Coal & Allied Industries Limited Annual General Meeting Chairman's Address.

Business Editors

LONDON--(BUSINESS WIRE)--April 24, 2001

Rio Tinto (NYSE: RTP). The following was released in Australia earlier today by Rio Tinto's 72.7 per cent owned subsidiary Coal & Allied Industries Limited.

The year 2000 saw Coal & Allied undergo some of the most significant and far-reaching changes in our 150-year history in the Hunter Valley.

Your company achieved a record profit, undertook major strategic expansions and reached new workplace agreements with employees to become the pre-eminent coal producer in New South Wales.

As a result of these changes, the company now manages an annual output of more than 37 million tonnes of coal and directly employs approximately 2000 people.

Total production for the year was 13.0 million tonnes, up 1.1 million tonnes compared with 1999. Total sales were 13.4 million tonnes, up 1.5 million tonnes.

Last year consolidated profit after tax was up more than 80% to A$123.5 million from A$67.6 million in 1999. The consolidated profit after tax but before abnormal items was A$90.5 million compared with A$71.3 million in 1999.

The profit was also helped by the weakness of the Australian dollar compared with the US dollar.

Throughout 2000, the coal market firmed compared with 1999 with upward pressure on prices. By year's end spot prices for thermal coal had firmed to equal term contract prices. 2001 has begun very well with prices rising sharply. I will expand later on current market conditions.

NEW WORKPLACE AGREEMENTS

Last year, Coal & Allied achieved two very significant breakthroughs in our long running effort to obtain world class working arrangements at our mines.

In August, the company signed a new collective agreement with employees at Mount Thorley Operations. Supported overwhelmingly by employees, the company believes this new agreement will become the benchmark for productive working in the coal industry.

In October, Hunter Valley Operations achieved a very similar agreement with its employees.

These new agreements allow Coal & Allied the flexible and modern working arrangements we need to be internationally competitive.

Improved productivity resulting from these new agreements enables the company to continue to pay the very high incomes enjoyed by coal miners in the Hunter Valley and still offer employees greater job security.

A NEW ERA OF GROWTH

Having reformed our work and management practices over the last three years, greater confidence in our competitiveness allowed long term decisions to be made.

In the final weeks of 2000, Coal & Allied undertook its most significant strategic expansion in many decades.

With the support of our major shareholder Rio Tinto, the company purchased the Lemington mine in the Hunter Valley from the Exxon Corporation and signed an agreement to buy all the Australian coal assets of the Peabody group for a combined total investment of A$1.2 billion.

These acquisitions mean that Coal & Allied now has an unrivalled resource base in the Hunter Valley with reserves to sustain open cut mining at current or greater rates for more than 20 years.

EMPLOYEE HEALTH AND SAFETY

Coal & Allied has set itself a target of achieving zero injuries in the workplace.

During 2000 we made substantial progress towards achieving our goal. Overall there were 20% fewer injuries recorded compared with the previous year and some areas of the business achieved a 50% reduction.

Coal & Allied believes that all injuries are preventable and our performance in 2000 shows that with sustained effort it is possible to sharply reduce injuries in the workplace.

With this is mind, we recently embarked on a major program to upgrade electrical systems for plant and equipment, some of which was installed more than 20 years ago.

More than A$3 million was spent on new isolation standards for electrical and mechanical equipment, which greatly enhanced safety levels.

Today Coal & Allied's mines are the first mines in the Hunter Valley to have lockout installed so that every employee working on equipment has a personal lock applied so that the equipment cannot be started until the individual removes his lock.

Our aim always is not to be simply legally compliant but to ensure everyone who comes to work goes home safely. We cannot achieve this without the commitment and active participation of all our employees. The SMAT system designed by DuPont and adopted by us is designed to engage our workforce and engender a real change in behaviour.

Turning now to our various mine sites,

MOUNT THORLEY OPERATIONS

In 2000 Mount Thorley Operations produced 4.4 million tonnes of soft coking and thermal coal for use in power stations and steel mills, predominantly in East Asia.

Following the signing of the new collective agreement in August, productivity in the second half of the year was 49 % higher than for the same period in 1999.

As a result of the benefits flowing from the new agreements, the economic life of the mine has been extended by approximately five years to 2012.

With a strong focus on safety, Mount Thorley achieved a 68% reduction in the number of injuries compared with the previous year and exceeded company targets for safety improvement.

HUNTER VALLEY OPERATIONS

During 2000, the Hunter Valley No.1 and Howick assets were fully integrated to form the Hunter Valley Operations. The Carrington deposit was developed in the second half of the year and began delivering coal in early 2001.

On 31 March this year the adjoining Lemington mine was absorbed into Hunter Valley Operations to produce a single mine delivering more than 13 million tonnes to the export market.

Following the Lemington integration, Hunter Valley Operations now employs around 700 people. With the new collective agreement in place until late 2003, Hunter Valley Operations is now capable of delivering world class levels of performance.

THE FORMER PEABODY ASSETS

The Peabody assets include the Ravensworth, Bengalla, Warkworth and Narama mines in the Hunter Valley and the Moura mine in Queensland. The purchase was completed in late January 2001.

The former Peabody mines in the Hunter produce a combined total of approximately 15 million tonnes of coal annually.

The process of fully integrating the mines into Coal & Allied is well underway. A new management structure is in place and Peabody's administrative functions are being amalgamated with Coal & Allied's shared services.

In bringing the two companies together, our management is working to maximise the strengths of both organisations and is sensitive to the needs of all employees in this period of transition.

We are also working closely with our various joint venture partners to protect shareholder value going forward.

ENVIRONMENTAL SERVICES 

Throughout 2000, Coal & Allied continued to apply the best contemporary environmental practices across all our operations. We recognise the importance that the community places on achieving environmental excellence and are committed to balancing economic growth with environmental protection.

Our environmental policy and management systems were continually upgraded throughout the year allowing the company to lower water use, minimise impacts from noise, expand our rehabilitation programs and reduce energy consumption.

In 2000 our commitment to the environment was recognised at the NSW Mineral Council's Premier's awards for Environmental Excellence.

COMMUNITY RELATIONS 

Coal & Allied is strongly committed to the communities of the upper and lower Hunter Valley. We recognise that community support for our work is an essential part of our role.

Our extensive community relations programs focus on strengthening the long-term sustainability of the region and assisting Hunter Valley people to respond to community needs.

The Coal & Allied Community Trust was established in 1999 with a fund of A$3 million dollars to assist people in the Upper Hunter address economic development, education and social issues. After 18 months the Trust has committed nearly A$1.5 million to ten community led projects. The projects range from school based programs to agribusiness and economic development.

Coal & Allied also continued to work in close consultation with the Aboriginal communities of the Hunter Valley to ensure sites of significance are protected.

Through our strong relationship with the Wonnarua people, Coal & Allied has developed policies which successfully balance economic, cultural and archaeological needs and allow mining operations to continue with the support of local Aboriginal people.

We believe these initiatives will help strengthen our relationship with the broader community and it is in our interests to operate within a strong economic and sound environment in the Upper Hunter

MARKETING

For the past several years the market for coal has been dynamic with price falls in 1999 and 2000 of approximately 30%, which reflected the global oversupply of thermal and coking coal.

The company responded to the difficult trading conditions in 2000 by continuing to focus on cost reduction and improved productivity from existing resources rather than seeking volume increases.

There was more positive news recently with Australian producers achieving a 20% increase in the headline price of thermal coal to Japanese customers. Spot prices rose sharply in late 2000 and early 2001 and are currently equal to the renegotiated contract prices.

The outlook remains positive with global growth and consequent energy demand for coal fired electricity continuing steadily. This also reflects the competitiveness of coal with alternative energy fuels such as oil or gas.

Going Forward

The changes and achievements of 2000 transformed Coal & Allied into a much larger, more productive and more efficient company, which is now a significant contributor to global coal markets.

The company has taken on new responsibilities and obligations to employees, customers, shareholders and the community.

Throughout 2001 we will be working to integrate successfully the people and the mines acquired during the year while maintaining a strong focus on cost control, employee safety and shareholder return.

We will strive to ensure Coal & Allied becomes the preferred supplier to customers, the preferred developer and operator to government and communities, the preferred employer to people who seek challenge and recognition, and a preferred investment opportunity for shareholders.