[miningmx.com] – TOM Albanese has resigned from Rio Tinto with immediate effect amid news the Anglo-Australian group will write-down $14bn relating to its Mozambique coking coal and Rio Tinto Alcan assets.
Sam Walsh, who headed Rio Tinto’s iron ore business, will replace Albanese while the displeasure of Rio Tinto’s board in the performance of its Mozambican assets was further expressed with the resignation of Doug Ritchie, who led the acquisition of the coking coal projects, Benga and Zambeze in 2011. Ritchie was formerly CEO of Rio Tinto’s energy division.
Jan du Plessis, chairman of Rio Tinto, was frank about the management changes saying he was disappointed the aluminium assets had suffered further write-downs.
As for the Mozambican projects, Du Plessis said: “The Rio Tinto board fully acknowledges that a write-down of this scale in relation to the relatively recent Mozambique acquisition is unacceptable”.
Albanese, who was appointed CEO of Rio Tinto in December 2006, is the third major change in management among the world’s top diversified miners. He follows Cynthia Carroll (Anglo American) and Mick Davis (Xstrata) who are due to leave their posts in the course of this year (Albanese leaves on July 16). BHP Billiton has also announced it is seeking a replacement for its CEO, Marius Kloppers, over the next two years.
Of the $14bn write-down, some $3bn relates to Rio Tinto’s shares in the coking coal assets it bought from Riversdale Mining in 2011 for about $4bn.
While the further write-down of the aluminium assets was largely expected, given the deterioration in the aluminium market during 2012, the impairment at the coking coal assets was more of a shock, and turns on frustrated project scope assumptions.
“In Mozambique, the development of infrastructure to support the coal assets is more challenging than Rio Tinto originally anticipated,” Rio Tinto said in an announcement.
“Rio Tinto sought to transport coal by barge along the Zambezi River, but this option did not receive formal approvals,” it said.
“These infrastructure constraints, combined with a downward revision to estimates of recoverable coking coal volumes on RTCM (Rio Tinto Coal Mozambique) tenements, have led to a reassessment of the overall scale and ramp up schedule of RTCM, and consequently to the impairment announced today,” it said.
In addition to the RTCM and RTA write-downs, there would be some $500m in impairments relating to smaller assets. Final details of the write-downs would be included in Rio Tinto’s full-year figures scheduled for a February 14 announcement.
Du Plessis said the health of Rio Tinto’s fundamental business was not in question while its balance sheet was robust. However, the group would take “… decisive action to improve our competitive position further with an aggressive cost reduction plan”.
Albanese took responsibility for the shock write-downs: “While I leave the business in good shape in many respects, I fully recognise that accountability for all aspects of the business rests with the CEO”.
Rio Tinto said that base pay, benefits and pension contributions would continue to be made to Albanese and Ritchie until July 16, but both would be penalised financially.
For instance, neither would receive a lump sum payment, annual short-term performance bonuses for either 2012 or 2013 and no long-term share award for 2013.
“In addition, when they leave the company, all outstanding entitlements under Rio Tinto’s long-term incentive plans will lapse and their outstanding deferred bonus share entitlements earned in previous years will be forfeited.
Said Walsh: “I will be working flat out to build an even stronger, more valuable Rio Tinto business for shareholders and for our many other stakeholders.”
