Report of the Rio Tinto Annual General Meeting 2003

Report of the Rio Tinto Annual General Meeting 2003

Queen Elizabeth Conference Hall,
London UK

Thursday 17th April 2003 11am -12.45pm

This is a report written by a Partizans member, and is in brief note form. It is intended for information purposes only.

The meeting opened with a series of images of Rio Tinto’s operations world wide (similar to those in its Annual Review) to a background of soothing music no captions or voiceover to give any locations, context or explanation.

Chairman’s address by Sir Robert Wilson (RW) This was almost a straight reading of the address in Annual Review (p2-3):

* Rio Tinto’s cautious remarks last year about future markets and prices had proved correct.
* Except for iron ore and gold, prices and/or demand have stagnated or dropped.
* Most Rio Tinto group companies showed lower profits due to lower global prices. Nevertheless, 2002 was Rio Tinto’s second best earning performance ever, with record cash flow of nearly US$4,000 million. This is due to the “quality of Rio Tinto’s assets and the commitment of its employees”
* Diamonds are going to become a more important part of Rio Tinto’s portfolio in future. A new diamond mine (Diavik) is opening in Canada.

* Growing importance of China, where there is 12% growth rate and high demand for iron and copper. This will help future profits (but won’t last forever).

* Rio Tinto is proud of the contribution it made to the World Summit on Sustainable Development and its role as chair of the International Council on Mining and Minerals (ICMM).

* A new version of ‘The Way We Work’ has been produced to reflect best practice.

* Geopolitical tensions will probably cause a slow recovery of prices.

* The key to Rio Tinto’s success is large-scale, long-life, low cost operations. This strategy has remained unchanged over the last 10 years. “Our aim is the maximisation of shareholder value and consistency in the long term.”

Reorganisation of Rio Tinto’s ‘groups’: Gold will now be partly covered by Copper and part by Exploration.

This is Robert Wilson’s last AGM. He is retiring after 8 years. He had "enormously enjoyed the job, with all its plusses and minuses. But I've never been quite sure on which side of the ledger to put these annual general meetings".

Wilson welcomed Paul Skinner (ex head of Shell) as Rio Tinto’s new chairman, but said he will not be an executive chairman (as he was). Leigh Clifford remains Chief Executive.

Chief Executive’s address: Leigh Clifford (LC) Again, much the same as in Annual Review (p4-5).

* Improved performance overall, due to increased efficiency. Australian production has increased, notably at Hamersley. * Margins are strong across all product groups. * Clifford picked out a number of examples where there had been increased investment and/or new technology, including Robe River in Western Australia and Pilbara. “The new ‘Hismelt’ iron technology will revolutionalise the iron ore business.”

* Increased investment in Escondida mine in Chile the world’s biggest copper producer

· The Diavik mine will double Rio Tinto’s income from diamonds and produce 8% of the world’s supply. * Hail Creek (coal) in Queensland, Australia is “making good progress”.

* The Comalco alumina refinery is on track for 2005 * Strong demand for iron ore from China is behind expansion plans or increased production at West Angelas, Hamersely and Yandicoogina operations in Australia.

Proposal of Resolution 10, on director’s remuneration prompted several angry shareholder questions:

· Why are directors’ fees paid in sterling or Aus$ but profits etc. quoted in US$? (Wilson agreed that the current exchange rate meant a contraction in UK dividends, but people were paid in currency of their nationality) · Why have fees for non-executive directors been increased to £50,000 and executive directors getting 22% more? (Wilson claimed this was a “one-off anomaly” due to “ a change in system”. Increased remuneration reflected increased work and responsibilities) · Dr Richard Sykes (chair of Rio Tinto’s Remuneration committee) was asked by several shareholders to justify his statement in the UK press that “private shareholders should have no more business in running the company” - or else to resign.

Resolution 11 concerned the Directors’ and auditor’s reports and financial statements for 2002 · (Albert Beale, shareholder): “Where in the accounts does it state how much Rio Tinto has set aside to settle outstanding legal cases against the company? (Wilson): The Board has been advised that there will be no material cost to the company. Liabilities are negligible. The Auditor pointed out that there was a disclaimer in Financial Report (p185) about future legal costs.

Resolution 12: Other questions · (Snowy Jones) re Capper Pass claimants in the UK. There is a huge payoff for the chairman, but many men in Hull are now dying of cancer and children had contracted leukaemia, due to Rio Tinto’s past operations there. The claims had not been settled. (Wilson): Rio Tinto has set up an independent review board to investigate these allegations, but 6 years later no scientific evidence has been submitted to the Board. Claims were only submitted at the last minute this year. (Ms. Jones): Getting the evidence is a complex business. There have been synergistic effects throughout the operations.

· (Jacqueline Membup, Lihir community, PNG) expressed fears for her children due to waste disposal (by Subarmine Tailings Disposal) from Rio Tinto’s Lihir gold mine. (Wilson): There is no alternative means of disposal of mining waste for Lihir as this is a small island, so no possibility of disposal on land. Lihir’s waste disposal is being “seriously and sensitively addressed by independent researchers”. Three separate research teams are confident that Lihir’s waste disposal method does not represent any risk”. (Clifford): The tailings are disposed of in the deep ocean at over 120m. This mining operation was approved under Australian and New Zealand environmental procedures. STD is “quite a benign procedure”. (Ms Mendup): The fish are dying on the reef. (Clifford) maintained that Lihir’s waste dumping was safe and he invited Jacqueline and other PNG visitors to discuss this further with him after the meeting.

· (Yuyun Indradi, DTE/AMAN): Poboya, Central Sulawesi, Indonesia Community is concerned that a gold mine will be opened in this Forest Park where they live and which protects water supply for the nearby city of Palu. Rio Tinto still has the concession rights. Local government and parliament have rejected plans to mine there. The Forestry minister has confirmed Poboya will remain a Protected Area. Mr Indradi drew attention to yesterday’s demonstration at the minesite and read out part of community’s statement. “When will Rio Tinto return this land to the people?” (Wilson): “I am surprised that this question keeps popping up. We haven’t been there since 1999. We have no intention of mining there. Rio Tinto isn’t there and won’t be there. If another company exploits the area, that is their business.”

· (Lyndon Ormond-Parker) read out a statement on the Jabiluka uranium project, on behalf of the Mirrar people of Kakadu. They see the mine as a threat to their culture and lives. They want a written statement and legal commitment from Rio Tinto that it will not develop this mine. Mr Ormond-Parker cited a commitment made by Wilson in a BBC World TV interview in Aug 2002, to restore the area by back filling. Will this commitment still stand after Wilson retires? (Wilson): “Rio Tinto has repeatedly expressed its commitment in public not to develop the mine without the consent of the traditional owners….No, that commitment does not go with me.”

· (Geoff Nettleton) noted that Wilson said Rio Tinto’s staff had been given new human rights guidelines. When would Rio Tinto provide these to shareholders? Mr.Nettleton also expressed grave concern about Rio Tinto’s involvement in countries with poor human rights records, including Indonesia, Laos, Turkey and China. How can the HR Guidelines be implemented in these countries. What assurances can Wilson give that Rio Tinto will not get involved in China-occupied Tibet? Wilson said he did not want to get drawn into discussing China-Tibet issue, but the company would not be involved in Tibet under Chinese rule.

· (Unknown shareholder) asked what Rio Tinto was doing to protect its staff in operations in Zimbabwe. Wilson acknowledged that there had been “problems operating in Zimbabwe and providing assurances for staff” while “support was provided to staff if their human rights are threatened”.

· (Unknown shareholder) quoted a statement by Barry Cusack of Bougainville Copper Ltd, that the company is involved in discussions with the government about disposal of assets. Is the aim to avoid litigation for Rio Tinto’s environmental crimes on the island? Wilson replied that he was not aware of any discussions. (Clifford): “The process is caught up in the peace process. For 13years the company hasn’t had access to the mine…. it hasn’t had any control over the site or waste management”. Any discussions would be with the provincial or central government. These are still at a very preliminary stage. He doesn’t have the details. Rio Tinto has no plans to re-open the mine. · · (Maggie Culver) Tio Tinto is prospecting in several places in Turkey along with a local company, Anatolia Minerals One of these prospects threatens an important Protected Area which is a sacred region for local people, covered by vital forests. The communities are resisting mining plans. (Wilson): “These people have not approached us yet with their concerns. This would be sensible as we are only at the exploration stage”.

· (Wayne Holland, Kennecott, Utah, USWA) referred to a statement in the Rio Tinto report (p14) that “new safety and protection records have been set” at the operations.. He said the smelter was held together with bailer twine and duct tape. 1,000 employees have signed a statement that their health has deteriorated. The safety record is atrocious. Will Rio Tinto direct the management to tackle this? (Clifford) said he couldn’t comment on Nucor who would be taking over the management in the near future. Rio Tinto has invested nearly US$3bn since it took over Kennecott (in 1989). The union and company had reached an impasse, but now new working agreements have been agreed. It is true that 2 people had been burned and that was “two too many”. But this is unusual. Rio Tinto sets very high safety standards and is making tremendous efforts towards safety.

· (Ralph Astorga, Kennecott USWA representative) described how he had worked for the company for 41 years and was getting only a US$14,000 pension. “Now the people taking over here have come from Freeport. We are being treated as Indonesian not as Americans”. Wilson: “We are in negotiation with the unions” He invited both union reps. to talk afterwards (Certainly one went to the reception later).

· (Richard Harkinson) also drew attention to statements about Rio Tinto’s guidelines to managers on human rights. Mr Harkinson asked how this squared with human rights violations at the Grasberg gold/copper mine. He called for an independent review on human rights there especially in view of recent revelation by Rio Tinto’s partners Freeport McMoRan that it had paid US$5.6 million to the Indonesian military who had caused gross violations. Wilson replied that, although Rio Tinto had made considerable expenditure in the Grasberg mine, it is not the operator Freeport is. Freeport does take human rights seriously. The respected lawyer Gabriel McDonald is on Freeport’s board as an advisor. (Wilson refused to comment on payments to the military).