Rio Tinto CEO departs after $14BN write-down
The chief executive of mining giant Rio Tinto PLC and another senior executive are stepping down immediately after the company announced a $14 billion write-down from its aluminum business and an acquisition of a coal company in Mozambique.
CEO Tom Albanese and Doug Ritchie, who led the Mozambique acquisition, were stepping down "by mutual consent" but would stay on until July 16 to assist with the transition, the company said Thursday.
Sam Walsh, head of the iron ore division, becomes chief executive of Rio Tinto, the world's third-largest diversified mining company.
Rio Tinto shares opened 4.1 percent lower in London at 3,315 pence before rebounding to be down 1.5 percent at midday.
"We had expected there to be further write-downs but the number is certainly more significant than the market would have anticipated, particularly given last year's impairments of around $9 billion," analysts at Investec Securities said in a research note.
Jonathan Jackson at Killik & Co. said the news presented an opportunity to buy shares.
"Given the mixed track record the group has on capital allocation, we expect the write-downs and management change to herald a welcome period of greater discipline, both in terms of M&A and capital expenditure," Jackson said.
The company disclosed that it will take an impairment charge of approximately $14 billion in its 2012 results to be published on Feb. 14, including about $3 billion on the acquisition of Rio Tinto Coal Mozambique, and $10 billion or more on the value of the company's aluminum assets.
Rio Tinto acquired the Mozambique operation in 2011.
The company said that developing infrastructure in Mozambique was more challenging than expected, and it had also downgraded its estimates of recoverable coal volumes.
"The Rio Tinto board fully acknowledges that a write-down of this scale in relation to the relatively recent Mozambique acquisition is unacceptable," said chairman Jan du Plessis.
"We are also deeply disappointed to have to take a further substantial write-down in our aluminum businesses, albeit in an industry that continues to experience significant adverse changes globally."
Albanese, appointed chief executive in 2007, and Ritchie will receive no lump sum payments, no performance bonus for 2012 or 2013 and will forfeit their deferred bonus share entitlements, the company said. However, they will continue to receive their salaries during the transition period.