Rio Algom announces strong first quarter

Rio Algom

News

Contact:
Corey B. Copeland
Vice-President
Corporate Affairs
416.365.6863

FOR RELEASE: APRIL 20, 2000

RIO ALGOM ANNOUNCES STRONG FIRST QUARTER RESULTS

Toronto, Ontario – Rio Algom today announced net earnings of $15 million for the first quarter of 2000, up from $1 million for the same period in 1999. After deducting dividends on preferred securities and financing costs, earnings per common share were $0.16 compared to a loss of $0.09 a year earlier. Strong sales growth and higher metal prices drove the improvement. The company’s average realized copper price was US$0.81 per pound versus US$0.66 per pound in the first quarter of 1999.

Revenue was $570 million, up 12% from $511 million in the first quarter of 1999, while operating profit rose sharply to $45 million from $14 million a year ago. The company’s operations generated $18 million of cash compared to $34 million a year earlier, as higher levels of working capital more than offset the favourable impact of increased net earnings.

Pat James, President and Chief Executive Officer said: "Our net earnings this quarter were the highest in over two years, supported by a strong operating performance and improving prices. We beat our targets for copper production and cash costs and our metals distribution business had one of its best quarters ever."

Accomplishments in the first quarter of 2000 included:

Producing 116 million pounds of copper, up 9% from a year ago;
Reducing average cash costs for copper to US$0.44 per pound, an 8% improvement from the first quarter of 1999;
Recording the best quarter in five years from metals distribution, where operating profit was $21 million, almost double the prior year’s level;
Advancing Antamina on schedule and on budget, with engineering close to 90% complete and construction reaching the 30% mark; and,
Commencing work on the Spence feasibility study.

Copper Mining

(Rio Algom’s copper mining operations include wholly owned Cerro Colorado in Chile, the company’s 33.6% interest in Highland Valley Copper (HVC) in British Columbia and its 25% interest in the Alumbrera copper-gold mine in Argentina. As the company’s investment in Alumbrera is accounted for using the equity method, Rio Algom records its share of Alumbrera’s earnings or losses on its income statement, but does not include Alumbrera in revenue or operating profit.)

Revenue from Cerro Colorado and the company’s share of HVC was $89 million in the first quarter of 2000, up 22% from the same period a year ago. Higher copper prices and an 11% increase in sales at Cerro Colorado more than offset lower sales at HVC. Production at HVC exceeded sales by 11 million pounds as the mine restored inventories after resuming operations last fall.

Operating profit from these operations was $18 million, up from $1 million a year earlier, reflecting higher revenue and a 11% reduction in the average cash cost to US $0.47 per pound.

No equity earnings or losses were recorded from Rio Algom’s 25% interest in Alumbrera, compared to equity earnings of $1 million in the first quarter of 1999. Rio Algom’s share of production included 19 million pounds of copper and 31,000 ounces of gold compared to 28 million pounds and 46,000 ounces, respectively, a year ago. The reductions largely resulted from lower grades, poor weather conditions and maintenance work during the quarter. Cash operating costs, net of gold byproduct credits, were US $0.34 per pound compared to US $0.31 per pound a year earlier.

Rio Algom’s total copper production in the first quarter of 2000, including Alumbrera, was 116 million pounds compared to 106 million pounds a year ago, while cash costs averaged US $0.44 per pound, down from US$0.48 per pound in the first quarter of 1999.

Other mining

(Other mining comprises the company’s US uranium operations (Rio Algom Mining Corp. or RAMC), a 25% royalty interest in the Polaris zinc-lead mine and the contribution from Rio Algom’s 29.1% interest in the Bullmoose Coal mine.)

Revenue from other mining in the first quarter of 2000 was $33 million, up from $27 million the previous year, largely reflecting higher uranium sales. Operating profit was $6 million compared to $2 million in the first quarter of 1999 with RAMC accounting for much of the increase.

Rio Algom Metals Distribution (RAMD)

Revenue in the first quarter of 2000 was $448 million, up $37 million or 9% from a year ago, reflecting higher sales volumes and prices for stainless steel and aluminum. The average selling price of stainless steel rose 15% from the first quarter of 1999, while sales volumes were 11% higher. Aluminum prices and volumes increased 2% and 6%, respectively.

Quarterly operating profit of $21 million was the highest since 1995, and was up from $11 million a year ago. RAMD‘s operating margin (operating profit as a percentage of revenue) increased to 4.7% from 2.7% in last year’s first quarter. Return on capital employed was 19%, up from 8% during the first quarter of 1999.

Cash Profile

Cash and equivalents were $51 million at March 31, 2000 compared to $38 million at December 31, 1999.

Cash flow from operations in the first quarter was $18 million compared to $34 million a year earlier mainly reflecting higher levels of working capital.

Total capital expenditures were $83 million, of which $78 million or about 94% was funded by drawdowns from the Antamina project financing. Project expenditures will continue to be funded by the senior lenders until a debt level of approximately 60% is reached, after which funds will be contributed by the lenders and the project’s owners on a pro-rata basis. Rio Algom does not anticipate making additional cash outlays for the project until the fourth quarter of this year.

Dividend

Rio Algom’s Board of Directors approved a quarterly dividend of seven cents per common share payable on June 30, 2000 to shareholders of record at the close of business on June 9, 2000.

CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited - in millions of Canadian dollars except per share data)

	Three Months Ended
March 31, 2000		March 31, 1999
Revenue Mining Metals distribution	$ 122 448	$ 100 411
	570	511
Expenses Cost of mine production and metal sales Selling, general and administration Depreciation and amortization Interest Exploration Receivables securitization expense	441 61 30 5 6 2	416 60 27 6 4 -
	545	513
Investment and other income	25 1	(2) 2
Earnings before taxes and equity in net earnings of associated company Income and mining taxes (note 1) Equity in net earnings of associated company	26 (11) -	- - 1
Net earnings for the period	$ 15	$ 1

Accretion of equity element of convertible debentures Dividends on preferred securities	$ (3) $ (3)	$ (3) $ (3)
Income (loss) attributable to the common shareholders	$ 9	$ (5)

Net earnings (loss) per common share	$ 0.16	$ (0.09
Weighted average shares outstanding (in millions)	60.6	60.6

Note 1: Income taxes
To comply with new Canadian accounting standards regarding income taxes, effective January 1, 2000 the company began to calculate income taxes using the liability method as opposed to the deferral method which was previously used. This new standard was adopted retroactively and as a result, opening retained earnings was reduced by $18 million. The comparative amounts for 1999 have not been restated. The effect of this change in Q1 2000 was not material.

Note 2: Employee Future Benefits
To comply with new Canadian accounting standards regarding employee future benefits, effective January 1, 2000 the company began accruing all future employee benefit costs over the working lives of the employees. This new standard was adopted retroactively and as a result, opening retained earnings was reduced by $38 million. The comparative amounts for 1999 have not been restated. The effect of this change in Q1 2000 was a reduction of $1.2 million pre-tax or $0.7 million after-tax and a reduction of $0.01 earnings per share.

SEGMENT DISCLOSURES (unaudited - in millions of Canadian dollars)
	Compania Minera Cerro Colorado		Highland Valley Copper		Rio Algom Metals Distribution		Other Mining		Corporate, Development and Exploration		Total
	2000	1999	2000	1999	2000	1999	2000	1999	2000	1999	2000	1999

Segmented Earnings
For the Three Months Ended March 31, 2000 and 1999
Revenue	68	5	2	20	448	411	2	7	-	-	570	511
Cost of operations	35	37	14	18	423	396	23	19	-	-	495	470
Depreciation and amortization	17	12	5	5	4	4	4	6	-	-	30	27
Segment profit (loss)	16	4	2	(3)	21	11	6	2	-	-	45	14
Corporate expenses Interest expense Exploration Receivables securitization expense Investment and other income									(7) (5) (6) (2) 1	(6) (6) (4) - 2	(7) (5) (6) (2) 1	(6) (6) (4) - 2
	16	4	2	(3)	21	11	6	2	(19)	(14)	26	-
Equity in net earnings of associated company	-	-	-	-	-	-	-	-	-	1	-	1
Earnings (loss) before taxes	16	4	2	(3)	21	11	6	2	(19)	(13)	26	1

Segmented Balance Sheets
As at March 31, 2000 and December 31, 1999
Total assets	759	781	173	165	57	510	173	166	970	86	1,652	2,485

Segmented Cash Flow
For the Three Months Ended March 31, 2000 and 1999
Operating activities	50	20	9	-	(20)	17	12	15	(33)	(18)	18	34
Capital expenditures	-	5	5	-	(2)	12	1	4	79	68	83	89

Geographic Data
	Canada		USA		Chile		Argentina		Peru		Total
	2000	1999	2000	1999	2000	1999	2000	1999	2000	1999	2000	1999
Revenue	137	141	365	317	68	53	-	-	-	-	570	511
Capital assets and goodwill	244	233	190	196	723	734	286	284	435	349	1,878	1,796

SUMMARY OF KEY OPERATING STATISTICS
	Three Months Ended
	March 31, 2000	March 31,1999
Copper Production (millions of pounds) (a)
Cerro Colorado Highland Valley CopperAlumbrera (b)	64 33 19	47 31 28
	116	106
Average Copper Cash Cost (US$ per pound)
Cerro Colorado Highland Valley Copper Alumbrera (b)	0.44 0.56 0.34	0.49 0.61 0.31
	0.44	0.48
Copper Sales (millions of pounds) (a)
Cerro Colorado Highland Valley Copper Alumbrera (b)	59 22 18	53 28 29
	99	110
Average Copper Price (US$ per pound)
Cerro Colorado Highland Valley Copper Alumbrera (b)	0.83 0.79 0.80	0.68 0.66 0.62
	0.81	0.66
Other Production (thousands) (a)
Gold (ounces) (b) Molybdenum (pounds) Uranium (pounds) Coal (tonnes)	31 382 359 79	46 441 523 129
(a) Rio Algom's share.(b) Not included in mining revenue or operating profit as the company's investment in Alumbrera is accounted for using the equity method. (b) Not included in mining revenue or operating profit as the company's investment is accounted for using the equity method.

CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited - in millions of Canadian dollars)
	Three Months Ended
	March 31, 2000	March 31, 1999
CASH PROVIDED BY (USED IN) THE FOLLOWING:
Operating Activities
Net earnings for the period Non-cash items: Depreciation and amortization Future income taxes Equity in (net earnings) of associated company Other non-cash items Site restoration and related obligations Changes in non-cash working capital: (Increase) decrease in receivables and prepaid expenses and inventories Increase (decrease) in accounts payable and accrued liabilities	$ 15 30 7 - (6) (2) (58) 32	$ 1 27 (2) (1) (1) (3) 33 (20)
	18	34
Financing Activities
Drawdown of senior project debt facilities Decrease in long term debt and other obligations Increase in short term borrowings Interest on equity portion of convertible debentures Dividends on preferred securities Dividends on common shares	78 (2) 12 (3) (3) (4)	- - 2 (3) (3) (4)
	78	(8)
Investing Activities
Decrease in short term investments Capital expenditures	- (83)	90 (89)
	(83)	1
Increase in cash and cash equivalents during period Cash and cash equivalents, beginning of period	13 38	27 85
Cash and cash equivalents, end of period (a)	$ 51	$ 112
(a) Cash and cash equivalents also includes $25M (2000) and $11M (1999) held by partnerships and joint ventures. (b) Interest paid in 2000: $2M (1999: $3M) . Income and mining taxes paid in 2000: $11M (1999: $6M).

CONSOLIDATED BALANCE SHEETS
(unaudited - in millions of Canadian dollars)
	March 31, 2000	Dec. 31, 1999
Assets
Current
Cash and cash equivalents Receivables and prepaid expenses Inventories	$ 51 279 444	$ 38 240 411
	774	689
Property, plant and equipment Antamina project in process Mining properties Investment Other assets	736 435 364 286 57	752 349 359 284 52
	$ 2,652	$ 2,485

Liabilities
Current
Bank loans and overdrafts Accounts payable and accrued liabilities Current portion of liability element of convertible debentures	$ 36 350 17	$ 24 318 17
	403	359
Long term debt Post-employment benefit obligations (note 2) Liability element of convertible debentures Site restoration and related obligations Future income taxes (note 1)	382 84 19 83 61	302 - 28 83 55
	1,032	827
Shareholders' equity
Equity portion of convertible debentures Preferred securities Common shares Contributed surplus Cumulative translation adjustment Retained earnings (notes 1 and 2)	316 223 491 38 81 471	311 223 491 38 73 522
	1 ,620	1 ,620
	$ 2,652	$ 2,485

Rio Algom Limited
120 Adelaide Street West
Toronto, Ontario, Canada M5H 1W5
416.367.4000 tel, 416.365.6870 fax
http://www.rioalgom.com