Rio Energy unit sees strong 2008 profits

LONDON (Reuters) - The Energy division of global miner Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) (RIO.AX: Quote, Profile, Research, Stock Buzz) expects strong profits this year on the back of buoyant prices for coal and uranium, the unit's head said on Tuesday.

"There will be a significant uplift in profitability and earnings," Preston Chiaro, chief executive of Rio Tinto's Energy division, told the Reuters Global Mining Summit in London.

When asked about an analyst estimate that 2008 earnings before interest, tax, depreciation and amortization (EBITDA) would double, he replied:

"All you really need to do is take a look at the volumes that we're selling and the kind of prices that are being offered in the market and you can pretty quickly get to a number like that."

Rio's Energy and Minerals unit accounted for less than 10 percent of group profits last year, but this should rise in 2008 after supply disruptions have sent coal prices surging, he said.

In uranium, the company had been locked into low contract prices for years, but these contracts are starting to fall away.

"Last year and even into this year and a bit into 2009, we'll be supplying those old low-priced contracts," he said.

"As those old contracts roll off and new contracts replace them at much higher, market related prices ... we'll see a significant improvement in earnings from uranium and we've started to see the front end of that wave."

Chiaro's unit also includes minerals such as boric acid and titanium, which have also seen healthy price rises, he added.  Continued...