Buoyant conditions in the mining sector in 2005, together with Rio Tinto"s strategic positioning and strong operating performance, resulted in a second successive year of record profits, the chairman of Rio Tinto Paul Skinner told the annual meeting of shareholders in Melbourne last month.

"We enjoyed strong prices for most of our products and an increase in production volumes. In 2005, underlying earnings of just under US$5 billion were 118% above 2004. Cash flow was 85% higher at US$8 billion and the company's regular dividend four per cent higher.

"Together with a 20 per cent increase in the regular dividend in 2004, this represents an increase of almost 25% over the last two years. In addition, we declared a significant special dividend," Paul Skinner said.

China has had a major impact on Rio Tinto's economic growth in its markets.

"Our view is that China will continue to enjoy strong long term economic growth - probably with some occasional short term variations."

The 11th five year plan, which was recently adopted, places considerable emphasis on balanced and sustainable growth and a gradual transition from investment to consumption as the key driver of the economy.

"We believe this will be supportive of metals and minerals markets over the longer term.

"We continue to enjoy strong relationships with our Chinese customers which have been built up over many years."

Paul Skinner also commented on the Japan market saying it was encouraging to see a more positive economic environment in Japan , which remains a major market for Rio Tinto products.

Rio Tinto chief executive Leigh Clifford also echoed Paul Skinner's comments. He said he expected demand from China to continue to support metal prices above the long term trend for some time yet.

Depending on the commodity, China now accounts for between 20 and 30 per cent of total global demand. Furthermore, 15 per cent of Rio Tinto's total sales revenue in 2005, over US$3 billion, was derived from China .

Leigh Clifford said it was worth noting the increasing gap between demand and supply of key mineral resources in China .

"While this may be offset to some degree by discovery of new mines in China , geological prospectivity is a key factor and identifying new indigenous resources is a challenge.

"To illustrate, China consumes 33 per cent of all steel, but produces only 17 per cent of the world's iron ore. Likewise, China consumes 22 per cent of copper, but its mine production is only 5% of world output. For aluminium, they consume 22% of aluminium metal but produce only 12% of the world's alumina," he said.