Operations & financial report

Kennecott Utah Copper

(Rio Tinto: 100 per cent)

Kennecott Utah Copper (KUC) operates the Bingham Canyon mine, Copperton concentrator and Garfield smelter and refinery complex, near Salt Lake City, US. KUC is a polymetallic mine, producing copper, gold, molybdenum and silver. As the second largest copper producer in the US, KUC supplies more than 13 per cent of the nation's annual refined copper requirements and it employs approximately 1,800 people.

KUC joined the Climate Registry, a voluntary reporting system for greenhouse gas emissions. KUC will continue to report publicly on greenhouse gas emissions associated with the operations. This can be found in the Sustainable development section of this report.

2007 operating performance

KUC has been operating for over 100 years, was Rio Tinto's most profitable mine in 2007 and has extensive optionality for future development. KUC is well positioned on the industry cost curve, benefiting from significant co-product revenues from gold and molybdenum. It continues to demonstrate operating flexibility by delivering high volumes of molybdenum during a continuing period of exceptionally high prices. Building on the foundation of Rio Tinto's Improving performance together (IPT) methodology, KUC continued to improve its knowledge of molybdenum mineralisation in the orebody to optimise production. The bulk flotation upgrade at the concentrator started in 2007 with an expected capital cost of US$88 million. The project, scheduled for completion in June 2008, is expected to increase recovery by around two per cent and increase concentrate grade by four per cent.

KUC continues to be one of the most favourable brownfield environments of all Rio Tinto's mines and retains significant options for further mine life extensions. Over the past two years brownfield exploration has uncovered a world class molybdenum deposit sitting underneath the Bingham open pit, additional porphyry mineralistion below the southern pit wall at depth and multiple targets with further potential both in the immediate three to four kilometre wide orbit of the Bingham pit and within 20 kilometres in the Oquirrh Range.

The Keystone project continues to evaluate pit expansion options while concurrently establishing underground access, through the dewatering and rehabilitation of an existing mine shaft to provide access for an underground drilling programme. Additional option analysis to accelerate the underground schedule through shaft and level access design will be conducted in 2008. Current open pit options indicate that there is good opportunity to expand mining in the southern area of the pit. Current ore reserves will support open pit operations until 2019 and this could be extended to 2036 through a combination of underground and open pit options.

KUC is progressing with a feasibility study to advance the molybdenum autoclave process (MAP), which will convert molybdenum concentrates into final saleable products. KUC currently produces a high grade molybdenum concentrate that is shipped to a third party roaster for conversion to metallurgical grade molybdenum products. The proposal is to produce enhanced chemical grade products on a brownfield site west of the smelter. The main economic drivers for the project are attracting a chemical grade premium with contract floor pricing and higher molybdenum recoveries. A decision whether or not to proceed with construction will be made in the first quarter of 2008, with operations commencing in the first quarter of 2010. The estimated capital cost to construct the facility is US$169 million with an additional US$106 million to expand the plant in 2014 to match a predicted increase in mined molybdenum production.

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