Earnings

The unprecedented demand for our products and the global shortfall in commodities over the first three quarters of 2008, combined with the weakening of the Australian dollar in the fourth quarter of 2008, led to an increase in Rio Tinto Coal Australia's earnings and contributions to Rio Tinto in 2008 compared with 2007.

In 2008, Rio Tinto Coal Australia contributed net earnings of $US1.7 billion to Rio Tinto - a 600 per cent increase on 2007. This contributed approximately 16.7 per cent to the Rio Tinto Group's underlying earnings in 2008.

Rio Tinto Coal Australia's total revenue reached $US 5.1 billion and capital expenditure totalled $US450 million on a Rio Tinto share basis.

While 2008 earnings were strong, the outlook for 2009 is uncertain as the impacts of the downturn in global demand for coking coal in particular are felt. Demand for thermal coal remains strong, however prices are forecast to fall. 

Coal & Allied reported a profit after tax of $A804 million in 2008, a 632 per cent increase on the result of $A110 million in 2007.

This reflected very strong demand and record pricing for thermal and semi-soft coking coal that was enhanced through a change in sales mix, with a 37 per cent increase in semi-soft coking coal to maximise returns from the strong semi-soft coking coal market.

This was partially offset by higher operating costs due to increased production and higher input prices. 

Also, selling and delivery costs were higher in 2008 by $70 million, which included an increase of $100 million in royalty payments to the New South Wales Government. Demurrage costs were $42 million lower because of reduced vessel queues at The Port of Newcastle.