A vigorous operational performance in a challenging environment plus strong global economic growth resulted in record earnings in 2006 for the third consecutive year.
Rio Tinto reported underlying earnings of US$7,338 million which were US$2,383 million or 48 per cent above 2005. Net earnings were US$7,438 million, up 43 per cent compared with US$5,215 million in 2005.
Record production volumes occurred in several product groups, including iron ore, alumina, US coal and molybdenum. The effect of price movements on all major commodities was to increase earnings by $3,068 million.
Cash flow from operations was a record US$11,196 million, 36 per cent higher than 2005. Capital expenditure was $3.9 billion, reflecting continuing investment in growth based on a quality portfolio of assets.
Prices for major products remained strong throughout the year and were considerably higher than those experienced in 2005. Average copper prices were 84 per cent higher whilst average aluminium prices were 35 per cent higher.
The strength of the global iron ore market was reflected in the 19 per cent increase in the benchmark price, mainly effective from 1 April 2006. The seaborne thermal coal market was also strong, although weakening in the second half.
Excluding the effects of inflation, higher costs reduced earnings by US$741 million, of which US$77 million was the result of higher energy costs.
Chairman Paul Skinner said Rio Tinto is investing heavily in future growth options from its broad portfolio of assets. He drew attention to recent investments in major copper projects.
"Looking to 2007, there are a number of uncertainties in the global economy, not least the direction of inflation and interest rates in major economies. We expect some moderation of global economic growth, although confidence in Japan and Europe is increasing.
"Growth in China, which is critical to the demand outlook for many of our products, remains strong and well balanced. We continue toview the overall outlook for commodities as positive, with prices remaining well above their long run averages in 2007."
Chief executive Leigh Clifford said operations generally recovered well from the effect of adverse weather conditions early in the year, particularly the cyclones which hit northern Australia.
"The operating and project environment for mining companies remains challenging, with shortages in key mining supplies and skills leading to continued industry wide cost pressures and delays. We remain focused on meeting these challenges through improving productivity and the spread of best practice across the Group, and are alert to the need not to lock in today's cost levels for the future.
"Our substantial investment programme of value enhancing projects remains on track, including a major expansion of our iron ore business in Australia." With the results a US$860 million expansion of the Cape Lambert iron ore port in Western Australia was announced.
The 2006 the safety record improved for the seventh consecutive year. Regrettably, three employees lost their lives at managed operations. The Group improved its lost time injury frequency rate by 11 per cent and its all injury frequency rate by 18 per cent.
To view our results presentation webcast, to join the North American conference call, or to view the press release itself in full, please view our Annual results page.