Limited compared to the ASX All Ordinaries Index are reproduced in this report. A comparative graph showing Rio Tinto’s performance relative to the HSBC Global Mining Index is also included to illustrate the performance of the Companies relative to other mining companies.

Other share plans
UK executive directors can participate in:

• the Rio Tinto plc Share Savings Plan, an Inland Revenue approved savings related plan which is open to all UK employees. Under the Plan directors can save up to £250 per month for a maximum of five years. At the end of the savings period the director may exercise an option over shares granted at a discount of up to 20 per cent to the market value at the time the savings contract is entered into. The number of options the director is entitled to is determined by the option price, the savings amount and the length of the savings contract; and

• the Rio Tinto Share Ownership Plan, also an Inland Revenue approved share incentive plan which was approved by shareholders at the 2001 annual general meeting and introduced in 2002. Under this plan, eligible employees can save up to £125 per month, which the plan administrator invests in Rio Tinto plc shares. Rio Tinto matches these purchases on a one for one basis. In addition, eligible employees may receive an annual award of Rio Tinto shares up to a maximum of five per cent of salary, subject to a cap of £3,000.

Australian executive directors can participate in the Rio Tinto Limited Share Savings Plan, also introduced in 2001, which is similar to the Rio Tinto plc Share Savings Plan.

Shareholding policy
In 2002, the committee decided that it would be appropriate to encourage executive directors and product group chief executives to build up a substantial shareholding, aiming to reach a holding equal in value to two times salary over five years. Details of directors’ share interests in the Group are set out in Table 3 on page 79.

Pension and superannuation arrangementsUnited Kingdom
UK executive directors and senior management, like all UK staff, participate in the non contributory Rio Tinto Pension Fund, a funded, Inland Revenue approved, final salary occupational pension scheme.
The Fund provides a pension from normal retirement age at 60 of two thirds final pensionable salary, subject to completion of 20 years’ service. Proportionally lower benefits are payable for shorter service or, having attained 20 years’ service, retirement is taken prior to the age of 60. Spouse and dependants’ pensions are also provided.

Rio Tinto 2004 Form 20-F 74

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     Members retiring early may draw a pension reduced by approximately four per cent a year for each year of early payment from age 50 onwards.
     Under the rules of the Rio Tinto Pension Fund, all pensions are guaranteed to increase annually in line with increases in the UK Retail Price Index subject to a maximum of ten per cent per annum. Increases above this level are discretionary.
     When pensionable salary is limited by the UK Inland Revenue earnings “cap”, benefits are provided from unfunded supplementary arrangements. The UK Government has made a number of pensions related announcements over the last two years and Rio Tinto continues to review developments in UK pensions legislation.
     In February 2005, the defined benefit section of the Rio Tinto pension fund was closed to new participants. Employees joining after that date will join the new defined contributions section of the Plan.
     No cash contributions were made in 2004 as the Rio Tinto Pension Fund remains fully funded.

Australia
The Australian executive director and senior management are members of the Rio Tinto Staff Superannuation Fund, a funded superannuation fund regulated by Australian legislation. The fund provides both defined benefit and defined contribution benefits. The executive director is a defined benefit member, accruing lump sums payable on retirement. Retirement benefits are limited to a lump sum multiple of seven times final basic salary at age 62. For retirement after 62, the benefit increases to 7.6 times average salary at age 65.
Death in service and disablement benefits are provided as lump sums and are equal to the prospective age 65 retirement benefit. Proportionate benefits are also payable on termination of employment for ill health or resignation.
Executive directors and senior management are not required to pay contributions. During 2004, Company cash contributions were paid into the Rio Tinto Staff Superannuation Fund to fund members’ defined benefit and defined contribution benefits.

Other pensionable benefits
As the increase in the percentage of total remuneration which is dependent on performance is substantial and has risen over recent years, the committee considers it appropriate that a proportion of this at risk pay should be pensionable. Annual STIP awards are pensionable up to a maximum value of 20 per cent of basic salary.
Details of directors’ pension and superannuation entitlements are set out in Table 2 on page 78.

Service contracts and compensation payments
All executive directors have service contracts with a one year notice period. Rio Tinto has retained the right to pay directors in lieu of notice. Under current pension arrangements, executive directors are normally expected to retire at the age of 60. In 2004, Leigh Clifford’s contractual retirement age was reduced from 62 to 60, with a corresponding change to his retirement arrangements. In the event of early termination, the Group’s policy is to act fairly in all circumstances and the duty to mitigate would be taken into account. Compensation would not reward poor performance.
Neither of the executive directors are proposed for election or re-election at the forthcoming annual general meetings.

Notice periods:			Remaining
Name	Date of	Notice period	service period
	agreement		if less than
			12 months

Leigh Clifford	30 March 2004	12 months	N/A
Guy Elliott	19 June 2002	12 months	N/A

External appointments
Executive directors are likely to be invited to become non executive directors of other companies. Rio Tinto believes that such appointments can broaden their experience and knowledge, to the benefit of the Group. It is Group policy to limit executive directors’ external directorships to one FTSE 100 company or equivalent and they are not allowed to take on the chairmanship of another FTSE 100 company. Consequently, where there is no likelihood that such directorships will give rise to conflicts of interests, the board will normally give consent to the appointment, with the director permitted to retain the fees earned. Details of fees earned are set out in the notes to Table 1 on page 76.

Non executive directors’ remuneration Chairman’s fees and letter of appointment
It is Rio Tinto’s policy that the chairman should be remunerated on a competitive basis and at a level which reflects his contribution to the Group, as assessed by the board. He does not participate in the Group’s incentive plans or pension arrangements. Details of his fees can be found in Table 1 on page 76.
Paul Skinner’s letter of appointment summarises his duties as chairman of the Group and was agreed by the Remuneration committee. It stipulates that he is expected to dedicate at least three days per week on average to carry out these duties. The letter envisages that Paul Skinner will continue in the role of chairman until he reaches the age of 65 in 2009, subject to re-election as a director by shareholders.

Rio Tinto 2004 Form 20-F 75

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Non executive directors’ fees and letters of appointment
The board as a whole determines non executive directors’ fees, although non executive directors do not vote on any increases of their own fees. Fees are set to reflect the responsibilities and time spent by the directors on the affairs of Rio Tinto. In the light of the increased volume of committee work following regulatory developments in the UK, US and Australia, it was decided in October 2004 to increase the fees for the chairmen of the Audit committee and Remuneration committee to £20,000 and £15,000 respectively. It was also agreed to increase the fees for Audit committee members to £10,000 and introduce a £5,000 fee for Remuneration committee members.
     Non executive directors do not participate in the Group’s incentive plans, pension or superannuation arrangements or any other elements of remuneration provided to executive directors.
     Non executive directors have a formal letter of appointment setting out their duties and responsibilities which is available for inspection at Rio Tinto plc’s registered office and annual general meeting.
     Details of non executive directors’ remuneration is set out in Table 1 on page 76.

Auditable information
Tables 1, 2, 4 and 5 comprise the auditable parts of the Remuneration report, except the information in Table 1 which is required by the Australian Corporations Act (see note 16 to Table 1).

Annual general meetings
Shareholders will be asked to vote on this Remuneration report at the Companies’ forthcoming annual general meetings.

By order of the board
Anette Lawless Secretary
Remuneration committee
24 February 2005

Table 1 – Total remuneration of directors and senior executives
Remuneration comprising salary, bonus and benefits

	Currency of	Base salary¹	Annual cash	Other benefits²		Subtotal
	actual payment		bonus¹
					2004	2003
Stated in US$’000		US$	US$	US$	US$	US$


Chairman
Paul Skinner	£	931	–	32	963	282

Non executive directors
Sir David Clementi	£	110	–	–	110	80
Leon Davis	£	275	–	–	275	245
Sir Richard Giordano	£	191	–	–	191	156
Richard Goodmanson³	£	8	–	–	8	–
Andrew Gould	£	110	–	–	110	91
Lord Kerr	£	115	–	–	115	18
David Mayhew⁵	£	122	–	–	122	91
John Morschel	A$	155	–	–	155	123
Sir Richard Sykes⁴	£	127	–	–	127	92
Lord Tugendhat⁷	£	34	–	–	34	91

Executive directors
Robert Adams⁹	£	911	789	59	1,759	1,334
Leigh Clifford⁹	£	1,428	1,288	375	3,091	2,143
Guy Elliott	£	850	855	42	1,747	1,146
Oscar Groeneveld^{6, 16}	A$ / £	776	649	485	1,910	1,223

Five highest paid senior executives below board level¹⁶
Tom Albanese	US$	635	560	1,334	2,529	1,511
Preston Chiaro	US$	492	400	963	1,855	870
Keith Johnson	£	530	517	27	1,074	655
Christopher Renwick	A$	1,000	672	1,447	3,119	1,385
Sam Walsh	A$	709	693	659	2,061	1,108

Remuneration, pension and share scheme fair values¹⁶

Rio Tinto 2004 Form 20-F 76

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Table 1 – Total remuneration of directors and senior executives (continued)
Remuneration comprising salary, bonus and benefits

Adjusted for

the term of

the

Pension

Value of long term incentive

performance

Total

Subtotal

contrib’s¹⁰

schemes¹¹

period¹⁵

remuneration

2004

MCCP¹²

SSP¹³

SOP¹⁴

2004

2003

US$

US$

Chairman

Paul Skinner

963

–

963

282

Non executive directors

Sir David Clementi

110

–

110

Leon Davis

275

–

275

245

Sir Richard Giordano

191

–

191

156

Richard Goodmanson³

–

Andrew Gould

110

–

110

Lord Kerr

115

–

115

David Mayhew⁵

122

–

122

John Morschel

155

–

155

123

Sir Richard Sykes⁴

127

–

127

Lord Tugendhat⁷

–

Executive directors

Robert Adams⁹

1,759

–

1,451

2,770

(3,081

)

2,901

2,204

Leigh Clifford⁹

3,091

465

2,646

2,503

(2,733

)

5,987

4,182

Guy Elliott

1,747

–

1,118

1,575

(1,874

)

2,578

1,591

Oscar Groeneveld^{6, 16}

1,910

249

1,212

2,203

(2,494

)

3,088

2,077

Five highest paid senior executives below board level¹⁶

Tom Albanese

2,529

1,249

3,171

(3,154

)

3,846

2,379

Preston Chiaro

1,855

816

1,247

(1,510

)

2,449

1,178

Keith Johnson

1,074

–

584

520

(807

)

1,377

655

Christopher Renwick

3,119

267

1,193

1,981

(2,287

)

4,281

2,186

Sam Walsh

2,061

228

989

1,620

(1,868

)

3,036

1,722

Notes to Table 1

1.	The total remuneration is reported in US dollars. The amounts, with the exception of the annual cash bonus, can be converted into sterling at the rate of 1US$ =£0.5463 or alternatively, into Australian dollars at the rate of 1US$ = A$1.3617, each being the average exchange rate for 2004. The annual cash bonus is payable under the STIP and this may be converted at the 2004 year end exchange rate of 1US$ = £0.519 to ascertain the sterling equivalent or alternatively, 1US$ = A$1.2847 to calculate the Australian dollar value.
2.	Other emolument items include healthcare, 401k contributions in the US where appropriate, car and fuel benefits, travel allowances to attend overseas meetings, and professional advice. Housing, relocation payments, tax equalisation adjustments and children’s education assistance are also provided for executive directors and product group executives living outside their home country. UK executive directors are also beneficiaries under the Rio Tinto All Employee Share Ownership Plan up to a maximum value of £3,000 (US$5,492) and may also contribute to the Rio Tinto Share Ownership Plan where the Company will match their personal contributions to a maximum of £1,500 (US$2,746) per annum. A payment in respect of long service leave is paid to Australian executive directors and senior executives on retirement.
3.	Richard Goodmanson was appointed a director on 1 December 2004.
4.	Sir Richard Sykes’ fees were paid direct to him up until 30 April 2004 and thereafter paid to Imperial College London.
5.	David Mayhew’s fees are paid to Cazenove Group plc.
6.	Oscar Groeneveld resigned as a director on 1 October 2004. The figures shown above relate to his total remuneration with the Group for the year. His emoluments for the period when he was a director amounted to US$1,182,341 comprising salary US$552,811, bonus US$465,237 and other benefits US$164,293.
7.	Lord Tugendhat retired on 22 April 2004 and received a gift to the value of US$3,661.
8.	Emoluments of US$53,022 from subsidiary and associated companies were waived by two executive directors (2003: two directors waived US$98,872). Executive directors have agreed to waive any further fees receivable from subsidiary and associated companies.
9.	In the course of the year, Robert Adams received US$45,763 and Leigh Clifford received US$22,881 in respect of non Rio Tinto related directorships.
10.	Includes actual contributions payable to both defined contribution and defined benefit arrangements that are required to secure the pension benefits earned in the year.
11.	The amount of long term share based compensation represents the estimated value of awards granted under the Rio Tinto Share Option Plan (the SOP), the Share Savings Plan (the SSP) and the Mining Companies Comparative Plan (the MCCP) which had not vested at 1 January 2004 or were granted during 2004. The fair value of the SOP and SSP awards have been calculated using an independent binomial model provided by external consultants, Lane Clark and Peacock LLP. The fair value of options granted to executive directors and product group chief executives under the SOP is 17 per cent of face value. The fair value of the MCCP awards has been calculated at the date of grant by external consultants, Kepler Associates based on the share price at that date and the percentage of the conditional awards expected to be paid out. The fair value of conditional awards made to executive directors and product group chief executives under the plan is 52.5 per cent of the face value. The value of long term share based compensation has been valued in accordance with the guidelines issued by the Australian Securities & Investments Commission dated 28 June 2004 (which replaced those of 30 June 2003). The non executive directors do not participate in the long term incentive share schemes.
12.	The number of conditional shares awarded to executive directors under the MCCP for the twelve month period ending 31 December 2004 are shown under Table 4 of this report. The figures in respect of the five highest paid senior executives of the Group are as follows: Tom Albanese 56,015, Keith Johnson 30,387 and Preston Chiaro 46,995 over Rio Tinto plc ordinary shares and Chris Renwick 44,171 and Sam Walsh 38,023 over Rio Tinto Limited shares. The market price of the Rio Tinto plc and Rio Tinto Limited shares were 1,276p and A$33.17 respectively.

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13.	The award of options to executive directors under the SSP during the 12 month period up to 31 December 2004 are shown in Table 5 of this report. During the same period, of the five highest paid executives, only Preston Chiaro subscribed for 490 Rio Tinto plc ordinary shares at an option price 1,277p. These options must be exercised in January 2006.
14.	The award of options to executive directors under the SOP during the twelve month period up to 31 December 2004 are shown in Table 5 of this report. During the same period options awarded to the five highest paid executives of the Group were as follows; Tom Albanese 84,020, Preston Chiaro 70,490 and Keith Johnson 43,500 over Rio Tinto plc ordinary shares and Chris Renwick 42,223 and Sam Walsh 54,400 over Rio Tinto Limited shares. The options are subject to the performance criteria explained on page 73 and are exercisable between 22 April 2007 and 21 April 2014. The exercise price was set at 1,329p per ordinary Rio Tinto plc share and A$34.406 per ordinary Rio Tinto Limited share.
15.	The fair value of unvested share grants is spread equally over the term of each plan’s performance period. This adjustment spreads the fair value of each grant of long term incentive shares over a three year period in respect of the SOP, a four year period in respect of the MCCP and the length of the relative contract period under the SSP.
16.	The following additional information is provided to meet the requirements of the Australian Corporations Act 2001: details about pension contributions, the value of long term incentive plans and accounting adjustments required to spread the value of long term incentive plans over the performance period;
	•	the total remuneration of the five highest paid senior executives below board level;
	•	the inclusion of Oscar Groeneveld’s earnings following his resignation from the board on 1 October 2004.
	•	The bases for determining the figures presented in respect of pension contributions and long term incentive plans are described in notes 10, 11 and 17 respectively.
17.	Christopher Renwick’s “Other benefits” included a statutory retirement payment of US$1,325,552 relating to his service with the Group.

Table 2 – Directors’ pension entitlements (as at 31 December 2004)

					Accrued benefits					Transfer values³

	Age	Years of	At 31 Dec	At 31 Dec	Change in		Change in		At 31 Dec	At 31 Dec	Change, net		Transfer
		service	2003	2004	accrued		accrued		2003	2004	of personal		value of
		completed			benefits		benefit net				contributions		change in
					during the		of inflation						accrued
					year ended								benefit net
					31 Dec								of inflation
					2004
UK directors			£’000 pa	£’000 pa	£’000pa		£’000 pa		£’000	£’000	£’000		£’000
			pension	pension	pension		pension


Robert Adams⁵	59	34	360	389	29		18		6,159	7,465	1,306		353
Guy Elliott	49	24	212	256	44		37		2,066	2,915	849		429


Australian directors			A$’000	A$’000	A$’000		A$’000		A$’000	A$’000	A$’000		A$’000
			Lump sum	Lump sum	Lump sum		Lump sum


Leigh Clifford^{2, 3}	57	34	12,099	12,026	(73	)	(1,881	)	12,099	12,026	(73	)	(1,881	)
Oscar Groeneveld^{2, 6}	51	29	4,661	5,079	418		21		4,661	5,079	418		21


Notes to Table 2

1.	A$76,659 and A$42,384 were credited to the respective accounts belonging to Leigh Clifford and Oscar Groeneveld in the Rio Tinto Staff Superannuation Fund in relation to the superannuable element of their 2004 performance bonus.
2.	The changes in accrued lump sums for Australian directors are before contributions tax and exclude interest.
3.	Transfer values are calculated in a manner consistent with “Retirement Benefit Schemes – Transfer Values (GN 11)” published by the Institute of Actuaries and the Faculty of Actuaries and dated 4 August 2003.
4.	During the period, Leigh Clifford’s Australian superannuable salary was determined by conversion of his sterling pay to A$ through exchange rates. The reduction in his overall accrued benefits reflects the changes in the exchange rate. The Remuneration committee has resolved that in respect of 2005 Leigh Clifford’s Australian superannuable salary will be uplifted by the same percentage used to uplift his sterling pay.
5.	Robert Adams died on 27 January 2005.
6.	Oscar Groeneveld resigned as a director on 1 October 2004. The accrued entitlement shown above represents the value at this date.

Rio Tinto 2004 Form 20-F 78

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Table 3 – Directors’ beneficial interests in shares

	1 Jan	31 Dec	10 Jun
	2004²	2004⁷	2005

Robert Adams^{3, 4}	71,764	72,243	n/a
Ashton Calvert⁸	–	–	–
Sir David Clementi	–	–	–
Leigh Clifford	2,100	2,100	2,100
	76,428	90,296	91,255
Vivienne Cox⁸	–	–	–
Leon Davis	6,100	6,100	n/a
	187,293	187,293	n/a
Guy Elliott³	40,847	42,888	43,558
Sir Richard Giordano	1,065	1,065	n/a
Richard Goodmanson	–	–	–
Andrew Gould	–	1,000	1,000
Oscar Groeneveld⁴	19,010	19,010	n/a
	23,515	32,012	n/a
Lord Kerr	–	2,300	2,300
David Mayhew	2,500	2,500	2,500
John Morschel	–	2,000	n/a
Paul Skinner	5,140	5,277	5,349
Sir Richard Sykes	2,359	2,422	2,455
Lord Tugendhat⁴	1,135	1,135	n/a


Notes to Table 3

1.	Rio Tinto plc – ordinary shares of 10p each; Rio Tinto Limited shares stated in italics.
2.	Or date of appointment if later.
3.	These directors also have an interest in a trust fund containing 8,219 Rio Tinto plc shares at 31 December 2004 (1 January 2004: 21,849 Rio Tinto plc shares) as potential beneficiaries of The Rio Tinto Share Ownership Trust. At 10 June 2005 this trust fund contained 825 Rio Tinto plc shares.
4.	Lord Tugendhat and Oscar Groeneveld retired and resigned as directors on 22 April 2004 and 1 October 2004 respectively. Robert Adams died on 27 January 2005. Leon Davis, Sir Richard Giordano and John Morschel resigned as directors on 29 April 2005.
5.	The above includes the beneficial interests obtained through the Rio Tinto Share Ownership Plan, details of which are set out on page 73 under the heading “Other share plans”.
6.	The total beneficial interest of the directors in the Group amounts to less than one per cent.
7.	Or date of retirement or resignation if earlier.
8.	Ashton Calvert and Vivienne Cox were appointed non executive directors on 1 February 2005.

Rio Tinto 2004 Form 20-F 79

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Table 4 – Awards to directors under long term incentive plans

Plan terms and conditions

Condi-

Perform-

Monetary

tional

ance

Market

Date

Market

value of

award

period

price at

award

price at

vested

Plan

1 Jan

Awarded²

Lapsed²

Vested²

31 Dec

granted

concludes

award

vests

vesting

award

2004²

2004⁸

US$’000

Leigh

MCCP

6 Mar

31 Dec

Clifford⁶

2001

37,474

–

37,474

–

2001

2004

34.406

–

MCCP

13 Mar

31 Dec

2002

34,435

–

34,435

2002

2005

39.600

–

MCCP

7 Mar

31 Dec

2003

36,341

–

36,341

2003

2006

30.690

–

MCCP

22 Apr

31 Dec

2004

–

119,581

–

119,581

2004

2007

33.170

–

108,250

119,581

37,474

–

190,357

–

Robert

MCCP

6 Mar

31 Dec

Adams⁹

2001

27,330

–

27,330

–

2001

2004

1,310p

–

MCCP

13 Mar

31 Dec

28 Jan

2002

25,064

–

25,064

2002

2005

1,424p

2005

1,651p

399

MCCP

7 Mar

31 Dec

28 Jan

2003

26,837

–

26,837

2003

2006

1,198p

2005

1,651p

427

MCCP

22 Apr

31 Dec

28 Jan

2004

–

54,372

–

54,372

2004

2007

1,276p

2005

1,651p

606

79,231

54,372

27,330

–

106,273

1,431

Guy

MCCP

6 Mar

31 Dec

21 Feb

Elliott^1&4

2001

7,845

–

6,865

980

–

2001

2004

1,310p

2005

1,759p

MCCP

13 Mar

31 Dec

2002

16,935

–

16,935

2002

2005

1,424p

–

MCCP

7 Mar

31 Dec

2003

22,923

–

22,923

2003

2006

1,198p

–

MCCP

22 Apr

31 Dec

2004

–

51,550

–

51,550

2004

2007

1,276p

–

47,703

51,550

6,865

980

91,408

Oscar

MCCP

6 Mar

31 Dec

Groeneveld⁶

2001

20,934

–

20,934

–

2001

2004

34.406

–

MCCP

13 Mar

31 Dec

2002

20,322

–

20,322

2002

2005

39.600

–

MCCP

7 Mar

31 Dec

2003

21,469

–

21,469

2003

2006

30.690

–

MCCP

22 Apr

31 Dec

2004

–

43,785

–

43,785

2004

2007

33.170

–

62,725

43,785

20,934

–

85,576

–

Notes to Table 4
1.	The Rio Tinto Group's 11th place ranking against the comparator group for the MCCP 2001 award will not generate any vesting of the conditional award to any participant who was an executive director at the time of the initial grant. Guy Elliott was not an executive director at that time and along with participating senior executives of the Group, he will qualify for a 12.5 per cent vesting based on the scales applied to conditional awards made prior to 2004.
2.	Rio Tinto plc – ordinary shares of 10p each; Rio Tinto Limited shares stated in italics.
3.	The shares awarded to Guy Elliott under the MCCP 2001 vested on 21 February 2005 but, as the performance cycle ended on 31 December 2004, they have been dealt with in this table as if they had vested on that date.
4.	The value of the award to Guy Elliott has been based on a share price of 1,759p, being the average share price of Rio Tinto plc ordinary shares of 10p each on 21 February 2005, the day the award vested to the beneficiary. The amount in sterling has been translated into US dollars at the year end exchange rate £1.9268.
5.	The shares awarded under the MCCP 2000 last year vested on 27 February 2004 but, as the performance cycle ended 31 December 2003, they were dealt with in the 2003 Annual report and financial statements as if they had vested on that date. The values of the awards in the 2003 Annual report and financial statements were based on share prices of 1,386p and A$35.24, being the closing share prices on 6 February 2004, the latest practicable date prior to the publication of the 2003 Annual report and financial statements. The actual share prices on 27 February 2004, when the awards vested were 1,440.5p and A$35.8327 with the result that the values of the awards had been understated in respect of Leigh Clifford by US$3,485, Robert Adams by US$17,335, Guy Elliott by US$2,663 and Oscar Groeneveld by US$1,975.
6.	Leigh Clifford was given a conditional award over 119,581 Rio Tinto Limited shares and Oscar Groeneveld was given a conditional award over 43,785 Rio Tinto Limited shares during the year. These awards were approved by the shareholders under ASX Listing Rule 10.14 at the 2004 annual general meeting.
7.	A full explanation of the MCCP can be found on pages 73 to 74.
8.	Or as at date of resignation or retirement if earlier.
9.	Robert Adams died on 27 January 2005 and the unvested conditional awards will now vest based on the assumption that Rio Tinto achieved median ranking on each of the outstanding performance cycles. This leads to a 50 per cent vesting in respect of the 2002 and 2003 awards and a 35 per cent vesting in respect of the 2004 award. The awards will be made to his estate at the earliest opportunity and, for the purpose of this report, have been valued using the closing price on 10 June 2005 (see also note 4).

Rio Tinto 2004 Form 20-F 80

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Table 5 – Directors’ options to acquire Rio Tinto plc and Rio Tinto Limited shares

Option type

At 1 Jan

Granted

Exercised

At 31

Option price

Market price

Date from

Expiry date

2004

Dec 2004

at date of

which first

exercise

exercisable

Robert

Adams⁶

RTPSSP

595

–

595

976p

–

1 Jan 2005

31 Dec 2005

431

–

431

876p

–

28 Jan 2005

27 Jan 2006

RTSOP

69,878

–

69,878

–

820p

1562p

27 May 2001

–

72,885

–

72,885

–

808.8p

1562p

12 Mar 2002

–

42,158

–

42,158

–

965.4p

1562p

7 Mar 2003

–

21,080

–

21,080

965.4p

–

28 Jan 2005

27 Jan 2006

100,268

–

100,268

1,265.6p

–

28 Jan 2005

27 Jan 2006

91,320

–

91,320

1,458.6p

–

28 Jan 2005

27 Jan 2006

114,014

–

114,014

1,263p

–

28 Jan 2005

27 Jan 2006

–

77,700

–

77,700

1,329p

–

28 Jan 2005

27 Jan 2006

Leigh

Clifford

RTLSSP

959

–

959

A$27.86

–

1 Jan 2005

30 Jun 2005

–

1,486

–

1,486

A$29.04

–

1 Jan 2010

30 Jun 2010

RTSOP

52,683

–

52,683

A$23.4382

–

28 May 2002

28 May 2009

59,318

–

59,318

A$24.069

–

7 Mar 2003

7 Mar 2010

29,660

–

29,660

A$24.069

–

7 Mar 2005

7 Mar 2010

241,430

–

241,430

A$33.0106

–

6 Mar 2005

6 Mar 2011

208,882

–

208,882

A$39.8708

–

13 Mar 2005

13 Mar 2012

254,132

–

254,132

A$33.336

–

7 Mar 2006

7 Mar 2013

–

179,370

–

179,370

A$34.406

–

22 Apr 2007

22 Apr 2014

Leon

Davis

RTSOP

93,978

–

93,978

A$23.4382

–

28 May 2002

28 May 2009

Guy

Elliott

RTPSSP

1,431

–

1,431

1,107

–

1 Jan 2009

30 Jun 2009

RTSOP

3,807

–

3,807

965.4

–

7 Mar 2005

7 Mar 2010

13,432

–

13,432

1265.6

–

6 Mar 2005

6 Mar 2011

61,703

–

61,703

1458.6

–

13 Mar 2005

13 Mar 2012

97,387

–

97,387

1263

–

7 Mar 2006

7 Mar 2013

–

73,700

–

73,700

1329

–

22 Apr 2007

22 Apr 2014

Director leaving the board in 2004

Oscar

Groeneveld⁷

RTLSSP

1,431

–

1,431

A$27.48

–

30 Jun 2009

RTSOP

43,851

–

43,851

–

A$23.4382

A$38.76

28 May 2002

–

33,542

–

33,542

–

A$24.069

A$38.76

7 Mar 2003

–

16,771

–

16,771

A$24.069

–

7 Mar 2005

7 Mar 2010

80,920

–

80,920

A$33.0106

–

6 Mar 2005

6 Mar 2011

73,965

–

73,965

A$39.8708

–

13 Mar 2005

13 Mar 2012

90,080

–

90,080

A$33.336

–

7 Mar 2006

7 Mar 2013

–

62,600

–

62,600

A$34.406

–

22 Apr 2007

22 Apr 2014

Notes to Table 5

1.	Rio Tinto plc ordinary shares of 10p each; Rio Tinto Limited – shares – stated in italics.
2.	Options have been granted under the Rio Tinto Share Option Plan, (“RTSOP”) the Rio Tinto plc Share Savings Plans (“RTPSSP”) and the Rio Tinto Limited Share Savings Plan (“RTLSSP”).
3.	The closing price of Rio Tinto plc ordinary shares at 31 December 2004 was 1,533p (2003: 1,543p) and the closing price of Rio Tinto Limited shares at 31 December 2004 was A$39.12 (2003: A$37.54). The highest and lowest prices during the year were 1,574p and 1,212p respectively for Rio Tinto plc and A$40.20 and A$31.98 for Rio Tinto Limited.
4.	No directors’ options lapsed during the year.
5.	Or at date of retirement or resignation if earlier.
6.	In accordance with the Plan rules, Robert Adams’ outstanding options become exercisable with immediate effect following his death. His award of options under the 2004 grant has been reduced by 17,881 to 59,819 options.
7.	Oscar Groeneveld exercised his options after his resignation as a director.

Rio Tinto’s register of directors’ interests, which is open to inspection, contains full details of directors’ shareholdings and options to subscribe for Rio Tinto shares.

Rio Tinto 2004 Form 20-F 81

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CORPORATE GOVERNANCE
The directors of Rio Tinto believe that high standards of corporate governance are critical to business integrity and performance. The following report describes how this philosophy is applied in practice.
As Rio Tinto’s three main listings are in London, Melbourne and New York, the directors have referred to the Combined Code as attached to the United Kingdom Listing Authority Listing Rules (the Code), the Australian Stock Exchange (ASX) Best Practice Corporate Governance Guidelines and the New York Stock Exchange (NYSE) Corporate Governance Listing Standards, as well as the Sarbanes-Oxley Act of 2002, when formulating this statement.
During 2004, Rio Tinto applied the principles contained in Part 1 of the Code. The detailed provisions of Section 1 of the Code have been complied with as described below. Rio Tinto also complied with the ASX Best Practice Corporate Governance Guidelines and has voluntarily adopted the recommendations of the US Blue Ribbon Committee in respect of disclosures to shareholders, as detailed in the Audit committee’s statement on page 87. A statement on compliance with the New York Stock Exchange’s Corporate Governance Listing Standards is contained below in this statement.

The board
The Companies have common boards of directors which are collectively responsible for the success of the Group and accountable to shareholders for the performance of the business. Throughout the rest of this report, they will be described as the board.
The board currently consists of 11 directors: the chairman, two executive directors and eight non executive directors. The Nominations committee continually assesses the balance of executive and non executive directors and the composition of the board in terms of the skills and diversity required to ensure it remains relevant in the current environment.

The role and responsibilities of the board
The role of the board is to provide the Companies with good governance and strategic direction. The board also reviews the Group’s control and accountability framework. The directors have agreed to a formal schedule of matters specifically reserved for decision by the board, including strategy, major investments and acquisitions. The full list is available on Rio Tinto’s website.
     Responsibility for day to day management of the business lies with the executive team, with the board agreeing annual performance targets for management against the Group’s financial plan. The board is ultimately accountable to shareholders for the performance of the business.
     To ensure an efficient process, the board meets regularly and in 2004 had eight scheduled and one special meeting. Details of directors’ attendance at board and committee meetings are set out below.
     The board has regular scheduled discussions on various aspects of the Group’s strategy and, in line with best practice, a dedicated annual two day meeting at which in depth discussions of Group strategy take place.
     Directors receive timely, regular and necessary management and other information to enable them to fulfil their duties. The board has agreed a procedure for the directors to have access to independent professional advice at the Group’s expense and to the advice and services of both company secretaries.
     In addition to these formal processes, directors are in regular communication with senior executives from the different product groups, at formal and informal meetings, to ensure regular exchange of knowledge and experience between management and non executive directors. To continue building on the formal induction programmes, which all new non executive directors undertake, they are encouraged to take every opportunity to visit the Group’s operating locations.
     The chairman also holds regular meetings with non executive directors without the executive directors present.

Board performance
In 2004, the board conducted a further formal process to evaluate its effectiveness and that of the board committees and individual directors.
Each director’s performance was appraised by the chairman and, in a meeting chaired by the senior non executive director, the non executive directors assessed the chairman’s performance, taking into consideration the views of executive colleagues. This evaluation process takes place annually and aims to cover board dynamics, board capability, board process, board structure, corporate governance, strategic clarity and alignment and the performance of individual directors. Following the evaluation, the directors believe they comply with the requirements of Clause A.6 of the Code and Principle 8 of the ASX Best Practice Corporate Governance Guidelines.

Independence
The board has adopted a policy on directors’ independence. The policy, which contains the materiality thresholds approved by the board, can be viewed on the Rio Tinto website.

Rio Tinto 2004 Form 20-F 82

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     The tests of director independence in the jurisdictions where Rio Tinto is listed are not wholly consistent. The board has, therefore, adopted the following criteria for independence: independence of management, the absence of any business relationship which could materially interfere with the director’s independence of judgement and ability to provide a strong, valuable contribution to the board’s deliberations or which could interfere with the director’s ability to act in the best interest of the Group. Where contracts in the ordinary course of business exist between Rio Tinto and a company in which a director has declared an interest, these are reviewed for materiality to both Companies.
     Applying these criteria, the board is satisfied that the majority of the directors, Ashton Calvert, Sir David Clementi, Vivienne Cox, Richard Goodmanson, Andrew Gould, Lord Kerr and Sir Richard Sykes are independent. John Morschel, who retired at the end of the 2005 annual general meetings, was also independent. Although Sir Richard Giordano, who also retired at the end of the 2005 annual general meetings, had served as a director since 1992, the strength, objectivity and nature of his contribution to board and committee discussions was fully consistent with those of an independent director. Leon Davis, a former chief executive of the Group, and David Mayhew, who is chairman of one of Rio Tinto plc’s stockbrokers, are not independent. Leon Davis also retired by rotation at the end of the 2005 annual general meetings.
     Paul Skinner was, until his appointment as chairman in 2003, an independent, non executive director in compliance with the Code. He satisfies the tests for independence under the ASX Best Practice Corporate Governance Guidelines.
     The directors’ biographies are set out on pages 67 to 69.

Election and re-election
Directors are elected by shareholders at the first annual general meetings after their appointment and, after that, offer themselves for reelection at least once every three years. Non executive directors are normally expected to serve at least two terms of three years and, except where special circumstances justify it, would not normally serve more than three such terms.

Chairman and chief executive
The roles of the chairman and chief executive are separate and the division of responsibilities has been formally approved by the board.

Directors’ attendance at board and committee meetings during 2004
Name of Director	Board		Audit		Remuneration		Committee on		Nominations
			committee		committee		social and		committee
							environmental
							accountability
	A	B	A	B	A	B	A	B	A	B

Robert Adams	9	8
David Clementi	9	8	8	8	5	4
Leigh Clifford	9	9
Leon Davis	9	9					3	3
Guy Elliott	9	9
Sir Richard Giordano	9	8	8	7			3	3	2	2
Richard Goodmanson¹	–	–
Andrew Gould	9	8	8	8	5	4
Oscar Groeneveld²	7	7
Lord Kerr³	9	8	5	5			2	2
David Mayhew	9	8	8	7					2	2
John Morschel	9	9			5	5	3	3	2	2
Paul Skinner	9	9					3	3	2	2
Sir Richard Sykes	9	8			5	5
Lord Tugendhat⁴	3	2	3	3			1	1

A = Maximum number of meetings the director could have attended
B = Number of meetings attended

1.	Richard Goodmanson was appointed on 1 December 2004
2.	Oscar Groeneveld resigned on 1 October 2004
3.	Lord Kerr became a committee member on 1 June 2004 (Audit and CSEA)
4.	Lord Tugendhat retired on 22 April 2004

Board committees
There are four board committees, the Nominations committee, Audit committee, Remuneration committee and the Committee on social and environmental accountability. Each committee plays a vital role in ensuring that good corporate governance is maintained throughout the Group. Committee terms of reference are reviewed annually by the board and the committees themselves to ensure they continue to be at the forefront of best practice and are posted on the Group’s website. Minutes of all committee meetings are circulated to the board, with oral reports at the next board meeting. All committee members are non executive directors.

Rio Tinto 2004 Form 20-F 83

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     The Audit committee’s main responsibilities include the review of accounting principles, policies and practices adopted in the preparation of public financial information; review with management of procedures relating to financial and capital expenditure controls, including internal audit plans and reports; review with external auditors of the scope and results of their audit; the nomination of auditors for appointment by shareholders; and the review of and recommendation to the board for approval of Rio Tinto’s risk management policy. Its responsibilities also include the review of corporate governance practices of Group sponsored pension funds. The committee has a number of training sessions which may cover new legislation and other relevant information. The external auditors, the finance director, the Group controller and Group internal auditor attend meetings. A copy of the Audit committee charter is reproduced on pages 88 to 89 and can be found on the Rio Tinto website.
     The Audit committee is chaired by Andrew Gould who succeeded Sir Richard Giordano on his retirement at the end of the 2005 annual general meetings. Its other members are Sir David Clementi, Vivienne Cox, Lord Kerr and David Mayhew. To comply with the NYSE’s rules on independence David Mayhew will cease to be a member of the committee with effect from 31 July 2005.
     The Remuneration committee is responsible for determining the policy for executive remuneration and for the remuneration and benefits of individual executive directors and senior executives. Full disclosure of all elements of directors’ and relevant senior executives’ remuneration can be found in the Remuneration report on pages 71 to 81, together with details of the Group’s remuneration policies. The committee is chaired by Sir Richard Sykes and its other members are Sir David Clementi, Richard Goodmanson and Andrew Gould.
     The Nominations committee is chaired by the chairman of Rio Tinto, Paul Skinner. It is the committee’s responsibility to ensure that there is a clear, appropriate and transparent process in place to source and appoint new directors. Its responsibilities also include evaluating the balance of skills, knowledge and experience on the board and iden

•	Sir Richard Sykes (chairman);
•	Sir David Clementi;
•	Richard Goodmanson (from 1 December 2004);
•	Andrew Gould; and
•	John Morschel.

•	two thirds of options vest when the Group’s adjusted earnings per share growth for a three year performance period is at least nine percentage points higher than US inflation over the same period, as measured by the US Consumer Price Index;
•	the balance of the grant vests when growth of at least 12 percentage points above US inflation has been achieved;
•	Rio Tinto performance is tested against the performance condition after three years; and
•	there is an annual retest on a three year rolling basis until options fully vest or lapse at the end of the option period.