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
Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
News
Campbell: ‘Sometimes you have to be economical with the truth’
newsFormer spin doctor says MPs should study tactics of leading sports figures like José Mourinho
Sport
football
News
Kelly Osbourne will play a flight attendant in Sharknado 2
people
Life and Style
Alexander McQueen's AW 2009/10 collection during Paris Fashion Week
fashionMeet the collaborators who helped create the late designer’s notorious spectacles
News
Down-to-earth: Winstone isn't one for considering his 'legacy'
people
News
The dress can be seen in different colours
i100
Life and Style
Agretti is often compared to its relative, samphire, though is closer in taste to spinach
food + drink
Sport
Wes Brown is sent-off
football
Voices
Lance Corporal Joshua Leakey VC
voicesBeware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
ebooks
ebooksA special investigation by Andy McSmith
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: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

Alexander McQueen's astonishing vision

Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

Dinner through the decades

A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

Philippa Perry interview

The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

Bill Granger's Indonesian stir-fry recipes

Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

Harry Kane interview

The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?