Customer Sector Group highlights

Record annual production records at 17 of our assets right across our commodity range, including record production in eight key commodities: natural gas, alumina, aluminium, copper, nickel, iron ore, manganese ore and metallurgical coal.
Significant volume growth expected in FY2008, especially in oil and gas, copper, iron ore and nickel.
Our project pipeline provides significant future value, with 33 projects in either execution or feasibility representing an expected capital investment of US$20.9 billion. We also have further medium-term options in our portfolio with capital expenditure requirements in excess of US$50 billion.

Petroleum

J Michael Yeager

	US$ million
Turnover	5,885
Underlying EBIT	3,014
Capital expenditure	1,687
Net operating assets	7,061

Underlying EBIT increased 1.5%

Development of the Shenzi oil and gas field in the Gulf of Mexico was given the go-ahead in June 2006. Shenzi will have the capacity to produce up to 100,000 barrels of oil and 50 million cubic feet of gas per day and is scheduled to come onstream by mid 2009.
The acquisition of an interest in the Genghis Khan oil and gas development in the deepwater Gulf of Mexico adds to our total oil and gas production.
Petroleum expanded its exploration portfolio in March with the addition of two highly prospective acreage positions offshore Malaysia, in the Sabah region northwest of Borneo, where water depths range from 1,600 to 2,800 metres.
Petroleum achieved a 50 per cent improvement in safety with a 2.37 total recordable incident frequency rate for FY2007, versus a rate of 4.73 the previous year.

Aluminium

Nelson Silva

	US$ million
Turnover	5,879
Underlying EBIT	1,856
Capital expenditure	369
Net operating assets	6,178

Underlying EBIT increased 55.8%

Record production of aluminium (1.3 mt) and alumina (4.5 mt) was achieved across a number of assets, which, combined with strong prices and cost control, resulted in a record Underlying EBIT contribution of US$1,856 million.
Our expansion project at Worsley in Australia was successfully ramped-up, to produce a record 2,956 mt. The Alumar Refinery expansion in northern Brazil remains in line with its revised budget and timetable.
We acquired a one-third interest in a long-life, low-cost bauxite resource and alumina refinery in Guinea, West Africa, one of the most advanced projects of its type.
The Aluminium Customer Sector Group achieved a significant decrease in the incidence of occupational illnesses in 2007.

Base Metals

Diego Hernandez

	US$ million
Turnover	12,635
Underlying EBIT	6,905
Capital expenditure	835
Net operating assets	10,954

Underlying EBIT increased 27.9%

A record Underlying EBIT of US$6,905 million, due largely to record copper production of 1,250.1 kt from ongoing operations, and continuing high commodity prices.
Spence, our new copper mine in Chile, began operating. Combined with our other mines, including Escondida and Olympic Dam, Spence made us the world’s second largest producer of copper in FY2007.
Spence also delivered outstanding safety performance, receiving a safety award from the Chilean National Mining and Geology Service (Sernageomin).
The Escondida Sulphide Bioleach Project harvested its first copper cathodes and will increase the production of electro-won cathodes by 180,000 tonnes per year (100 per cent) when at full capacity. The new seawater desalinisation plant, a milestone in the industry, produces 525 litres per second of industrial water that is transported through a 170 kilometre pipeline to the site, located 3,200 metres above sea level.

Diamonds and Specialty Products

Alberto Calderon

	US$ million
Turnover	893
Underlying EBIT	261
Capital expenditure	144
Net operating assets	1,759

Underlying EBIT decreased (24.3)%

EKATI in northern Canada is transitioning from open-pit mining to underground. The Koala Underground project is on time and on budget with first production anticipated in the second quarter of FY2008.
Diamonds exploration makes good progress in Angola.
We captured access to substantial acreage in the world’s most sizable potash basin in Saskatchewan, with evaluation at the Corridor Sands project in Mozambique to progress next year.
The Diamonds and Specialty Products Customer Sector Group achieved a 30 per cent reduction in classified injuries, 23 per cent reduction in classified injury frequency rate and a 45 per cent reduction in total recordable injury frequency rate.

Stainless Steel Materials

Jimmy Wilson

	US$ million
Turnover	6,901
Underlying EBIT	3,697
Capital expenditure	1,509
Net operating assets	6,598

Underlying EBIT increased 310.3%

Nickel production from the combined Yabulu Extension and Ravensthorpe projects in Australia is expected in the first quarter of CY2008 with the projects tracking to schedule.
We responded strongly to increased market demand with nickel production increasing by 7 per cent over the previous 12 months to 186,300 tonnes.
Strong demand conditions emphasise our imperative of delivering on existing and new projects including developing our new joint venture with Norilsk in Russia and furthering studies in other areas prospective for nickel, particularly South East Asia and South America.
Our approach to community development at Cerro Matoso, Colombia, is recognised as leading practice and lessons learned are being used in Guatemala and the Philippines.

Iron Ore

Ian Ashby

	US$ million
Turnover	5,524
Underlying EBIT	2,738
Capital expenditure	1,186
Net operating assets	4,191

Underlying EBIT increased 7.9%

Strong market conditions and the successful integration of expansion capacity resulted in record production and sales at the Western Australian iron ore operations.
Rapid Growth Project 4, which will increase capacity at the Western Australian iron ore operations to 155 mtpa by the first half of CY2010, was approved.
Construction of a third pellet plant at Samarco in Brazil continued on schedule and on budget. The project will increase annual iron ore pellet production capacity to more than 21 mtpa and is expected to be completed in the first half of CY2008.
A healthy lifestyle program called ‘The Biggest Winner’ has been launched for Western Australian iron ore workers and their families in Newman and Port Hedland. The program is facilitated by an external provider and, to date, 1,000 employees and family members have signed on.

Manganese

Peter Beaven

	US$ million
Turnover	1,244
Underlying EBIT	253
Capital expenditure	72
Net operating assets	590

Underlying EBIT increased 91.7%

All time record production levels were recorded for both ore and alloy. Production for ore was 14 per cent higher than FY2006 and alloy was 17 per cent higher, due to increased reliability and productivity and stable operations.
Second highest ever Underlying EBIT was achieved for the Manganese Customer Sector Group in FY2007.
The expansion project at the Groote Eylandt ore mine progressed to feasibility stage and the expanded capacity is expected to be on stream by the end of December 2008.
The percentage of employees in our South African operations attending voluntary confidential counselling and testing for HIV and AIDS increased to 71 per cent (target 60 per cent).

Metallurgical Coal

Dave Murray

	US$ million
Turnover	3,769
Underlying EBIT	1,249
Capital expenditure	555
Net operating assets	2,173

Underlying EBIT decreased (31.9)%

The demand for seaborne high-quality metallurgical coal remains solid with year on year volume growth, although prices retreated from their peak levels of two years ago.
Annual production records were delivered at Queensland Coal in Australia to meet customer needs, with Poitrel having commenced production in October.
Record throughput at our Hay Point Terminal, which was being successfully expanded to 40 mtpa capacity. Further expansion will see throughput capacity increase to 44 mtpa by the end of CY2007.
A$65 million was committed over five years to low emissions technology development through the Australian coal industry’s COAL21 Fund. Going forward, our contribution will increase to in excess of A$100 million over 10 years.

Energy Coal