Rio Tinto's new man at top wins praise from investors

£8.7bn writedowns blow but hopes are voiced of a 'hard-nosed' era for miner

Rio Tinto's shareholders have welcomed the promotion of Sam Walsh, the miner's iron ore chief executive, to the top job following the sudden resignation today of Tom Albanese after five years at the helm and two decades with the company.

But shareholders were disappointed by the $14bn (£9bn) worth of writedowns Rio announced alongside Mr Albanese's resignation, as the FTSE 100 miner took another major charge against its beleaguered Alcan aluminium business as well as a hit on its coal operation in Mozambique.

"We knew there would be a further writedown but this is certainly larger than we had expected. Tom Albanese definitely had to go because he is closely associated with the Alcan deal and has taken full responsibility for the Mozambican coal business," Charles Stanley's analyst Tom Gidley-Kitchin said.

Today's writedowns came less than a year after Rio cut by $8.9bn the value of Alcan, the Canadian aluminium giant Mr Albanese bought at the top of the market in 2007, just two months into his five-year reign as chief executive. It has been hammered by rising costs and falling prices.

Analysts welcomed the promotion of Mr Walsh, an avid collector of antique milk jugs who joined Rio Tinto in 1991 after 20 years in the car industry at General Motors and Nissan Australia. Now 63, Mr Walsh has spent the last eight years of his 21-year stint at Rio running its key iron ore unit.

"It makes a lot of sense that Sam Walsh should run Rio after running the most successful part of the business – iron ore accounted for about three-quarters of the group's operating profit last year," Mr Gidley-Kitchin said.

Kate Craig, an analyst at Liberum Capital, added: "Rio appears to be taking the front foot on the writedowns, launching management changes and cost-cutting before the market has asked for it. Sam Walsh is the logical replacement for Albanese and has a strong operational heritage."

Shareholders are hoping that the top-level management change will herald a new era at Rio, in which it keeps a much tighter grip on both operating and developing costs and gives greater consideration to the prospect of handing cash back to investors rather than automatically investing it.

"Given the mixed track record the group has on capital allocation, we expect the writedowns and management change to herald a welcome period of greater discipline, both in terms of M&A [mergers and acquisitions] and capital expenditure," Jonathan Jackson at Killik & Co said.

Mr Gidley-Kitchin added: "The changes are consistent with the picture that is emerging at Rio of a company that is taking a more hard-nosed approach to running a business and capital expenditure."

He pointed to Rio's announcement in November that it planned to cut spending by $7bn over the next two years as the first significant example of its emerging tougher line. Analysts said that achieving those "aggressive" cost cuts will present Mr Walsh with one of his biggest challenges.

As part of his drive to contain costs, he will have to keep a tight grip on three key projects that are in development. These include Riversdale, the fledgling Mozambique-focused coal business it bought in 2011, which Rio announced the $3bn writedown against as the cost of developing supporting infrastructure spiralled and estimates of its recoverable reserves had to be written down.

The other two – the Simandou iron ore project in Guinea and the Oyu Tolgoi copper and gold mine in Mongolia – have already shown the potential to go significantly over budget, analysts said. Mr Albanese, who received a $1.6m bonus in 2010, waived his bonus for 2011 as retribution for the first big writedown of Alcan. Today, he forwent his bonus for 2012, along with £12.3m-worth of outstanding long-term incentive plans.

Mr Walsh will receive total pay, including bonuses, of up to A$7.8bn (£5.1bn). Shares in Rio initially fell 5 per cent but ended down 0.5 per cent at 3,439.5p as the management change balanced out the writedown.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Lewis Hamilton walks back to the pit lane with his Mercedes burning in the background
Formula 1
Arts and Entertainment
The new characters were announced yesterday at San Diego Comic Con
comic-con 2014
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
PROMOTED VIDEO
News
i100
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
News
A rub on the tummy sprang Casey back to life
video
Sport
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
i100
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
people
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
Tovey says of homeless charity the Pillion Trust : 'If it weren't for them and the park attendant I wouldn't be here today.'
people
Sport
Rhys Williams
commonwealth games
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little