Record earnings for Rio, but divestments on the cards

PERTH - Mining giant Rio Tinto has reported record underlying earnings and cash flows for 2011, despite increasingly unpredictable markets.

Underlying earnings reached $15.5-billion to the financial year, an 11% step up from the previous corresponding period, while cash flows from operations improved by 16% to $27.4-billion.

"Today's set of strong results was primarily driven from the impressive performance of the iron-ore operations and prices for most of our products," said Rio CEO Tom Albanese.

"Our Australian business rapidly recovered from your severe flooding from the first 1 / 2 the year. This enabled us to use advantage of the strong market conditions."

Albanese noted, however, that not all of the company's divisions were enjoying similar success.

"At our November investor seminar, we noted that uncertain macroeconomic conditions, in addition to stronger currencies in most regions and high raw material costs would cause impairment individuals aluminium business." Ball Mill for sale

Albanese stated that under these conditions, all of the value of Rio's planned improvements in cash margins from existing aluminium operations and in the successful implementation of growth projects had not been reflected in the marketplace valuation used in impairment purposes.

The amalgamation of these factors led Rio to post off some $8.9-billion of that aluminium assets in 2011, and in total, impairments were $9.3-billion, which resulted in a 59% decline in net earnings to $5.8-billion.

"As the purchasing of Alcan happened on my watch, I felt it only right to not be considered on an annual bonus this season," Albanese said.

Looking ahead, Albanese noted that development in demand for alunimium remained strong, adding, however, how the industry ended up being running surpluses in the past five years.

"Chinese production is still tracking international demand, but has shifted more for the north-west, where stranded coal is being used to generate electricity."
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Albanese declared that Rio was working diligently on raising the performance of its alunimium business, and completed a strategic review during 2011.

"This has led us to take a few difficult but necessary decisions, such as identification on the number of assets that do not fit our strategy and for that reason will be divested. We've refocused on our core assets, specifically our world-class bauxite resources, industry-leading technologies and today's portfolio of large-scale, long-life, hydro-based smelters.

"I firmly believe we have been on track to secure our position for the reason that lowest-cost producer in the aluminium industry," he added.

Meanwhile, Albanese noted that despite the uncertainty in the global economic markets, Rio would continue its investment in its high reward project portfolio, while tackling cost issues.

"I believe that we have the highest-value growth programme on the market and our iron-ore expansions within the Pilbara are the best. We are to normal to increase the ability of our low-cost iron-ore operations in Western Australia by over 50% afterwards of the first 1 / 2 of 2015, ensuring that we are ideally placed to capture the world's growing need for steel."

Albanese asserted that the growth programme was complemented by targeted mergers and acquisitions, and exploration activity to offer the company with further growth options.

"While our growth programme looks for the medium and long run, we are alert to short-term uncertainties. We percieve some moderation in market expectations for global gdp growth in recent months, yet it's still forecast to nurture by around 3.3% in 2012."

He added that increase excess of 8% in 2012 in China continued to underline the company's expectations on the "soft landing" in its key Chinese market.

"Long-term, the drivers of industrialisation and urbanization in emerging economies continue in place and will lead to an unprecedented boost in demand for metals and minerals within the next ten to twenty years."

Albanese added who's was increasingly apparent the mining industry as a whole would find it difficult to bring new supply towards market quickly enough to fulfill this heightened demand.

"We use a high-quality growth programme, strong balance sheet, proven project execution skills and leadership in innovative technologies. This provides me confidence that any of us are favourably positioned to supply shareholder value over time."