How cynical of Rio Tinto, two days after announcing record iron ore production and shipments, to hit investors with such bad news. The miner yesterday said it would make more huge writedowns – this time totalling about $14bn after tax – in its 2012 results. That Rio is impairing a further $10bn-$11bn on its pre-crisis Alcan acquisition is hardly a surprise given aluminium’s fortunes. True, in November, Rio warned it could cut asset values in its full-year results. But its $3bn impairment on a coal asset in Mozambique acquired only in 2011 takes some beating. It is right for the chief executive to go.
When a man loses an arm and a leg, he is not the best person to sew it back on again. Tom Albanese’s continued tenure as boss of Rio since Alcan has been a source of dismay. That it has taken until now, when the company is safely spewing cash from its Pilbara iron ore mines in Australia, and its Oyu Tolgoi copper project in Mongolia nears production, shows how cautious the board has become post-Alcan. Even Sam Walsh, Rio’s respected iron ore man, is a safe choice of successor – and really only a stopgap measure. The board should have cast its net wider.
Betting the farm on Alcan left Rio overburdened with debt mid-crisis, almost threw it into Chinalco’s arms, and forced it into a rights issue. Rio was not alone in failing to see the crisis looming. But to pile into a coal investment in a complex region even as the shale gas revolution gains pace looks doubly irresponsible.