Rio Tinto takes big hit as chief executive resigns

By KRISTY DORSEY
Published on 18/01/2013 00:00

MINING heavyweight Rio Tinto has parted company with its chief executive following revelations that it will take a $14 billion (£8.7bn) hit on acquisitions that have gone sour.

Tom Albanese stepped down “by mutual agreement” with the board, the group said in a statement issued yesterday. He will be replaced by Sam Walsh, the head of Rio’s iron ore business since 2004.

Some $10bn-$11bn of the charges will come from writing down the value of the group’s aluminium business, which has chalked up years of losses and billions in impairments since the $38bn acquisition of Alcan in 2007. A further $3bn will be wiped off the value of Mozambican coal operations acquired by Rio Tinto in 2011.

Rio chairman Jan du Plessis said the board fully acknowledged that the scale of the write-down on the Mozambique acquisition was “unacceptable”, while the fresh impairments on the aluminium business were “deeply” disappointing.

Callum D’Ath, who looks after international investment portfolios at fund firm Brewin Dolphin, said Albanese had previously survived the Alcan disaster because it was pretty much a “done deal”, completed just two months after Albanese took over.

Mozambique, however, was entirely on Albanese’s watch. He spearheaded that deal, fending off rival bidders with a $4bn takeover offer.

“Nearly 80 per cent of that has now been written down,” D’Ath said. “That is appalling.”

Doug Ritchie – who led the acquisition and integration of the Mozambique coal assets as head of Rio Tinto’s energy division – has also resigned.

He and Albanese will leave the company in July after a hand-over period, with neither receiving a lump-sum payment, or bonus, upon departure.

Investors and analysts welcomed the appointment of Walsh, a 63-year-old industry veteran who is regarded as a safe pair of hands. He will take control of the group’s aggressive cost reduction programme in what du Plessis expects to be a “rapid and seamless transition”.

“He is ideally placed to cast a fresh eye over how we address the challenges and opportunities in the business, and derive greater value from it,” du Plessis said of Walsh.