Rio Tinto to place up to 15 million tonnes of iron ore into the spot market in 2008

18 December 2007

Rio Tinto has announced plans to place up to 15 million tonnes of iron ore into the spot market in 2008.

Rio Tinto announced at its Investor Seminar on 26 November 2007 that it is planning substantial expansions of capacity over the next decade in its Western Australia Pilbara operations. This will allow the Group to place substantially more tonnage on to the higher priced spot market while continuing to meet longer-term contractual commitments.

Rio Tinto has been active in the spot market during 2007 and in December sold one million tonnes at US$190 per tonne. A similar volume has been sold for January shipment at an average price of US$187 per tonne. This compares with the current equivalent benchmark price of US$85 per tonne (FY2007 FOB benchmark plus spot freight).

"The iron ore market is changing", said Tom Albanese, chief executive of Rio Tinto. "Customers are demanding more transparency in pricing and more tonnes, faster than ever before. Our industry-leading growth pipeline in iron ore puts us in a strong position to benefit from stronger prices, now and in the future."

Sam Walsh, Rio Tinto's chief executive Iron Ore, said, "The bulk of Rio Tinto's Pilbara capacity is committed under long term contracts and Rio Tinto will continue to honour these contracts. At the same time the gap between the benchmark and spot prices is huge and we intend to continue to take advantage of those higher prices".

Mr Walsh said the iron ore market was extremely tight. "We produce more tonnes at lower cost, from locations closest to the growth iron ore markets. We believe in competitive and transparent pricing, and our production expansion plans give us the capacity to supply all of our markets and allow us to agree prices for all durations."

This announcement follows the 26 November 2007 Investor Seminar outlining Rio Tinto's conceptual pathway to iron ore production of more than 600 million tonnes per year, including 420 million tonnes a year from the Pilbara.

At that time Rio Tinto also announced a US$2.4 billion commitment to develop the Mesa A and Brockman 4 iron ore deposits in the Pilbara, as well as outlining plans to increase the potential capacity of its Simandou iron ore project in Guinea (West Africa) to 170 million tonnes per year.

The existing Pilbara rail and port infrastructure secures Rio Tinto's position as the premier Australian iron ore supplier, allowing it to reap maximum benefit from a strong pricing outlook, Mr Walsh said. "We own and operate three ports in two locations, and we have the capability to expand these facilities well beyond the existing levels."

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