Rio chief quits after $14bn writedown

Tom Albanese, the chief executive of Rio Tinto, has stepped down after the resources company booked $14 billion of impairment charges, most of them related to the disastrous acquisition of Alcan, its aluminium business.

Rio said on Thursday that the value of its aluminium assets would be written down by $10 billion-$12 billion and that it would also take a $3bn charge against its recently acquired Mozambique coal assets. The company also expects to report a number of smaller asset writedowns totalling around $500 million.

Albanese will be replaced by Sam Walsh, the head of Rio Tinto’s iron ore division – its biggest and most profitable business.

Rio paid $44 billion, including debt, to buy Canada-based Alcan in June 2007, shortly before the worst of the global financial crisis hit in 2008. The deal saddled Rio with large debts and led to a $15.2 billion rights issue.

“The further deterioration in aluminium market conditions in 2012, together with strong currencies in certain regions and high energy and raw material costs, has had a negative impact on the current market values in the aluminium industry,” Rio said in a statement.

Jan du Plessis, Rio chairman, said the writedowns – the second for the Alcan business in less than a year – were “disappointing” and “unacceptable”. Rio wrote down the value of Alcan by almost $9 billion last February, a decision that led to Albanese waiving his annual bonus.

“The Rio Tinto board fully acknowledges that a writedown of this scale in relation to the relatively recent Mozambique acquisition is unacceptable,” said du Plessis. “We are also deeply disappointed to have to take a further substantial writedown in our aluminium businesses, albeit in an industry that continues to experience significant adverse changes globally.”

Analysts at Nomura said the scale of writedowns and the forced management change would be taken negatively even though Mr Walsh was well known to investors.

“He is seen as a pretty straight shooter, but perhaps his credentials in strategically managing such a diverse business may be questioned by the market,” they said.

But they added: “We do not think you will see any major change in strategy from the group with the new appointment. We certainly think they’ll be steering well clear of any acquisitions, possible upside being increased capital returns for shareholders.”

Shares in Rio were down 2.9 per cent at £33.57 in early London trading.

Rio Tinto paid $4bn for Africa-focused coal miner Riversdale Mining, which had coking coal assets in Mozambique, eventually taking control of the business in early 2011. Rio on Thursday said Doug Ritchie, the executive who led the acquisition and integration of those assets, had also stepped down by mutual consent of the board.

The company said the $3 billion writedown reflected infrastructure issues – the government in Mozambique had rejected a plan to send coal down the Zambezi river – and lower than expected recoverable coking coal volumes.

Rio said that both Albanese and Mr Ritchie would remain with the business until July. During that time both would receive base pay, benefits and pension contributions but would not be entitled to a lump-sum payment or annual performance of share awards for 2013.

Rio has yet to appoint a replacement for Mr Walsh. Analysts believe Greg Lilleyman, the head of Rio’s iron ore operations in the Pilbara region of Western Australia, would be a logical successor.

The company is also searching for a replacement for Guy Elliott, its long-serving chief financial officer who last year announced he would step down by the end of this year.