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
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
Sport
Romelu Lukaku puts pen to paper
sport
News
Robyn Lawley
people
Arts and Entertainment
Unhappy days: Resistance spy turned Nobel prize winner Samuel Beckett
books
PROMOTED VIDEO
News
people
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
News
i100
Life and Style
Phones will be able to monitor your health, from blood pressure to heart rate, and even book a doctor’s appointment for you
techCould our smartphones soon be diagnosing diseases via Health Kit and Google Fit?
News
people
Extras
indybest
Travel
Ryan taming: the Celtic Tiger carrier has been trying to improve its image
travelRyanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
Life and Style
Slim pickings: Spanx premium denim collection
fashionBillionaire founder of Spanx launches range of jeans that offers 'thigh-trimming construction'
News
Sabina Altynbekova has said she wants to be famous for playing volleyball, not her looks
people
News
i100
Life and Style
tech'World's first man-made leaves' could use photosynthesis to help astronauts breathe
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 Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

BA/PM,EMIR/Dodd-Frank,London,£450-650P/D

£450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...

Senior Analyst - ALM Data - Banking - Halifax

£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

Java developer - Banking - London - Up to £600/day

£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star