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.

Start your day with The Independent, sign up for daily news emails
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the iWatch for you? Well, it depends if you want for the fitness tech, or the style
News
Astronauts could be kept asleep for days or even weeks
scienceScientists are looking for a way to keep astronauts in a sleeplike state for days or weeks
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own