Rio Tinto Coal Australia (Rio Tinto: 100 per cent)
Rio Tinto Coal Australia manages the group's Australian coal interests. These include, in Queensland: 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). The sale of the Tarong mine to Tarong Energy Corporation was announced in 2007 and this sale took effect from 31 January 2008.
RTCA also provides management services to Coal & Allied Industries (Coal & Allied) for operation of its four mines located within the Hunter Valley in New South Wales. Coal & Allied (Rio Tinto: 75.7 per cent) is publicly listed on the Australian Securities Exchange and had a market capitalisation of A$6.5 billion (US$5.7 billion) at 31 December 2008. Coal & Allied wholly owns Hunter Valley Operations, has an 61 per cent interest in Mount Thorley Operations, a 42 per cent interest in the contiguous Warkworth mine, and a 30 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 loading terminal.
In New South Wales, Coal & Allied was an active participant in a review of port allocation set up by the state government to work with industry to achieve a long term framework. The Government of New South Wales has announced a proposal which includes long term contracts to underpin investment in port and rail; triggers to build new port capacity on demand; and a proposal for a fourth terminal, to be managed by Port Waratah Coal Services. In addition, the Federal Government has announced A$1 billion in funding to the ARTC to increase rail track capacity in the Hunter Valley.
Blair Athol produces thermal coal and sells principally to the Japanese market generally based on annual agreements. Kestrel and Hail Creek sell mainly metallurgical coal to customers in Japan, south east Asia, Europe and Central America, generally on annual agreements.
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 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.
RTCA and Coal & Allied collectively employ approximately 3,200 people.
2008 operating performance
RTCA's 2008 contribution to underlying earnings was US$1,721 million, US$1,475 million higher than in 2007. This was driven by increases in hard coking, semi-soft and thermal coal prices.
Hard coking coal production from the Queensland coal operations increased by 20 per cent in 2008 compared with 2007. Higher production was achieved at all Queensland operations despite loss of volume in January and February due to severe flooding. Total production at Blair Athol increased from 7.9 million tonnes to 10.2 million tonnes primarily as a result of exploitation of port capacity allowing additional sales. Kestrel's total production increased by 11 per cent to 4.0 million tonnes. Hail Creek total production was 6.0 million tonnes, an increase of 21 per cent.
In the Hunter Valley production also increased at all operations. Production of semi soft coal increased by one million tonnes to take advantage of stronger prices. Vessel queues in New South Wales were relatively stable in 2008.
An investment programme by the owners and operators of the coal ports at Newcastle and Dalrymple Bay on the eastern seaboard of Australia is expected to result in additional port capacity from 2010.
Rio Tinto Energy America (Rio Tinto: 100 per cent)
Rio Tinto Energy America 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. RTEA also manages the group's interest in Colowyo Coal in Colorado, US.
The second largest US coal producer based on sales volume, RTEA sells its ultra low sulphur coal to electricity generators predominantly in mid-western and southern states.
In April, RTEA obtained rights to a federal coal tract adjacent the Cordero Rojo mine with an estimated 266.2 million tonnes of in place coal. The acquisition will extend the operating life of the mine.
Rio Tinto is exploring options to sell most of RTEA.
RTEA employed 2,159 people at year end 2008.
2008 operating performance
A record for coal production and sales was posted by RTEA overall with a year end shipment total of 133.3 million tonnes. Site specific annual coal production records were set at Antelope (32.5 million tonnes), Jacobs Ranch (38.2 million tonnes) and Spring Creek mine (16.3 million tonnes). This was the result of strong customer demand for Powder River Basin coal and was supported by incremental expansions at Antelope and Spring Creek and installation of an overland conveyor at Jacobs Ranch mine. Record overburden movement volumes were also recorded at Jacobs Ranch and Spring Creek during 2008.
Energy Resources of Australia (Rio Tinto: 68.4 per cent)
Energy Resources of Australia (ERA) is a publicly listed company and had a market capitalisation of A$3.6 billion (US$2.5 billion) at 31 December 2008.
Since 1981 ERA has mined ore and produced uranium oxide at its Ranger open pit mine, 250 kilometres east of Darwin in Australia's Northern Territory. ERA also has title to the adjacent Jabiluka mineral lease, which in 2003 was put on long term care and maintenance. Ranger and Jabiluka are surrounded by, but remain separate from, the World Heritage listed Kakadu National Park, and especially stringent environmental requirements and governmental oversight apply.
The Ranger mine is the second largest uranium mine in the world and ERA is the fourth largest producer. ERA has considerable operational experience and a well established market position and is focused on maximising value from resources available on existing lease areas which are considered highly prospective.
In line with the group's strategy of seeking additional production volumes and long term expansions to supply the current favourable market environment, ERA put significant effort into achieving growth through capitalising on opportunities for expansion and extension of production including an extension of the existing Ranger mine through exploration, and installation of additional processing equipment to treat low grade and lateritic ore.
ERA's capital expansion projects to radiometrically sort low grade ores and process laterite ore were commissioned during 2008. The laterite processing plant will contribute approximately 0.88 million pounds per annum of uranium oxide to production from 2008 through to 2014. The radiometric sorter will upgrade lower grade ore and allow an additional 2.4 million pounds of uranium oxide to be produced over a five year period from 2008.
ERA employs 448 people.
2008 operating performance
ERA's 2008 contribution to underlying earnings was US$141 million, US$103 million (271 per cent) higher than in 2007. This was driven by a rise in the average realised price of uranium oxide from US$25.06 per pound to US$32.53 per pound despite sales being lower at 11.6 million pounds compared to the 2007 volume of 11.7 million pounds. The 2008 sales figures include no borrowed material.
Recovery work following 2007 flooding was successful in allowing production to return to normal levels, including access to higher grade ores in 2008 with no adverse environmental consequences. In December 2008 ERA received a A$188 million (US$130 million) settlement relating to the 2007 flooding and losses arising from Cyclone Monica and the failure of the acid plant in 2006. Further work has been completed to reduce the impact of future weather events on the mine's performance.
ERA continued to work with the Mirarr, traditional owners of the land on which the mining lease is located. The Mirarr continued delivery of a cultural awareness program to all new ERA employees and participated in environmental and cultural heritage management programmes. Increasing indigenous employment is a significant focus including the provision of training and employment opportunities. The year saw the number of indigenous employees increase from 65 to 95 (21 per cent of the workforce). Improving on this result will continue to be a focus for 2009.
Rössing Uranium (Rio Tinto: 68.6 per cent)
Rössing Uranium produces and exports uranium oxide from Namibia to power utilities globally. Rössing continues to play a major role in the Namibian economy, both in terms of GDP contribution of around ten per cent as well as education, employment and training. In 2008 the company was recognised by one of Namibia's leading business journals as a major contributor to national human capital development.
Notable achievements for 2008 were the attainment of 2.9 million lost time injury free hours and the production of nine million pounds of uranium oxide, the highest since 1988. The company continues to implement innovative practices aimed at enhancing internal efficiency.
Commissioning of the heap leach test columns was completed as part of the heap leach project. The project is expected ultimately to lower treatment operating costs, enabling lower grade of uranium oxide to be treated successfully. Capital equipment acquisitions associated with the life of mine extension project for the new mining area are in place and supported increased mining activity in 2008 as well as improved plant availability and efficiency contributing to higher uranium metal output for the year.
A pushback on the south wall in Trolley 10 area has extended the life of the phase one pit to 2011. The mine is positioned for higher volumes in 2009 and beyond.
The current approved life of mine extensions will take the mine life to 2020 and further potential opportunities exist to extend both the mine life and production volumes depending on the long term price outlook and costs of production. Activities will continue to focus on continuous net present value (NPV) growth, improving margins and creation of options from potential resources and reserves.
Studies undertaken during 2008 are showing support for an expansion plan that includes heap leaching with production up to 13 million pounds per year. This compares to the base case which is limited to existing tank leach capacity of ten million pounds per year U3O8. The current work is not yet complete and therefore has not been used for the 2009 annual life of mine plan. The current life of mine plan is based on an expanded tank leach case. It is anticipated that future plans will include heap leaching which will be supported by the current feasibility study targeted for approval mid 2009.
Rössing currently employs approximately 1,300 people.
2008 operating performance
Operating results for 2008 were much improved from 2007. Production volumes increased as a result of improved grades from the mine as well as improved availability and efficiency of both fixed and mobile plant.
Total uranium production at Rössing increased to 9.0 million pounds in 2008, compared to 6.7 million pounds in 2007, an increase of 34 per cent. The increase was due to higher grades at Rössing as well as the stripping campaign carried out in 2007 to expose ore reserves for mining.
In 2008 the mine focused on maintaining stability in the process and improving the head grade by applying a better blending strategy.