Bougainville Copper Limited

Incorporated in Papua New Guinea A.R.B.N. 007 497 869

Bougainville Copper Limited (BCL) is owned 53.58% by Rio Tinto Limited . The Papua New Guinea Government owns 19.06% while public shareholders hold the remaining 27.36% of the share capital. The Panguna mine has not operated since 15 May 1989, and it has not been possible for company employees to return to the mine since their withdrawal early in 1990.

Following withdrawal of employees from the island, a small management team was established in Port Moresby . This team has now been incorporated into Rio Tinto Minerals (PNG) Limited (RTM), a wholly owned subsidiary of Rio Tinto Limited. BCL has a management service agreement with Rio Tinto. RTM performs this agreement on behalf of Rio Tinto.

The Board has adopted a new and comprehensive three year plan with a vision of returning to active exploration and profitable mining in PNG. The main focus in 2007 will be on getting resolution on the tax dispute, commencing the Bougainville Copper Agreement

Review, preparation in the event the exploration moratorium is lifted, communication with stakeholders, and the completion of a mine asset stock take.

We expect the Bougainville Copper Agreement re-negotiations will be revived and make significant progress. The opportunities that the current resources boom offer will not be maintained indefinitely. If the main stakeholders are to gain mutual economic benefit from Bougainville 's mineral potential a proper framework needs to be put in place without delay. The peak in copper and gold prices may have already passed.

During the year more work will be undertaken on preparing for the possible lifting of the moratorium on new exploration and mining. It is intended to identify targets within the company licences and identify how best to manage an exploration program. That may involve entering into an exploration agreement with others. Work is also being undertaken to ensure the extensive mine database the company has is up to date and able to be utilised quickly and effectively if a return to mining at Panguna is agreed.

The Mineral Resources Authority (MRA) has been established to act as a statutory authority to manage and regulate the industry. A board of directors, which includes industry nominees, has been appointed. The MRA board now has the task of selecting a managing director. We hope the MRA can play an active and guiding role in facilitating the BCA re-negotiation.

A communications plan has been developed. Now that circumstances on Bougainville have changed and exploration and mining are being openly debated the company needs to publicly project its position on key issues affecting it. The plan also aims to enhance the company's image among key stakeholders.

An important component in achieving the vision will be an environmental plan that is not only based on best practice but also meets the expectations of the local community. Work will be done on identifying the key issues and solutions.

As the mine assets are still not accessible to the company. To understand the true value of these assets and the extent to which they may be used for future mining and exploration, access to the mine site is needed. For this BCL needs the support of local landowners and will be working to enhance relations with them. The ultimate aim is to obtain landowner support for exploration and mining.